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Payoff of WRS Unfunded Liability


									                     Cooperative Educational Service Agency (CESA)
             Wisconsin Retirement System (WRS) Prior Service Liability Payoff

The following information relates to a CESA that elects to payoff WRS prior service liability.
The payoff is made either by use of available fund balance or long-term debt proceeds.

Account Coding
The payoff is recorded as expenditure in the fiscal period in which it occurs. When payment is
made using available fund balance, the payoff should be coded to function 290000, object 210.
Payment made with use of debt proceeds is treated as a refinancing transaction in the debt
service fund and the proper coding is function 282000, object 690.

Allowable Cost Under A-87
A-87 states that “amounts funded in excess of the actuarially determined amount for a fiscal year
may be used as the government units’ contribution in future periods” and “when a governmental
unit converts to an acceptable actuarial cost method, as defined by GAAP, the unfunded liability
at the time of conversion shall be allowable if amortized over a period of years in accordance
with GAAP”. DPI’s understanding of this is that a deferred charge would need to be set up in
the year of the payoff and the deferred charge would be amortized over the remaining life of the
WRS liability (which could be as long as 40 years).

The DPI position is that the liability payoff is not to be amortized. This conclusion is based on
the extensive amortization period on the payoff, the cumbersome recordkeeping required to
allocate the payoff with individual salaries and the minimal impact on allowable grant charges.

The payoff is considered to be a payment of an agency-wide obligation and is not associated with
any particular salary expenditure line item. Because it cannot easily be allocated as a benefit
cost it CANNOT be charged against federal or state aid.

How does CESA fund the payoff?
A CESA may be able to recover the cost of the payoff through an administrative assessment to
districts. The districts would not be able to charge the assessment against any categorical or
grant programs, but the cost to the districts would become shared cost.

Issued: April 26, 2004

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