GASB 67/68: Substantively automatic plan provisions

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This PERiScope article in the GASB 67/68 miniseries 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, 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.