On June 25, 2012, TIA’s Founder and CEO, Sheila Weinberg and others gave testimony before the Government Accounting Standards Board (GASB), which impacted GASB to approve new accounting standards1 for pensions.
Under GASB Statement No. 67, (effective in the 2014 fiscal year) state pension plans were required to report their total “Net Pension Liability” (NPL). This NPL is the difference between Total Pension Liability (TPL) and Fiduciary Net Position (FNP) (i.e. market value of assets).
Once a pension plan is projected to run out of assets, the pension liabilities must be valued using a “blended” discount rate, which is lower than the historical rate. New Jersey, Illinois, and Kentucky estimated their pension plans will run out of assets therefore the actuaries used the blended discount rate to calculate their plans' unfunded liabilities. All of the other states were not dramatically affected by the new standard, because they assume their plans will not run out of assets.
GASB Statement No. 68 (effective in the 2015 fiscal year) will require states to report the full amount of their unfunded pension liabilities on the face of their balance sheet. This will represent a major change in the reprting requirements because the vast majority of these liabilities were previously excluded from states’ financial statements. This study calculated state financial conditions as if this standard were in effect.
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