GFOA Resolution

The GFOA Supports Guidelines for Funding a Pension Plan 

Whereas, the Governmental Accounting Standards Board (GASB) has issued new pension standards for how state and local government employers should account for the cost of pension benefits; and

Whereas, under these new standards, the GASB will no longer require governmental employers to report an actuarially determined annual required contribution (ARC) in their financial reports; and

Whereas, the new GASB standards will no longer set the parameters within which an employer’s ARC must be calculated; and

Whereas, in the absence of an ARC, it will be difficult for stakeholders, including policy-makers, employees and the public to determine whether public pension funding commitments are being met and;

Whereas, there is a pressing need for widely recognized, standardized guidelines concerning what constitutes a sound funding plan for state and local government employers; and

Whereas, the GFOA and several other national associations representing state and local governments and retirement systems are developing  a set of recommended guidelines for funding a pension plan:

Now therefore, be it resolved that the GFOA supports the basic principle that state and local governments should have a pension funding policy based on an actuarially determined ARC, and believes that the general policy objectives for funding a pension plan should include practicing funding discipline, maintaining intergenerational equity, managing contributions as a stable percentage of payroll, and ensuring accountability and transparency.

Be it further resolved that the GFOA believes that a funding policy for pensions should address three core elements – actuarial costs, asset smoothing, and amortization – in a manner consistent with those general policy objectives.