Public plans will be required to highlight net unfunded liabilities on their balance sheets and will have less time to expense them under a draft of new GASB rules unveiled Friday.
The draft by the Governmental Accounting Standards Board also would require underfunded public plans to use a more conservative 30-year municipal bond index rate, and cost-sharing plans will be subject to full accounting for the first time instead of simply included in the combined statements.
Funds will have to expense their unfunded liabilities immediately for inactive workers' costs and will face a new amortization period for active workers based on their average remaining service life. Currently, funds have up to 30 years to account for actuarial gains and losses.
The proposed rules were designed to increase transparency and uniformity among plans, GASB Chairman Robert Attmore said in an interview.
“The point is so people have the best information to make the best decisions,” Mr. Attmore said.
The board will offer a comment period until Sept. 30 and will hold three public hearings this fall in New York, Chicago and San Francisco.
Final rules are expected out by July 2012. Single-employer plans with $1 billion or more in assets will adopt them first, and other plans will have another year to do so. GASB will offer a “plain language” supplement, illustrations and a 10-year implementation schedule on its website later Friday.
The higher pension liability numbers have some critics on alert for possible misuse in funding decisions and political debates. “We're concerned about multiple calculations” needed for compliance and for educating policymakers, Keith Brainard, research director of the National Association of State Retirement Administrators, said in an interview.
“Government sponsors and their defined benefit plans will be challenged by the tough new changes,” NASRA said in a joint statement with the National Council on Teacher Retirement. Yet given the deliberative rule-making process, “we are hopeful that on balance, these industry changes may ultimately help alleviate concerns … and strengthen public confidence,” the statement said.