As alluded to in an earlier blog (“GASB Requirements – Timing and Frequency of Actuarial Valuations”), there may be certain situations in which it is necessary to begin the valuation process earlier than usual. Specifically, this may occur when plans are being administrated through trusts or equivalent arrangements that meet the criteria outlined within the respective GASB statements.
For Plan reporting, GASB statements 67 and 74 require that liabilities be measured as of the plan’s most recent fiscal year end. Thus, the liability and fiduciary net position information that is necessary for the Plan disclosures needs to be as of the reporting date of the financials. This is not typically the case when the valuation uses a measurement date that is 12 months prior to the reporting date. However, when the valuation is prepared early, it can be used for both Plan reporting now as well as Employer reporting on the subsequent year’s financial statements.
For example, let’s consider a 6/30 valuation that administers its benefits through a trust. In this example, we’ll use a valuation date of 6/30/2022 and also measure both the total liabilities and fiduciary net position as of 6/30/2022 (i.e., measurement date of 6/30/2022). For KBC, a valuation such as this would generally be provided and used for reporting on the 6/30/2023 audited financial statements. Usually, it would be completed after the filing deadline for the 6/30/2022 audited financial statements since its initial intent would be for the subsequent year’s financials. As noted above, certain Plan disclosures require that all information be as of the most recent fiscal year end. Therefore, if the valuation and table updates are provided in this manner in their usual timeframe, it would not meet the necessary requirements nor would it be available at the time of filing.
If, however, the valuation process begins before late summer and fall of the valuation year, there would be enough time to comfortably finish the valuation in advance of the filing date for the 6/30/2022 audited financial statements. For Wisconsin public school districts, the deadline is typically the first or second week of December. Thus, the information provided in the 6/30/2022 valuation could be used for Plan reporting on the 6/30/2022 audited financial statements (as liabilities and fiduciary net position information are measured through the fiscal year end) and then subsequently on the 6/30/2023 audited financial statements for Employer reporting, using a measurement date 12 months prior to the reporting date.
In this example, the measurement date of the liabilities and fiduciary net position remained unchanged. However, the timing of preparing the valuation and exhibits was moved up, allowing for it to meet all necessary reporting requirements outlined in the GASB statements pertaining to Pensions and Other Post-Employment Benefits (OPEB). While this is not the only option for meeting such requirements, it is one that we’ve found to be the most straightforward for those who have already selected a measurement date 12 months prior to the reporting date for Employer reporting purposes that need to report such Plan information as of the most recent fiscal year end.