NEWBERRY — Most Newberry County local governments are still one year out in the new Government Accounting Standard Board’s (GASB) accounting process.
In June 2012, the GASB approved two related statements that reflect improvements to the accounting and financial reporting of pensions by state as well as local governments and pension plans.
The first — Statement No. 67, Financial Reporting for Pension Plans — addresses financial reporting for state and local government’s pension plans. The second — Statement No. 68, Accounting and Financial Reporting for Pensions — establishes new accounting and financial reporting requirements for governments that provide their employees with pensions, according to the GASB.
What this now means is that the information contained in both Statement 67 and 68 will change how governments calculate and report the costs and obligations associated with pensions.
According to GASB, it is designed to improve the decision-usefulness of reported pension information and to increase the transparency, consistency and comparability of pension information across governments.
Statement 67 is replacing the requirements of Statement No. 25 for most public employee pension plans, while Statement 68 replaces requirements of Statement No. 27 for most government employers. The new statements also replace the requirements of Statement No. 50, Pension Disclosures for those governments and pension plans.
Shannon Smith, director of the finance department for the City of Newberry, said the new statements have not come into play for the city yet, as they went into effect for the fiscal year that just ended June 30.
The city’s accountant, Sheryl Medders of McKinley, Cooper and Co. LLC in Greenville, said the accounting process will require the city to issue a financial statement that shows their net pension liability which is the actuarial determined amount of real liability to retirees to find the benefits, less the assets available to fund it.
Next year, the city will be required to show the liability directly on their financial statements. Medders said this will be the city’s share of the unfunded liability of the South Carolina Retirement System or Police Officers Retirement System.
Smith said Medders told them that she knew no other way for them to determine this amount except that it be calculated by SC PEBA and allocated to all the entities it serves.
It could be this time next year or later, Smith said, before they know how this will affect them directly on their financial statements.
“We are depending on the state retirement system to tell us what it (net pension liability) is,” she said.
Medders said plan members might be shocked because even well-funded plans typically have not accumulated the resources needed to cover the actuarial-determined liability.
“The reason is that your contributions are not necessarily based on an actuarial calculation of pension benefits earned,” Medders said. “Plan contribution rates may instead be based on statute.”
For example, Medders said a pension promise could actually be costing the city 26 percent of the employee salary each year, but they are only paying in 14 percent required by state law.
“We do not know what it will do to financial statements of SC PEBA members because we, of course, do not know how well funded the SC PEBA is,” Medders said. “I think that is supposed to be shown in their implementation of GASB 67 for the year ending June 30, 2014.”
Prosperity Town Administrator Karen Livingston said they have not yet been through training on the new statements and have not yet gone over that with their auditors.
“It just went into effect this year for last year’s audit,” Livingston said.
All of Prosperity’s retirement pensions are through the state retirement system, Livingston said, because the town does not offer those individually. She does not think the new statements will affect the town very much.
Debbie Cromer with the county’s finance and budget department and Wanda Hill with the human resources department believe the GASB implementations will have little affect on Newberry County but more on the state of South Carolina. Both believe GASB will put more pressure on the state because the county pays into state retirement.
“What we pay in employee contributions, we show now,” Hill said.
With Newberry County already showing the information GASB requires, Hill and Cromer believe that the state, rather than the county, will hold the net pension liability. Hill also added that the state will most likely hire an actuarial firm and they will analyze and submit information to the U.S. government.