New rules for college pension plans

The impact of GASB 68’s pension standards on educational institutions
By: | Issue: June, 2014
May 23, 2014

The Governmental Accounting Standards Board (GASB) voted unanimously in March to implement GASB Statement No. 68, Accounting and Financial Reporting for Pensions.

This accounting standard modifies existing financial reporting requirments as well as establishes new ones for governmental entities—including public colleges and universities—that participate in defined benefit pension plans.

GASB 68 dramatically changes the way that public colleges and universities account for their defined benefit pension plans. The primary consequence is that most institutions will have to report a much larger pension liability on their financial statements than in the past.

Until now, public colleges and universities were only required to report a pension liability to the extent that they were behind on their annual actuarially-determined payments into the pension plan. Under GASB 68, institutions will have to report a liability for the entire underfunded status of the plan.

Why is this significant?

Think of a governmental pension plan as though it were a mortgage. Under existing requirements, institutions only have to report a liability to the extent they have been behind on their monthly mortgage payments. Under GASB 68, they will have to report the entire remaining outstanding balance of the mortgage as a liability. As one can imagine, this will cause the pension liabilities reported by many colleges and universities to skyrocket.

A second significant consequence of GASB 68 is that institutions will have to report their portion of the liability of any cost-sharing, multiple employer pension plans they participate in. Until now, if a public college or university has participated in a cost-sharing plan with others, it only had to disclose the existence of the plan in a footnote, but did not have to record any liability related to the plan.

GASB 68 will require institutions participating in a cost-sharing plan to determine the underfunded status of the plan as a whole, and to record the proportional share of this liability on their financial statements.

Ready or not

A number of stakeholder groups, including finance officers, elected officials and industry observers, are concerned that many government entities won’t be ready for GASB 68’s 2015 launch.

Some groups also expressed concern that institutions in multi-employer pension plans may receive a modified audit opinion on their financial statements, since auditing procedures related to GASB 68 will not have been applied to the plans for a sufficient period. Accordingly, these stakeholder groups requested that the GASB indefinitely delay Statement No. 68.

Other organizations and stakeholder groups, however, urged the GASB not to delay implementation, and in the end, the board decided to stick to its original schedule.

Key reasons include the fact that many plans are already implementing GASB 67 (a related pronouncement governing financial reporting by pension plans), the strong objection of financial statements users to further delays in the implementation of Statement No. 68, and the GASB’s conclusion that the concerns raised by those requesting a delay were no different than the concerns raised during the initial deliberation of the standard.


Governmental entities and public colleges and universities are encouraged to begin planning for GASB 68 as soon as possible. The requirements of this standard are significant, and fiscal year 2015 is fast approaching.

To help preparers, auditors and government financial report users, GASB has released a free Statement No. 68 guide and online toolkit with resources, videos and articles on pension accounting and reporting requirements. The free toolkit can be found at

Ted Williamson and Brent Stevens are partners in RubinBrown’s Assurance Services Group, focusing on clients in the government, not-for-profit and college and university sectors.