Public pension plan and government employee groups worried about sweeping new accounting rules for public pension plans proposed by the GASB are asking for more time.
In an Oct. 14 letter to the Governmental Accounting Standards Board, 21 organizations — including AARP, the National Conference of State Legislatures and multiple public employer groups — expressed their concern that GASB’s timeline for finalizing its proposal “may be too compressed to properly assess the impact” of the proposed changes and the transition time needed for the new rules.
The GASB first proposed the changes July 8 in two exposure drafts — one for government employers and one for public pension plans — that were designed to bring what GASB Chairman Robert H. Attmore called “more robust disclosure.” The GASB planned to finalize the proposals by next summer, after public hearings and field studies.
One of the biggest proposed changes would have plans highlight their net pension liability on their balance sheets, instead of in the footnotes. That is “a radical departure” from the current practice of reporting annual required contributions, the groups wrote in their letter. “This departure will create much confusion.” While the proposed accounting numbers should not be used to evaluate the funded status or required contributions, “there already has been serious misunderstanding in this area,” and the GASB should at least consider adding a warning in the final rules, the groups argued.
Recognizing the significant financial reporting issues involved, the GASB on Sept. 23 extended its comment period and field studies timeline by two weeks. At that time, GASB spokeswoman Christine Klimek promised further outreach: “The comment period is not the end of the process,” she said.
In a separate letter also sent Oct. 14, 131 representatives of public pension plans in 37 states wrote to express concern about the overall proposed rules. “Everybody is interested in transparency, but the widespread concern is implementation. Employers who have to do this have not gotten engaged to understand what’s coming,” a source familiar with the GASB rulemaking process said.
GASB officials were not available to comment on the Oct. 14 letters.