For June 30, 2018, financial statements, school districts will be required to adopt GASB 75, Accounting and Reporting for Postemployment Benefits other than Pensions (OPEB). This significant new standard mirrors GASB 68 adopted four years ago covering pensions. In Michigan, both plans are administered by the Office of Retirement Services (ORS) and are part of the Michigan Public School Employees Retirement System (MPSERS). This adoption will be similar to the adoption of GASB 68. In fact, it captures the remaining part of the defined benefit plan offered through MPSERS.
GASB 75 impact on district financial statements
The net OPEB liability will be reported on the governmentwide financial statements in the statement of net position. We expect the liability will be roughly one-third the size of the current pension liability, and just like GASB 68, will have its own set of deferred inflow and outflows.
GASB 75 adoption will require an adjustment to the net position at the beginning of the year. That is, there will be a restatement of the beginning net position as of July 1, 2017. This will also create an emphasis of matter paragraph in the auditor’s opinion, pointing out the impact of the addition of the new liability. This was also done when GASB 68 was adopted.
GASB 75 adoption will require an adjustment to the net position at the beginning of the year.
The footnote disclosures will be expanded to discuss the new liability. The pension and OPEB plans are different, but there are some common elements that impact both plans. The disclosures will incorporate the common elements but will be expanded to provide the additional information needed under GASB 75.
The Required Supplementary Information section of the financial statements will also be expanded to include a 10-year history of OPEB plan information. Similar to GASB 68, the table will start with current year information and will grow each year until 10 years of information is included. Lastly, for districts with funds accounted for under full accrual, such as enterprise funds, the net OPEB liability will also be allocated to those funds. Again, this is similar to how GASB 68 is applied.
GASB 75 implementation plan
There are a few key elements to consider when implementing GASB 75. Many of the elements are similar to those required by GASB 68 and some may even perform “double duty.” Implementation will require teamwork between the district and the auditor as well as timely information from the ORS. Specifically,
- Compensation data must be available for the periods ending Sept. 30, 2017, and June 30, 2018.
- Contribution data must be available for the same periods.
- Employee participation data for the period ending Sept, 30, 2016. Note, if this data was tested when GASB 68 tests were performed, it’s possible it may not need to be duplicated.
- Additional accounts included in the district chart of accounts to record GASB 75 related amounts. The School Accounting Manual (Bulletin 1022) has been updated with guidance related to these new accounts.
- Completion and issuance of the audit of the GASB 75 proportionate share information by the Auditor General.
- Data tables are prepared by the ORS to communicate district participation amounts and information to complete disclosures.
- Auditor tests to determine the amounts are accurate, supported, and correctly reported.
ORS's current expectation is that the release of the Auditor General's report and the data table information will be available by mid-July 2018.
Clearly, events at the ORS are critical to a timely audit of the amounts, and completion of the financial statements. We’ve been working closely with the ORS staff to determine the steps needed and content requirements. ORS’s current expectation is that the release of the Auditor General’s report and the data table information will be available by mid-July 2018. If this is the case, districts should have the information needed to complete the audit and financial report in a timely manner.
Leveraging success with our GASB 68 and GASB 75 templates
Under GASB 68, we created a template to capture district information but also assist in the district’s assessment and determination of amounts to be reported. We’re revising that template to build in the elements of GASB 75. This template will help districts finalize the amounts that are required to be reported. We can then audit the results for both GASB 68 and 75.
By combining the like elements, our goal is to simplify the preparation process and better manage the result. Since the template utilizes information provided by the ORS, we will release the templates shortly after the ORS issues its data tables and the Auditor General’s report. Our hope is that the district inputs, along with the ORS information incorporated into the template, will simplify the final determination of amounts to be reported.