Paying for GASB Actuarial Valuations

The OSA has received questions regarding the payment of fees for actuarial valuations performed as part of a relief association’s or a municipality’s implementation of the Governmental Accounting Standards Board (GASB) Statements No. 67 and 68. Specifically, questions have arisen as to whether a relief association may use special fund assets to pay for an actuarial valuation performed to obtain data needed to implement the new standards.

Minnesota Statutes permit the payment from a relief association’s special fund of certain defined “necessary, reasonable and direct expenses of maintaining, protecting and administering the special fund, when provided for in the bylaws of the association and approved by the board of trustees.” Actuarial expenses are authorized payments from the special fund under these conditions.

Relief associations that are having their financial statements audited and are implementing the new GASB standards may use special fund assets to pay for a GASB 67/68 actuarial valuation. If the actuarial valuation will also be used by the affiliated municipality for purposes of its audit, the relief association and the affiliated municipality should work together to decide which entity will bear the cost or whether it will be shared by the entities.

In the case of a relief association not having its financial statements audited, any GASB 67/68 actuarial valuation would solely be used by the affiliated municipality. The actuarial valuation expense would not be a necessary, reasonable and direct expense of maintaining, protecting or administering the relief association’s special fund. These relief associations therefore should not use special fund assets to pay for a GASB 67/68 actuarial valuation.

The new GASB standards do not impact whether a relief association is required to have an audit. The audit requirement is defined in Minnesota Statutes and is triggered when a relief association’s assets or liabilities exceed $750,000.

Published last in the May 2015 Pension Newsletter