GASB 67/68: Substantively automatic plan provisions

This PERiScope article authored by Michael Iacoboni discusses “substantively automatic” plan provisions and their inclusion in the determination of a plan’s total pension liability (TPL). For many plans, the concept of “substantively automatic” is critical to the treatment of cost-of-living adjustments (COLAs), which are often granted on a discretionary or ad hoc basis. In Statements 67 and 68, the Governmental Accounting Standards Board (GASB) neither objectively nor specifically defines the term “substantively automatic” and it does not prescribe a one-size-fits-all formula for determining if a plan’s COLA policies fall into this category.

To read Milliman’s PERiScope series on technical and implementation issues surrounding GASB 67 and 68, click here.