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Valuation, Measurement & Reporting Dates

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Valuation, Measurement & Reporting Dates

Parker Elmore, ASA, MAAA, EA, FCA | Francis Fraine

New accounting rules for public other postemployment benefit plans to replace GASB 45 will take effect in 2018 for most plan sponsors. To ensure a successful transition to the new standards, you will need to understand various new concepts (largely mirroring those found in GASB 67/68) and new terms. Odyssey will be providing a series of white papers on this subject which will review these topics in some detail. We continue with “Valuation, Measurement & Reporting dates & their interaction” to provide a detailed explanation of these dates.

GASB 75 – Valuation, Measurement & Reporting Dates & Their Interaction

The Governmental Accounting Standards Board (GASB) has released GASB 75 “Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions” – a new accounting standards for public Other Post Employment Benefit (OPEB) plans which will replace GASB 45.

This GASB 75 white paper is part of the continuing series of white papers discussing the new accounting standards released under GASB 75 for OPEB plans. It will discuss Valuation, Measurement, and Reporting dates and their interaction

Implementation of these Statements is required for fiscal years beginning after June 15, 2017.

Odyssey’s working group is reviewing the new Statements, issuing guidance on how to best transition to the new Statements, determining the impact on our client’s liabilities and expenses and evaluating strategies for pre-funding and financial statement recognition.

Past Working Group Updates

  • GASB 75 – Introduction & Notable Changes
  • GASB 75 – Crossover Date & Why It Matters
  • GASB 75 – Investment Return & Money- Weighted Rate of Return
  • GASB 75 – OPEB Expense And Deferred Inflow & Outflow Of Resources

How Often Do We Need To Perform Valuations?

With GASB 45 most employers are required to perform a valuation at least every other year. The results of that valuation would then be rolled forward for the following fiscal year.

Smaller (less than 200 covered employees, retirees and spouses) employers must perform a valuation at least once every three years. The results of that valuation would then rolled forward for the following two fiscal years.

Under GASB 75 all employers must perform a valuation at least biennially – similar to that of large employers today under GASB 45. Additionally, GASB is encouraging significant changes (e.g., major cost sharing changes, much higher than expected increases or decreases in premiums, significant difference in actual vs. expected investment return) occurring prior to the Measurement Date to be reflected immediately.

What Are The Valuation, Measurement & Reporting Dates?

The Valuation Date is the date as of which actuarial valuation is performed. These results are then rolled forward to the Measurement Date (significant changes between the Valuation Date and the Measurement Date should be reflected). These figures are then reported on the plan sponsor’s Reporting Date which is the fiscal year end.

How Do We Determine These Dates?

The Valuation Date may be up to 30 months and 1 day prior to the Reporting Date. As such, you can choose a Valuation Date that will enable you to utilize one valuation to obtain results for the entire two (2) year valuation cycle. The Measurement Date shall not be earlier than the plan sponsor’s prior fiscal year end (12 months prior to the Reporting Date) and the Reporting Date is the fiscal year end for financial statement purposes. Given that the Reporting Date is your fiscal year end, you will need to choose the Valuation Date & Measurement Date. We encourage you to discuss this with both your auditors & actuaries as the proper choice of these dates will allow for a smoother financial statement closing.

What Are Some Examples Of How The Dates Can Be Chosen?

Scenario 1

Assuming an upcoming Reporting Date of June 30, 2018 and your prior GASB 45 valuation cycle included the Reporting Date of June 30, 2017, you may choose a valuation date as early as December 30, 2015 and a Measurement Date as early as June 30, 2017. Given that you will want to use this same valuation for the June 30, 2019 Reporting Date, you will not want to choose a Valuation Date earlier than December 30, 2016 (30 months and 1 day prior to the 2nd Reporting Date in the cycle). So, we will assume a Valuation Date of June 30, 2017 in this situation and a Measurement Date of June 30, 2017 for the 1st Reporting Date. The valuation results will then be “rolled forward” to June 30, 2018 for the 2nd Reporting Date.

Scenario 2

Let’s assume that our prior GASB 45 valuation cycle does NOT include the June 30, 2017 Reporting Date. We may utilize a Valuation Date of June 30, 2016 to perform the GASB 45 valuation for the June 30, 2017 Reporting Date and use that same census information & valuation date to perform a GASB 75 valuation which may be “rolled forward” to a June 30, 2017 Measurement Date for our June 30, 2018 Reporting Date. Under this scenario, we would encourage you to review early adoption of GASB 75 with your auditors & actuaries as this may be more cost effective.

How Should We Pick These Dates?

The main thing to consider is timing – choosing Valuation and Measurement Dates that allow the valuation to be performed and the Net OPEB Liability (“NOL”) to be measured in advance of the Reporting Date while still being rolled forward to the subsequent Reporting Date. For example, if the Reporting Date is June 30, 2018; a June 30, 2017 Valuation Date would be early enough to be performed long before the Reporting Date while still being within the 30 month and a day time frame to be rolled forward to the June 30, 2019 Reporting Date. The June 30, 2017 valuation results could then be rolled forward to a June 30, 2018 Measurement to calculate the NOL to be reported on the June 30, 2018 Reporting Date. This would leave ample time to gather all the information needed to complete the valuation while remaining timely enough to reflect impactful changes.

Should We Adopt GASB 75 Early?

Ultimately this is a decision you need to make with your auditors and actuary but one key thing to consider is that GASB 75 will be effective for fiscal years beginning after June 15, 2017. As noted earlier, if you were planning on performing a GASB 45 valuation for the fiscal year ending June 30, 2017, you may want to consider adopting GABS 75 for that valuation and rolling the numbers forward for the fiscal year ending June 30, 2018 instead of doing a GASB 45 valuation for the fiscal year ending June 30, 2017 and a new GASB 75 valuation for the fiscal year ending June 30, 2018.

What’s Next?

The main takeaway is choosing dates that will provide the actuary with enough time
to produce results before the fiscal year end but not so early that the results cannot be rolled forward to a second Reporting Date. Additionally, you may want to consider adopting GASB 75 early if you would like to avoid having to do a valuation two years in a row.

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