1. Public Employees Retirement Association of Minnesota Calculating Employer’s Proportionate Share of Collective Pension Amounts Presenter: Jim Riebe Principal Accounting Officer, PERA

2. Public Employees Retirement Association of Minnesota Agenda Review key GASB 68 concepts Explain PERA’s methodology for calculating the employer’s proportionate share Present unique issues related to employer’s proportionate share calculations Discuss employer’s/auditor’s responsibility for verifying proportionate share calculation 2

3. Public Employees Retirement Association of Minnesota GASB 68 Review Effective for fiscal years beginning after June 15, 2014 Requires employers to report proportionate share of collective pension amounts All pension amounts calculated by PERA’s actuary 3

4. Public Employees Retirement Association of Minnesota GASB 68 Review Employers must now report on their government- wide financial statements their proportionate share of the collective: Net pension liability or NPL (similar to unfunded actuarial accrued liability); Total deferred inflows of resources and total deferred outflows of resources related to pensions; and Pension expense. 4

5. Public Employees Retirement Association of Minnesota Proportionate Share Allocation methodology should be representative of future contribution effort of the employer GASB allows allocation to be based on past contributions GASB does not specify who calculates the proportionate share 5

6. Public Employees Retirement Association of Minnesota Proportionate Share AICPA White Paper recommends having the pension plan calculate proportionate share PERA’s will use employer’s contributions paid n relationship to all employer contributions to calculate the employer’s proportionate share For the plan fiscal year ended June 30, 2014, PERA included employer contributions received by September 1, 2014, for employer payroll paid dates from July 1, 2013, through June 30, 2014 (the measurement period). Employers can generate a contribution report by plan in ERIS that details employer contributions. 6

7. Public Employees Retirement Association of Minnesota Proportionate Share In this example: City A’s proportionate share is calculated as: $830,387/$375 million = 0.221% and it’s share of the NPL is calculated as $4.5 billion*0.221% = $9,945,000 City B’s proportionate share is 0.017% and its proportionate share of the NPL is $765,000 7

8. Public Employees Retirement Association of Minnesota Proportionate Share Employers (and their auditors) must understand the employer’s relationship with PERA. Employers need to ensure they have accounted for all of the contributions paid to PERA. Employers may have established multiple employer unit ID’s with PERA: Separate employer numbers for component units Separate employer numbers for certain funds or functional areas, e.g. General Fund and Enterprise Funds 8

9. Public Employees Retirement Association of Minnesota Proportionate Share Schedule of Employer Allocations As of June 30, 2014 Unit IDEmployer Name ContributionsAllocation 0002-00AITKIN COUNTY 598,539.730.16045% 0006-00ANOKA COUNTY 6,113,109.911.63871% 0008-01BECKER COUNTY 814,665.350.21838% 0010-00BELTRAMI COUNTY 932,224.260.24990% 0012-00BENTON COUNTY REVENUE 672,278.560.18021% 0014-00BIG STONE COUNTY 186,633.810.05003% 0016-00BLUE EARTH COUNTY 1,333,635.980.35750% 0018-00BROWN COUNTY 683,226.740.18315% 0020-00CARLTON COUNTY 1,020,241.270.27349% 0022-00CARVER COUNTY 2,114,587.950.56685% 0022-09CARVER COUNTY HISTORICAL SOCIETY 9,978.970.00268% 0024-00CASS COUNTY 849,624.340.22776% 0026-00CHIPPEWA COUNTY 353,070.320.09465% 0027-00CHIPPEWA COUNTY SWCD 9,983.350.00268% 0028-00CHIPPEWA COUNTY HOSPITAL 980,099.650.26273% 0030-00CHISAGO COUNTY 1,013,041.900.27156% 0032-00CLAY COUNTY 1,075,596.370.28833% 9115-00CLAY COUNTY SWCD 17,500.390.00469% … … …… 375,000,000.00100.00000% 9

10. Public Employees Retirement Association of Minnesota Contributions Included/Excluded Some contributions will be excluded from PERA’s allocation because they do not reflect future contribution effort. PERA will provide a reconciliation of employer contributions in its audited financial statements to contributions included/ excluded from the proportionate share calculation. 10 Revenue Codes4000YE 2013YE 2014Subtotal4025403047104725SubtotalTotal Employer Unit Employer Contributions - Matching (6.25 or 6.5%) Employer Accrual (Received in Current FY but Recognized in Prior FY) Employer Accrual (Received in Future FY but Recognized in Current FY) Employer Contributions Allocated for GASB 68 Omitted Deduction Contribution Invoices for Employer Portion of Member Buybacks Employee Contribution Paid by Employer (OD) Interest on OD Employer Contributions NOT Allocated for GASB 68 Employer Contributions Amount Reported on CAFR 200$535,331-$22,440$598,540$0$598,540 600$5,477,764-$241,438$243,840$6,356,610$0$340$0$8$358$6,356,968 801$702,298$814,665$316$814,981 …………………………… 994900 $869$1,008$0$1,008 Totals$329,397,171-$9,163,798$8,522,223$381,456,778$340,961$172,215$166,660$45,148$794,328$382,251,106

11. Public Employees Retirement Association of Minnesota MERF Special Funding Situation The State of Minnesota’s contributions ($24 million in fiscal year 2014) to the Minneapolis Employees Retirement Fund (MERF) meet the definition of a special funding situation. Therefore: The state is allocated its proportionate share of the MERF pension amounts; and Participating employers need to recognize their proportionate share of the state’s contributions as part of their pension expense (and grant revenue). PERA will provide a separate schedule of the pension amounts resulting from the special funding situation. 11

12. Public Employees Retirement Association of Minnesota Beginning NPL for Schools GASB 68 states that the beginning NPL be allocated as of the measurement date. The beginning NPL for school districts is measured at June 30, 2013, which would mean the beginning NPL would be allocated based on employer contributions during plan fiscal year 2013. However, PERA determined the difference between allocating the beginning NPL based on 2014 contributions was not materially different. Therefore, PERA used 2014 contributions to allocate the beginning NPL for school districts. 12

13. Public Employees Retirement Association of Minnesota Employer/Auditor Responsibilities The AICPA White Paper states the employer and employer auditor need to: verify and recalculate the employer amount used in the allocation percentage, recalculate the allocation percentage for the employer, and recalculate the pension amounts allocated to the employer based on the allocation percentage, and the employer auditor should evaluate whether: the plan auditor’s report and accompanying schedules are adequate and appropriate; and the plan auditor has the necessary competence and independence 13

14. Public Employees Retirement Association of Minnesota More Information PERA’s Website  www.mnpera.org  Employers tab  GASB 68 Toolkit Contact Jim Riebe GASB@mnpera.org 14