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Accounting Board May Change Reporting Rules for Public Pensions
The accounting board for state and local governments may soon require U.S. states and cities to change the way they report unfunded pension liabilities.
The proposals by the Governmental Accounting Standards Board (GASB) are intended to ensure that governments account for the pension costs of their workforce while those employees are still on the job, according to a Wall Street Journal report.
Most public pension plans calculate the cost of paying off unfunded pension liabilities over a 24- to 25-year period.
Under the new GASB proposals, pension plan managers would have to report unfunded obligations as if they would be paid off over the remaining years of service for employees covered by the plans. On average, that would be about 10 to 15 years.
Unfunded pension obligations aren’t typically even listed as a liability on government balance sheets. Instead, plan managers only list shortfalls to the required annual contribution.
Under GASB’s proposal, an estimate of the total plan shortfall would be be listed on the actual balance sheet.
The proposals are expected to be released in July followed by a 90-day period for public comment.