1. Precision Experience Assurance The New Pension Standards GASB Statements 67 and 68 Milestone Professional Services, CPE Day September 13, 2013, Kissimmee FL Mark White CPA, Audit Partner Purvis Gray & Company, LLP Tallahassee / Gainesville / Ocala / Sarasota 1

2. Precision Experience Assurance No!…. Anything But Pension CPE!

3. Precision Experience Assurance Two New Statements Issued June 2012 Amends No. 25 Effective FYE 2014 No. 67 Plan Reporting Amends No. 27 Effective FYE 2015 No. 68 Employer Reporting 3

4. Precision Experience Assurance Final Statements Issued 2012 Research Project Agendas 2006/2008 Invitation To Comment 2009 Preliminary Views 2010 Exposure Draft 2011 4 The GASB’s Deliberative Process

5. Precision Experience Assurance The No. 68 Big Picture 5 Unfunded Defined Benefit Pension Liability Will Now Be Booked in BS of Economic Resources FS Formerly Disclosed In Notes & RSI

6. Precision Experience Assurance Notes and RSI Changes Change In Pension Liability Aggregate Employer Information Annual Rate of Return on Plan Assets 6 Highlights of No. 67 – Plan Reporting Very Few FS Recognition Changes From No. 25 Clarified That Drop Liability Not Recorded During Buildup Applies to Pension Plan FS Issued Separately or as P/T/F of Local Government

7. Precision Experience Assurance Who is included? 7 Applies Equally To; Local Municipal Plans Multi- Employer Agent Plans (FLC) Multi- Employer Cost Sharing Plans (FRS)

8. Precision Experience Assurance Implementation Applied Retroactively, Restate Opening Equity and New Pension Liability at BOY (PPA Like) Applied Retroactively, Restate Opening Deferred Inflows if Available, Otherwise Start at Zero This is Unlike No. 45 OPEB Implementation Which is Being Re-examined and May Soon Change 8

9. Precision Experience Assurance Up Until Now Government-wide employer accounting and actuarial funding/contributions have been ONE Old GASB Statement No. 27 (current) – The employer’s obligation is to fund the plan – The accounting expense (ARC) -- an actuarial funding contribution – The balance sheet liability -- contribution shortfall 9 Member PlanEmployer Funding Obligation Benefits

10. Precision Experience Assurance Up Until Now AccountingFunding 10 Same

11. Precision Experience Assurance From Now On Government-wide employer accounting and funding have been delinked, decoupled,... DIVORCED ! 11 AccountingFunding

12. Precision Experience Assurance From Now On Accounting and actuarial funding will be separate The GASB has found a completely new, way to define the government-wide expense and liability “We do accounting; actuaries do funding.” – Bob Attmore, GASB Chairman 12

13. Precision Experience Assurance From Now On Now the GASB is looking at it this way: New GASB Statement No. 68 – The employer’s obligation is “ultimately to the members” – The accounting expense -- not determined w.r.t. to any actuarial funding contribution 13 Plan Member Employer Benefit Obligation The balance sheet liability --an unfunded actuarial accrued liability Benefits Funding

14. Precision Experience Assurance Two Actuarial Reports Now Needed 14 Actuarial Report For Accounting Actuarial Report For Funding Likely Done at the Same Time From Same EE Demographics

15. Precision Experience Assurance The New Pension Liability Equation 15 TPL Total Pension Liability, Minus NPP Net Plan Position, Equals NPL Net Pension Liability

16. Precision Experience Assurance Terminology-Definitions New (GASB 67/68) – Total Pension Liability (TPL) – the portion of the actuarial present value of projected benefit payments that is attributable to past periods of employee service in conformity with the requirements of Statement 68. – Net Plan Position - Fair Value of Plan Assets less plan liabilities - FMV as of the measurement date (no longer smoothed – Net Pension Liability (NPL) – difference between the TPL and the value of plan assets available to pay pension benefits. – Projected Benefit Payments – All benefits estimated to be payable through pension plan to current active and inactive employees as a result of their past service and their expected future service. – Measurement Date - TPL and NPL measured as of the same date not more than 12 months before the reporting date. 16

17. Precision Experience Assurance TPL Illustrated 17

18. Precision Experience Assurance Discount Rate = LTEROR For Plan AssetsNet Plan Position = No More Asset SmoothingTPL Calculated Using Entry Age Normal A/C/M Only 18 Calculating The Net Pension Liability

19. Precision Experience Assurance Pension Expense = Change in NPL Change in NPP Change in TPL 19 Pension Expense

20. Precision Experience Assurance Change in TPL Expense Some Parts Immediately Expense Some Parts Gradually Deferred In/Outflows Change in NPP Expense Some Parts Immediately Expense Some Parts Gradually Deferred In/Outflows 20 Immediate vs. Gradual Recognition

21. Precision Experience Assurance Expense Immediately Annual Service Cost Benefits Paid Plan Benefit Changes Interest on PY NPL 21 Changes in TPL Expensed Immediately

22. Precision Experience Assurance 22 Changes in TPL Expensed Gradually Assumption Changes Actuarial Gains and Losses Expense Gradually

23. Precision Experience Assurance Recognized Immediately Projected Investment Earnings Benefits Paid Administrative Expenses Actual Contributions 23 Changes in NPP Gradual Recognition For Difference In Projected Vs. Actual Investment Earnings

24. Precision Experience Assurance Deferred Inflows and Outflows Deferred Inflows and Deferred Outflows Concept Statement No. 4 GASB 53 Derivatives GASB 60 SCA GASB 63 Financial Reporting GASB 68 – Pensions GASB 65 – Items Previously Recognized

25. Precision Experience Assurance Calculation of Pension Expense

26. Precision Experience Assurance Timing Issues 26 Full Actuarial Report Actuarial Update Full Actuarial Report Financial Reporting Actuarial Valuation Required Every Two Years, Can Do an Update In Between

27. Precision Experience Assurance Timing Issues 27 Actuarial Valuation completed within 30 months and 1 day of RD – 3/31/12 Measurement Date Must Be Within 1 Year of RD - 10/1/14 Reporting Date (RD) FYE 9/30/15

28. Precision Experience Assurance Timing Issues 9/30/15 FS Date Measurement Date Actuarial Valuation Date Employer FYE Prior FYE 9/30/14 MD 9/30/13 Beg Bal. Date 30 months + 1 day 3/31/12

29. Precision Experience Assurance Timing Issues Get AV as of 9/30/14 or Roll Forward of 9/30/13 AV to 9/30/14 FYE 9/3015 Municipal Audit Get Allocated FRS AV as of 6/30/15 or Roll forward of 6/30/14 AV to 6/30/15 FYE 9/30/15 County Audit Get Allocated FRS AV as of 6/30/14 FYE 6/30/15 School Bd. Audit 29

30. Precision Experience Assurance Contributions Made After MD 9/30/15 FS Date Measurement Date Actuarial Valuation Date Employer FYE Prior FYE 9/30/14 MD 9/30/13 Beg Bal. Date 30 months + 1 day 3/31/12 Contributions Made - Deferred Outflow

31. Precision Experience Assurance Note Disclosure Additional disclosures Depends Upon Plan Type - Generally: – In the Notes to Financials Plan description, benefit terms, employee groups Changes in all components of the NPL Significant Assumptions – discount rate, mortality, etc. Numerous other disclosures – In the Required Supplementary Information 10 Year table(s) for: TPL, Plan Net Position, NPL, Net Position as a % of TPL, Covered Payroll (PR), NPL as % of Covered Payroll, Required & Actual Contributions, Covered PR, Contributions as % of PR. Other disclosures 31

32. Precision Experience Assurance High-Level Implications 32 More Fuel to Pension Rollback Movement Net Position May Go Negative Higher Profile in CAFR Liability From Notes to BS

33. Precision Experience Assurance High-Level Implications More Volatile FS as Pension Liability and Expense Bounce With Market Fluctuations 33

34. Precision Experience Assurance High-Level Implications Executive Staff and Elected Officials Press Employees 34 Communication Challenges

35. Precision Experience Assurance High-Level Implications Amortization Periods and Methods Disciplined Process For LTEROR Actuarial Cost Methods 35 Revisit Funding Policies

36. Precision Experience Assurance High-Level Implications Local Governments Rush For Actuarial Services 36 Start Talking With Your Actuary and Auditors Now

37. Precision Experience Assurance Wow, That Was Sure A Lot Of Fun!

38. Precision Experience Assurance The New Pension Standards GASB Statements 67 and 68 Milestone Professional Services, CPE Day September 13, 2013, Kissimmee FL Mark White CPA, Audit Partner Purvis Gray & Company, LLP Tallahassee, Gainesville, Ocala, Sarasota 38