The GASB has issued three statements that are relevant to health care OPEB plans as follows.
- Statement No. 43 - Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans
- Statement No. 45 - Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions
- Statement No. 57 - OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans
Each is highlighted below.
Statement No. 43
Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans
In addition to pensions, many state and local governmental employers provide other postemployment benefits
(OPEB) as part of the total compensation offered to attract and retain the services of qualified employees.
OPEB includes postemployment healthcare, as well as other forms of postemployment benefits (for example, life
insurance) when provided separately from a pension plan.
GASB Statement No. 43 establishes uniform financial reporting standards for OPEB plans and supersedes the
interim guidance included in Statement No. 26, Financial Reporting for Postemployment Healthcare Plans
Administered by Defined Benefit Pension Plans. The approach followed in this Statement generally is consistent
with the approach adopted in Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note
Disclosures for Defined Contribution Plans, with modifications to reflect differences between pension plans
and OPEB plans.
The standards in this Statement apply for OPEB trust funds included in the financial reports of plan
sponsors or employers, as well as for the stand-alone financial reports of OPEB plans or the public employee
retirement systems, or other third parties, that administer them. This Statement also provides requirements
for reporting of OPEB funds by administrators of multiple-employer OPEB plans, when the fund used to accumulate
assets and pay benefits or premiums when due is not a trust fund. A related Statement, Accounting and Financial
Reporting by Employers for Postemployment Benefits Other Than Pensions (referred to as the related Statement),
addresses standards for the measurement, recognition, and display of employers’ OPEB expense/expenditures and
related liabilities (assets); note disclosures; and, if applicable, required supplementary information (RSI).
The measurement and disclosure requirements of the two Statements are related, and disclosure requirements are
coordinated to avoid duplication when an OPEB plan is included as a trust or agency fund in an employer’s
financial report. In addition, reduced disclosures are acceptable for OPEB trust or agency funds when a
stand-alone plan financial report is publicly available and contains all required information.
Summary of Standards
OPEB Plans That Are Administered as Trusts (or Equivalent Arrangements)
Financial Reporting Framework
The financial reporting framework for defined benefit OPEB plans that are administered as trusts or
equivalent arrangements includes two financial statements and two multiyear schedules that are required
to be presented as RSI immediately following the notes to the financial statements. The financial statements
focus on reporting current financial information about plan net assets held in trust for OPEB and financial
activities related to the administration of the trust. The statement of plan net assets provides information
about the fair value and composition of plan assets, plan liabilities, and plan net assets held in trust for
OPEB. The statement of changes in plan net assets provides information about the year-to-year changes in plan
net assets, including additions from employer, member, and other contributions and net investment income and
deductions for benefits and refunds paid, or due and payable, and plan administrative expenses.
Required notes to the financial statements include a brief plan description, a summary of significant
accounting policies, and information about contributions and legally required reserves. In addition, OPEB
plans are required to disclose information about the current funded status of the plan as of the most recent
actuarial valuation date, and actuarial methods and assumptions used in the valuation.
The required schedules (RSI) provide actuarially determined historical trend information from a long-term
perspective, for a minimum of three valuations, about (a) the funded status of the plan and the progress
being made in accumulating sufficient assets to pay benefits when due and (b) employer contributions to the
plan. The schedule of funding progress reports the actuarial value of assets, the actuarial accrued liability,
and the relationship between the two over time. The schedule of employer contributions reports the annual
required contributions of the employer(s) (ARC) and the percentage of ARC recognized by the plan as contributions.
The required schedules are accompanied by notes regarding factors that significantly affect the identification
of trends in the amounts reported.
Measurement (the Parameters)
Plans are required to measure all actuarially determined information included in their financial reports
in accordance with certain parameters. The parameters include requirements for the frequency and timing of
actuarial valuations as well as for the actuarial methods and assumptions that are acceptable for financial
reporting. If the methods and assumptions used in determining a plan’s funding requirements meet the parameters,
the same methods and assumptions are required for financial reporting by both a plan and its participating
employer(s). However, if a plan’s method of financing does not meet the parameters (for example, the plan
is financed on a pay-as-you-go basis), the parameters apply, nevertheless, for financial reporting purposes.
For financial reporting purposes, an actuarial valuation is required at least biennially for OPEB plans
with a total membership (including employees in active service, terminated employees who have accumulated
benefits but are not yet receiving them, and retired employees and beneficiaries currently receiving benefits)
of 200 or more, and at least triennially for plans with a total membership of fewer than 200. The projection
of benefits should include all benefits covered by the current substantive plan (the plan as understood by the
employer and plan members) at the time of each valuation and should take into consideration the pattern of
sharing of benefit costs between the employer and plan members to that point, as well as certain legal or
contractual caps on benefits to be provided. The parameters require that the selection of actuarial assumptions,
including the healthcare cost trend rate for postemployment healthcare plans, be guided by applicable
actuarial standards.
Alternative Measurement Method
OPEB plans with a total membership of fewer than one hundred have the option to apply a simplified
alternative measurement method instead of obtaining actuarial valuations. This alternative method includes
the same broad measurement steps as an actuarial valuation (projecting future cash outlays for benefits,
discounting projected benefits to present value, and allocating the present value of projected benefits to
periods using an actuarial cost method). However, it permits simplification of certain assumptions to make
the method potentially usable by non-specialists.
OPEB Plans That Are Not Administered as Trusts or Equivalent Arrangements
Multiple-employer defined benefit OPEB plans that are not administered as trusts or equivalent arrangements
should be reported as agency funds. Any assets accumulated in excess of liabilities to pay premiums or benefits,
or for investment or administrative expenses, should be offset by liabilities to participating employers.
Required notes to the financial statements include a brief plan description, a summary of significant accounting
policies, and information about contributions.
Defined Contribution Plans
Defined contribution plans that provide OPEB are required to follow the requirements for financial
reporting by fiduciary funds generally, and by component units that are fiduciary in nature, set forth
in Statement 34 and the disclosure requirements set forth in paragraph 41 of Statement 25.
Effective Date
GASB 43 is now effective for all governments.
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Statement No. 45
Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions
In addition to pensions, many state and local governmental employers provide other postemployment
benefits (OPEB) as part of the total compensation offered to attract and retain the services of qualified
employees. OPEB includes postemployment healthcare, as well as other forms of postemployment benefits
(for example, life insurance) when provided separately from a pension plan. This Statement establishes
standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (
assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial
reports of state and local governmental employers.
How This Statement Improves Financial Reporting
Postemployment benefits (OPEB as well as pensions) are part of an exchange of salaries and benefits
for employee services rendered. Of the total benefits offered by employers to attract and retain
qualified employees, some benefits, including salaries and active-employee healthcare, are taken
while the employees are in active service, whereas other benefits, including postemployment healthcare
and other OPEB, are taken after the employees’ services have ended. Nevertheless, both types of benefits
constitute compensation for employee services.
From an accrual accounting perspective, the cost of OPEB, like the cost of pension benefits, generally
should be associated with the periods in which the exchange occurs, rather than with the periods (often
many years later) when benefits are paid or provided. However, thein current practice of, most OPEB plans
was to are financed the plan on a pay-as-you-go basis, withand financial statements generally do not
reporting the financial effects of OPEB until the promised benefits are paid—normally after retirement.
As a result, current ffinancial reporting before GASB 45 generally faileds to:
- Recognize the cost of benefits in periods when the related services are received by the employer
- Provide information about the actuarial accrued liabilities for promised benefits associated
with past services and whether and to what extent those benefits have been funded
- Provide information useful in assessing potential demands on the employer’s future cash flows.
This Statement improves the relevance and usefulness of financial reporting by (a) requiring systematic,
accrual-basis measurement and recognition of OPEB cost (expense) over a period that approximates employees’
years of service and (b) providing information about actuarial accrued liabilities associated with OPEB and
whether and to what extent progress is being made in funding the plan.
Summary of Standards
Measurement (the Parameters)
Employers that participate in single-employer or agent multiple-employer defined benefit OPEB plans
(sole and agent employers) are required to measure and disclose an amount for annual OPEB cost on the
accrual basis of accounting. Annual OPEB cost is equal to the employer’s annual required contribution
to the plan (ARC), with certain adjustments if the employer has a net OPEB obligation for past under-
or over contributions.
The ARC is defined as the employer’s required contributions for the year, calculated in accordance
with certain parameters, and includes (a) the normal cost for the year and (b) a component for amortization
of the total unfunded actuarial accrued liabilities (or funding excess) of the plan over a period not
to exceed thirty years. The parameters include requirements for the frequency and timing of actuarial
valuations as well as for the actuarial methods and assumptions that are acceptable for financial
reporting. If the methods and assumptions used in determining a plan’s funding requirements meet the
parameters, the same methods and assumptions are required for financial reporting by both a plan and
its participating employer(s). However, if a plan’s method of financing does not meet the parameters
(for example, the plan is financed on a pay-as-you-go basis), the parameters nevertheless apply for
financial reporting purposes.
For financial reporting purposes, an actuarial valuation is required at least biennially for OPEB
plans with a total membership (including employees in active service, terminated employees who have
accumulated benefits but are not yet receiving them, and retired employees and beneficiaries currently
receiving benefits) of 200 or more, or at least triennially for plans with a total membership of fewer
than 200. T the projection of benefits should include all benefits covered by the current substantive
plan (the plan as understood by the employer and plan members) at the time of each valuation and should
take into consideration the pattern of sharing of benefit costs between the employer and plan members to
that point, as well as certain legal or contractual caps on benefits to be provided. The parameters
require that the selection of actuarial assumptions, including the healthcare cost trend rate for
postemployment healthcare plans, be guided by applicable actuarial standards.
Alternative Measurement Method
- The plan issues a financial report prepared in conformity with the requirements of Statement
43 but is not required to obtain an actuarial valuation because (a) the plan has fewer than one hundred
total plan members (all employers) and is eligible to use the alternative measurement method, or (b) the
plan is not administered as a qualifying trust, or equivalent arrangement, for which Statement 43
requires the presentation of actuarial information.
- The plan does not issue a financial report prepared in conformity with the requirements of
Statement 43.
This alternative method includes the same broad measurement steps as an actuarial valuation
(projecting future cash outlays for benefits, discounting projected benefits to present value, and
allocating the present value of benefits to periods using an actuarial cost method). However, it
permits simplification of certain assumptions to make the method potentially usable by nonspecialists.
Net OPEB Obligation—Measurement
An employer’s net OPEB obligation is defined as the cumulative difference between annual OPEB cost
and the employer’s contributions to a plan (including any premiums paid of retired members), including
the OPEB liability or asset at transition, if any. (Because retroactive application of the measurement
requirements of this Statement is not required, for most employers the OPEB liability at the beginning
of the transition year will be zero.) An employer with a net OPEB obligation is required to measure
annual OPEB cost equal to (a) the ARC, (b) one year’s interest on the net OPEB obligation, and (c) an
adjustment to the ARC to offset the effect of actuarial amortization of past under- or over contributions.
Financial Statement Recognition and Disclosure
Sole and agent employers should recognize OPEB expense in an amount equal to annual OPEB cost in
government-wide financial statements and in the financial statements of proprietary funds and fiduciary
funds from which OPEB contributions are made. OPEB expenditures should be recognized on a modified
accrual basis in governmental fund financial statements. Net OPEB obligations, if any, including amounts
associated with under- or over contributions from governmental funds, should be displayed as liabilities
(or assets) in government-wide financial statements. Similarly, net OPEB obligations associated with
proprietary or fiduciary funds from which contributions are made should be displayed as liabilities
(or assets) in the financial statements of those funds.
Employers are required to disclose descriptive information about each defined benefit OPEB plan in
which they participate, including the funding policy followed. In addition, sole and agent employers
are required to disclose information about contributions made in comparison to annual OPEB cost, changes
in the net OPEB obligation, the funded status of each plan as of the most recent actuarial valuation date,
and the nature of the actuarial valuation process and significant methods and assumptions used. Sole and
agent employers also are required to present as RSI a schedule of funding progress for the most recent
valuation and the two preceding valuations, accompanied by notes regarding factors that significantly
affect the identification of trends in the amounts reported.
Effective Dates and Transition
This Statement is now effective for all governments.
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Statement No. 57
OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans
The GASB has addressed issues related to the use of the alternative measurement method and the
frequency and timing of measurements by employers that participate in agent multiple-employer other
postemployment benefit (OPEB) plans (that is, agent employers). This was an issue with several California
governments who belonged to CALPERS.
GASB Statement No. 57 amends Statement No. 45, Accounting and Financial Reporting by Employers for
Postemployment Benefits Other Than Pensions, to permit an agent employer that has an individual-employer
OPEB plan with fewer than 100 total plan members to use the alternative measurement method, at its option,
regardless of the number of total plan members in the agent multiple-employer OPEB plan in which it
participates. Consistent with this change to the employer-reporting requirements, this Statement also
amends a Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans,
requirement that a defined benefit OPEB plan obtain an actuarial valuation. The amendment permits the
requirement to be satisfied for an agent multiple-employer OPEB plan by reporting an aggregation of
results of actuarial valuations of the individual-employer OPEB plans or measurements resulting from
use of the alternative measurement method for individual-employer OPEB plans that are eligible. Thus,
California governments who belong to CALPERS may use the alternative measurement method for plans with
fewer than 100 total plan participants.
Effective Date
The provisions of Statement 57 related to the use and reporting of the alternative measurement method
are effective immediately. The provisions related to the frequency and timing of measurements are effective
for actuarial valuations first used to report funded status information in OPEB plan financial statements
for periods beginning after June 15, 2011.
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