Actuarial & Health Care Solutions, LLC
GASB Standards 43 and 45:
Accounting for Other Post-Employment Benefits, or OPEB
The Governmental Accounting Standards Board (GASB) has issued standards related to the accounting and reporting of Other Post-Employment Benefits (OPEB). Standard 43 applies to financial reporting for post-employment benefit plans other than pension plans. Standard 45 applies to accounting and financial reporting by employers for post-employment benefits other than pensions.
These standards require governments to account for and report the annual cost of OPEB. For many public sector employers, these amounts would be produced by actuarial valuations. The required implementation date was somewhere between 2006 and 2009. The date is based on whether the financial report is
issued for a plan or an employer, and also on the government’s total revenue.
The purposes of the valuation are to measure an employer’s liability for the post-employment benefit plans and to provide reporting and disclosure information for financial statements, governmental agencies, and other interested parties. A valuation report is prepared containing information that is required for compliance with the GASB Standards.
The Actuarial Accrued Liability (AAL), Annual Required Contribution (ARC), Net OPEB Obligation, and schedule of funding progress are some of the information that is required under the GASB standards. The AAL as of a particular date is the portion of the present value of all benefits expected to be paid to retirees, their beneficiaries, and any covered dependents attributed to the employee's service rendered to that date. The ARC is the amount recognized in an employer's financial statements as the cost of a post-employment benefit plan for a period. The Net OPEB Obligation is the cumulative difference (calculated beginning the effective date of the GASB Statement) between the annual OPEB cost and the employer’s contributions to the plan. The schedule of funding progress presents information about the plan’s funding progress for the most recent and preceding valuations.
A typical actuarial valuation for retiree health benefits would begin by gathering information on plan design, eligibility requirements, and two or three years of recent claims experience. Existing health insurance rates may be used if claims experience is not available. Census information on current employees and retirees is also needed. Date of birth, hire date, gender, marital status, and eligibility category (for example, teachers, administrators, and support staff) are the elements needed. The actuary would review this information, and, after discussions with the employer, select health care trend and discount rates, as well as retirement, disability, and withdrawal rates for use in the valuation.
Revisions to the GASB standards related to the accounting and reporting of OPEB have been proposed for fiscal years beginning after 12/15/15.