Employees of state and local governments generally receive two types of compensation in return for their labor—current compensation (salaries and health insurance benefits, for the most part) and deferred compensation (primarily pensions and retiree health insurance). Both current and deferred compensation are earned by the employees as they work. But whereas salaries and other forms of current compensation generally are received by employees while they are employed by the government, deferred compensation is not received until after employees have retired or otherwise left the employment of the government. The most common form of deferred compensation is pension benefits.

In the Preliminary Views, the GASB affirms this understanding of the nature of pension benefits—that they are a form of deferred compensation that is earned as employees work for a government—an understanding that underlies the existing pension standards.