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GASB Issues Proposed Statement on Section 457 Plan Reporting

The Governmental Accounting Standards Board (GASB) has issued an exposure draft of a statement intended to enhance reporting for Section 457 plans.

Proposed Statement on 457 Plans that Meet the Definition of a Pension Plan and Supersession of GASB Statement 32 is intended to enhance the relevance, consistency and comparability of the accounting and financial reporting for Section 457 plans that meet the definition of a pension plan and for benefits provided through those plans.

All accounting and financial reporting requirements that are relevant to pensions should be applied to benefits provided through a 457 plan that meets the definition of a pension plan, GASB says. The proposed statement would:

  • establish accounting and financial reporting requirements for Section 457 plans that meet the definition of a pension plan and for benefits provided through those plans;
  • modify the investment valuation requirements for all Section 457 plans;
  • specify that 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; and
  • require investments of all 457 plans to be valued as of the end of the plan’s reporting period in all circumstances; and
  • apply to the financial statements of all state and local governments.

What it Would Supersede

The proposed statement would supersede the remaining provisions of Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, as amended, regarding investment valuation requirements for Section 457 plans.
 
The GASB says that Statement 32 was developed in response to a change in the Internal Revenue Code requiring that assets of 457 plans be “held in trust for the exclusive benefit of participants and their beneficiaries.” When Statement 32 was issued, the GASB did not view 457 plans as pension plans, but as being more similar to tax-deferred employee savings plans, primarily because 457 plans typically did not have employer contributions. Subsequent implementation guidance indicated that the pension standards should not be applied to benefits provided through 457 plans because those plans are not considered to be pension plans. However, the GASB says that after it issued Statement 32, the characteristics of certain 457 plans changed, due in part to revisions to the Internal Revenue Code.

The proposed statement also would supersede:

  • Implementation Guide No. 2015-1, Question 5.116.5; and
  • Implementation Guide No. 2016-1, Implementation Guidance Update—2016, Question 4.69.

Comments Accepted

The GASB is accepting written comments on the proposal through Sept. 27, 2019. Comments should be addressed to the Director of Research and Technical Activities, Project No. 3-33, and emailed to director@gasb.org.
 

Effective Date

The requirements of the proposed statement would be effective for fiscal years beginning after Dec. 15, 2020; however, the GASB encourages plans to apply it before that date.