In November, the State Auditor’s Office released guidance on how changes in the “fully funded” status of several state-sponsored pension systems will change the reporting requirements that local government employers must comply with. As more pension plans become “fully funded” (currently, 6 of 8 state plans are now fully funded) local governments will need to begin reporting net pension assets instead of net pensions liability. Reporting assets can be complex for governments that haven’t had to do it previously, which is why the SAO is releasing this guidance now.

According to the SAO, only PERS plan 1 and TRS plan 1 still show pension liabilities. That means that cities that participate in PERS 2/3, SERS 2/3, and PSERS 2/3 will need to report them as net pension assets, and they will need to understand how to calculate their restricted net position and report negative pension expenses (i.e. an asset). As the SAO guidance states, cities will need to show their deferred inflows and deferred outflows related to the fully funded pension plans in their restricted net position calculation. Additionally, cities will that have a negative pension expense (i.e. a credit) should continue to be reported as a component of wages and benefits.

SAO says that in future reporting years, cities may once again have to report a liability on these plans. They say that this flip-flopping between assets and liabilities is common for plans that are close to 100% funded, and that cities will need to keep a closer eye on their pensions so they can correctly report each year.

Cities can reach out to DRS staff here if they have further questions about pensions reporting.