United States

GASB Exposure Draft addresses accounting for Section 457 plans

FINANCIAL REPORTING INSIGHTS  | 

The Governmental Accounting Standards Board recently issued an Exposure Draft, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans – an amendment of GASB Statements No. 14 and No. 84, and a supersession of GASB Statement No. 32. This Exposure Draft addresses (a) the applicability of component unit criteria to certain arrangements, including some Internal Revenue Code Section 457 deferred compensation plans, and (b) the accounting and financial reporting for Section 457 plans. If finalized, among other amendments, this Exposure Draft would require that:

  • For purposes of determining whether a primary government is financially accountable for a potential component unit, except for a potential component unit that is a defined contribution pension plan, a defined contribution OPEB plan, or an other employee benefit plan (for example, a Section 457 plan to which only employees contribute), the absence of a governing board should be treated the same as the appointment of a voting majority of a governing board if the primary government performs the duties that a governing board typically performs.
  • The financial burden criterion in paragraph 7 of Statement No. 84, Fiduciary Activities, be applicable to only defined benefit pension plans and defined benefit OPEB plans that are administered through trusts that meet certain criteria.
  • All accounting and financial reporting requirements relevant to pension plans be applied to Section 457 plans that meet the definition of a pension plan. 
  • All accounting and financial reporting requirements relevant to pensions be applied to benefits provided through Section 457 plans that meet the definition of a pension plan.
  • Investments of all Section 457 plans be measured as of the end of the plan’s reporting period in all circumstances.

If finalized, the requirements related to the accounting and financial reporting for Section 457 plans that meet the definition of a pension plan and benefits provided through those plans would be effective for fiscal years beginning after June 15, 2021. The requirements related to the applicability of component unit criteria to certain arrangements would be effective for reporting periods beginning after June 15, 2021. Certain other requirements are expected to be effective immediately upon issuance of the final standard.

The Exposure Draft is available for comment until April 10, 2020.

 

 

How can we help you?

To discuss how our team can help your business, contact us by phone 800.274.3978 or

EMAIL US


Subscribe to Financial Reporting Insights

(* = Required fields)