Early retirement liabilities change school finances
By Jenny Welp Journal staff writer | Posted: Monday, June 18, 2007
Next year the Sioux City Community School District's financial statements will include a footnote about a $25 million liability that never used to be reported. That's because the Governmental Accounting Standards Board is changing the way state and local governments must show the liabilities related to early retirement.
"It's a full disclosure of the future potential liabilities that may affect state and local governments," said Gordy Winterlin, accounting manager for the Sioux City school district.
Local and state government employees in Iowa can take early retirement if their age plus years of experience equal at least 88. For example, teachers could potentially retire at age 55. They would receive a pension from the state, but they would not yet be eligible for Medicare or Social Security.
So in 1995, the local district began offering early retirement medical as another benefit for employees. At first the district covered 100 percent of the expense, but now it covers between 50 and 72 percent of the cost, depending on how long the employee worked in the district.
Until now, the school district's financial statements have only shown the liability of all the employees who have already taken early retirement.
While the Sioux City school district's expense for early retirement medical in fiscal year 2006 was $728,612, the long-term liability of those early retirees was shown to be about $3.1 million.
But the Governmental Accounting Standards Board decided governments needed to also show in their financial statements the eventual liability of current employees who may take early retirement.
Winterlin said an actuary will look at the governmental agency's employees of all ages and experience levels and figure how many will likely take early retirement one day. He said the total liability in today's dollar of all those early retirees in Sioux City is expected to be about $25 million.
"It's a full disclosure of the future potential liabilities that may affect state and local governments," said Gordy Winterlin, accounting manager for the Sioux City school district.
Local and state government employees in Iowa can take early retirement if their age plus years of experience equal at least 88. For example, teachers could potentially retire at age 55. They would receive a pension from the state, but they would not yet be eligible for Medicare or Social Security.
So in 1995, the local district began offering early retirement medical as another benefit for employees. At first the district covered 100 percent of the expense, but now it covers between 50 and 72 percent of the cost, depending on how long the employee worked in the district.
Until now, the school district's financial statements have only shown the liability of all the employees who have already taken early retirement.
While the Sioux City school district's expense for early retirement medical in fiscal year 2006 was $728,612, the long-term liability of those early retirees was shown to be about $3.1 million.
But the Governmental Accounting Standards Board decided governments needed to also show in their financial statements the eventual liability of current employees who may take early retirement.
Winterlin said an actuary will look at the governmental agency's employees of all ages and experience levels and figure how many will likely take early retirement one day. He said the total liability in today's dollar of all those early retirees in Sioux City is expected to be about $25 million.
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