Updated Sept. 27, 2011
Public pension plan officials bracing for sweeping new accounting rules proposed by the Governmental Accounting Standards Board will have two extra weeks to submit comments, as the board moved the deadline to Oct. 14 from Sept. 30.
The changes, first proposed July 8, were designed to bring what GASB Chairman Robert H. Attmore called “more robust disclosure” by having plans highlight their net unfunded liabilities instead of contributions, limiting plans with more benefits owed than assets to a more conservative index rate, and reducing the amount of time that plans can expense their unfunded liability. For the first time, cost-sharing plans will be subject to a full accounting approach.
GASB planned to finalize the proposals by next summer, after public hearings and field studies. In response to requests for more time, GASB recognized the “significant financial reporting issues” involved in preparing comments, Mr. Attmore said in a statement.
Pat Robertson, executive director of the $20 billion Mississippi Public Employees' Retirement System, Jackson, thinks the field studies are crucial to the process moving forward. “The field studies could validate whether or not what the GASB is trying to accomplish is going to provide the relevant information, and whether or not from a cost/benefit standpoint it is justified,” said Ms. Robertson, who is on GASB's Governmental Accounting Standards Advisory Council. Mississippi PERS is participating in the field studies, Ms. Robertson said.
In response to concerns that the two week extension does not do enough to prepare plans for such game-changing rules, GASB spokeswoman Christine Klimek said in an interview, “There is more outreach to come. The comment period is not the end of the process.”
“Government sponsors and their defined benefit plans will be challenged by the tough new changes,” the National Association of State Retirement Administrators and the National Council on Teacher Retirement said in a joint statement when the changes were first announced. Concerned that new accounting figures could be misused in funding decisions, the groups said they are “hopeful” that they could wind up strengthening public confidence in the plans.
Changing the rules to bringer greater transparency “is a valid argument if you're an accountant, but it's just going to create incredible confusion,” William B. Fornia, president of Pension Trustee Advisors in Centennial, Colo., a consulting actuary to public plans and governments, said in an interview. “Accounting numbers and the cash contribution numbers will no longer be the same. There will be volatility, unless the general public understands that, which is unlikely. The new rules are so complicated that I don't think they've thought it through.”
A public hearing on the proposal is scheduled for Oct. 4 in New York.