Ask Jack Jack Ehnes

What is the Governmental Accounting Standards Board’s intent behind new accounting rules?

GASB‘s intent behind the new accounting rules is to implement improved financial reporting, which CalSTRS supports. However, in their current state, the proposed GASB amendments do not accurately address the cost-sharing accountability structure of the CalSTRS pension system.

Unlike most systems, the plan sponsor of CalSTRS is the state of California, not the employer, which is the school district. Both are different entities and both contribute to the plan in addition to the employees. GASB is proposing to make the school employer (school districts) responsible for reporting unfunded liabilities.

However, at CalSTRS, the state as the plan sponsor is ultimately responsible for reporting the $56 billion funding shortfall and we don’t think it makes sense for school employers to be required to show a portion of the CalSTRS unfunded liability on their balance sheets. Because of this, CalSTRS has formally recommended GASB remove cost-sharing plans from the proposed amendments until more appropriate accounting standards can be implemented.

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