New rules aim to improve public pension reporting
Two new measures could change how governments calculate and report the costs of public pensions. The accounting rules were issued by the Governmental Accounting Standards Board (GASB), an independent group that recommends financial and reporting standards for state and local governments.
The new standards, Statement No. 67 and Statement No. 68, are intended to improve accounting and financial reporting of public employee pensions, according to GASB. The provisions require for the first time that governments providing defined benefit pensions recognize long-term obligations for pension benefits as a liability. The provisions also call for improved reporting about the costs of pension benefits in financial statements and other documents.
The provisions in Statement 67 are effective for financial statements for periods beginning after June 15, 2013, according to GASB. The provisions in Statement 68 are effective for fiscal years beginning after June 15, 2014. The group urged governments to begin applying the new standards even earlier.
Details about the new rules are available on the GASB website. GASB does not have enforcement authority, though the group’s accounting standards are enforced through the laws of some individual states.
Rising pension costs threaten many local governments. Moody’s Investors Service, the Wall Street credit agency, estimates that state and local governments have unfunded pension liabilities totaling more than $2 trillion. The agency is considering new rules for treating pension liabilities that could lower credit ratings for many governments beginning this fall.