Definition
Under GASB Statement 68, a government employer that provides defined benefit pensions reports a net pension liability: the total pension liability, measured by an actuary, minus the plan's fiduciary net position. GASB Statement 67 sets the matching rules for plans. A cost-sharing employer reports its proportionate share. The net pension liability is measured as of a date no earlier than the end of the employer's prior fiscal year, applied consistently. Deferred outflows and inflows and pension expense are recognized alongside it.
Why it matters in an audit or review
The balance is often one of the largest on a government's statement of net position and depends on actuarial assumptions, such as the discount rate. Auditors obtain the plan's audited statements and actuarial report, evaluate the specialist, test the employer's contributions and census data, and check the proportionate share allocation. The notes disclose sensitivity to a change in the discount rate.
Example
Illustrative: total pension liability is $50,000,000 and plan fiduciary net position is $38,000,000, so the net pension liability is $12,000,000. A cost-sharing employer with a 2% proportionate share reports $240,000.
Common mistakes
- Using a measurement date earlier than allowed.
- Using contribution data that does not agree to the plan's records.
Sources
- GASB Statement No. 68, Accounting and Financial Reporting for Pensions: https://storage.gasb.org/GASBS_68_0.pdf
- GASB Statement No. 67, Financial Reporting for Pension Plans: https://www.gasb.org
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error