How to Read an Actuarial Report (and Derive Journal Entries) · 2/27/17 1 How to Read an Actuarial...
Transcript of How to Read an Actuarial Report (and Derive Journal Entries) · 2/27/17 1 How to Read an Actuarial...
2/27/17
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How to Read an Actuarial Report (and Derive Journal Entries)
Preeta Nayak, Department of State Treasurer
March 2, 2017
References
LGERS December 31, 2014 Valua:on Report o h?ps://www.nctreasurer.com/ret/
Re:rement%20Reports/LGERSActuarialValua:on_December31_2014.pdf
JE template workbook – Summary Exhibit tab o h?ps://www.nctreasurer.com/slg/lfm/
audit_acct/Pages/Pension-‐Standards-‐Unit-‐Tools.aspxGASB 68
Same concepts apply to all cost-‐sharing plans 2
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Timeline
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12/31/2014 • Actuarial valua:on for ending balances
6/30/2015 • Measurement date of NPL, ending balances, pension expense, deferrals
6/30/2016 • Repor:ng date – current year
6/30/2017 • FY 2016 plan contribu:ons (deferred ou_lows) recognized in NPL
Abbreviations
Ø DO – deferred outflows of resources Ø DI – deferred inflows of resources Ø FYE – fiscal year end Ø NPL – net pension liability Ø NPA – net pension asset Ø SLGFD – State and Local Government Finance
Division Ø TSERS – Teachers and State Employees
Retirement System Ø LGERS – Local Government Employees
Retirement System 4
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Valuation overview
Why perform valuation? o Determine contribution rates o Differences between current and prior valuation o Meet standards of GASB and other regulatory
requirements Results
o Contribution rates o Actuarial value of assets and accrued liability o Other
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Tour of Report
Valuation process Demographic and financial data Employer contribution Plan balance sheet Accounting results Projections General actuarial terms, methods, summary of provisions Detailed employer participant information
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Accounting Results - TPL
Total Pension Liability calculation – Table 18 on page 33
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Accounting Results - NPL
NPL calculation – Table 19, page 33 • RSI
o Proportionate share of NPL o Funded percentage
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Sensitivity Analysis – Table 20, page 34 • Notes to financial statements
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JE components Component Source Loca/on in Audit Report
NPL Valua:on report (LGERS page 33)
SNP, RSI
Deferrals Experience Investment earnings
Actuaries’ data tables, LGERS page 33
SNP, notes
Pension expense
Actuaries’ data tables SOA, notes
Actual contribu:ons Accoun:ng system, valua:on report (page 33)
SNP, notes, RSI
Amor:za:on periods GASB Statement 68 and actuaries’ data tables
Propor:onate share percentage
Based on projected payroll (actuaries)
Notes, RSI
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Pension Expense
Not in valuation report o Two components
§ Actuarially allocated • Is on data tables
q Includes amortized deferral amounts § Difference between unit’s contributions and
ORBIT contributions
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Journal Entries
Includes CY amortizations, pension expense, current year NPA/NPL Contributions made subsequent to the measurement date (deferred outflows) Reclass entries
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Deferrals
Data comes from Summary Exhibit tab Four deferrals
o Proportionate share deferrals o Difference between expected and actual
experience o Difference between projected and actual
earnings o Change of assumptions (every 5 years)
Amortized to pension expense
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Deferrals - proportional share
Actually 2 different deferrals
• Change in proportionate share
• What unit contributed compared to what its
proportionate share of contributions is
Amortized to pension expense
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Deferrals - expected vs actual experience
• Demographic and economic data
• Numbers come from actuarial report
o Table 18, page 33
• Amortized to pension expense over actuarially
determined amortization period
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Deferrals - Change of assumptions
Future demographic and economic data
Assessed every 5 years – next study used with
December 31, 2015 valuation
Numbers come from actuarial report
o Table 18, page 33
Amortized to pension expense over actuarially
determined amortization period
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Deferrals – actual vs projected investment earnings
How investments performed compared to what was projected
o Overperform – DI – reduce pension expense over time
o Underperform – DO – increase pension expense over time
Included in collective pension expense Amortized to pension expense over 5 years Only deferral that can be netted
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Entries
Purpose Source Reverse beginning DO and record effect of measurement period contribu:ons on NPL
ORBIT
Adjust ending deferred ou_low and inflow balances to reflect CY change in propor:on
GASB 68, paragraph 54
Record prior years’ amor:za:on of deferrals Establish current year’s deferrals Data tables Record current year’s amor:za:on of deferrals
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Pension expense
Deferrals get amortized to pension expense annually Amortization of inflows will reduce pension expense – outflows will increase it Two components
o Current year’s share of collective/contribution differences
o Offset to amortization of deferrals
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Pension Expense, Reclass Entries
Purpose Source Record propor:onate share of collec:ve pension expense
Data tables (actuarially determined)
Reclass contribu:ons made subsequent to measurement date to DO
GASB 68, paragraph 57
Deferrals cleanup – reclassify and consolidate to match data tables
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Year 3 JE template wrap-up
Year 3 JE template is less complicated than year 2 template
All entries should look familiar Will add another layer All units using same set of entries
• No need to choose implementation year • Will not be able to use template if
implementing this year Annual entries
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Questions?
Preeta Nayak at 919-814-4291 or
Pension Standards Page -
https://www.nctreasurer.com/slg/lfm/audit_acct/
Pages/Pension-Standards.aspx
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Thank You!
Together we can build and maintain a fiscally strong and prosperous North Carolina.
www.NCTreasurer.com