The Governmental Accounting Standards Board (GASB) approved two statements it says will significantly improve accounting and financial reporting by state and local governments for post-employment benefits other than pensions (referred to as OPEB)—primarily retiree health insurance.
GASB Statement No. 74, “Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans,” addresses reporting by OPEB plans that administer benefits on behalf of governments. GASB Statement No. 75, “Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions,” addresses reporting by governments that provide OPEB to their employees and for governments that finance OPEB for employees of other governments.
Statement 75 replaces the requirements of GASB Statement No. 45. It requires governments to report a liability on the face of the financial statements for the OPEB that they provide, as follows:
- Governments that are responsible only for OPEB liabilities related to their own employees and that provide OPEB through a defined benefit OPEB plan administered through a trust that meets specified criteria will report a net OPEB liability—the difference between the total OPEB liability and assets accumulated in the trust and restricted to making benefit payments.
- Governments that participate in a cost-sharing OPEB plan that is administered through a trust that meets the specified criteria will report a liability equal to their proportionate share of the collective OPEB liability for all entities participating in the cost-sharing plan.
- Governments that do not provide OPEB through a trust that meets specified criteria will report the total OPEB liability related to their employees.
Statement 75 carries forward from Statement 45 the option to use a specified alternative measurement method in place of an actuarial valuation for purposes of determining the total OPEB liability for benefits provided through OPEB plans in which there are fewer than 100 plan members (active and inactive). This option was retained in order to reduce costs for smaller governments.
Statement 75 requires governments in all types of OPEB plans to present more extensive note disclosures and required supplementary information (RSI) about their OPEB liabilities. Among the new note disclosures is a description of the effect on the reported OPEB liability of using a discount rate and a health care cost trend rate that are one percentage point higher and one percentage point lower than assumed by the government. The new RSI includes a schedule showing the causes of increases and decreases in the OPEB liability and a schedule comparing a government’s actual OPEB contributions to its contribution requirements.
Some governments are legally responsible to make contributions directly to an OPEB plan or make benefit payments directly as OPEB comes due for employees of other governments. In certain circumstances—called special funding situations—Statement 75 requires these governments to recognize in their financial statements a share of the other government’s net OPEB liability.
Statement 74 replaces GASB Statement No. 43. It addresses the financial reports of defined benefit OPEB plans that are administered through trusts that meet specified criteria. The statement follows the framework for financial reporting of defined benefit OPEB plans in Statement 43 by requiring a statement of fiduciary net position and a statement of changes in fiduciary net position. The statement requires more extensive note disclosures and RSI related to the measurement of the OPEB liabilities for which assets have been accumulated, including information about the annual money-weighted rates of return on plan investments. Statement 74 also sets forth note disclosure requirements for defined contribution OPEB plans.NEXT: A new pension accounting statement.
The GASB also approved a third statement establishing accounting and financial reporting requirements for pensions and pension plans that were outside the scope of the pension standards the GASB released in 2012.
GASB Statement No. 73, “Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68,” completes the suite of pension standards. Statement 73 establishes requirements for those pensions and pension plans that are not administered through a trust meeting specified criteria (in other words, those not covered by Statements 67 and 68). The requirements in Statement 73 for reporting pensions generally are the same as in Statement 68.
However, the lack of a pension plan that is administered through a trust that meets specified criteria is reflected in the measurements.
The provisions in Statement 73 are effective for fiscal years beginning after June 15, 2015—except those provisions that address employers and governmental non-employer contributing entities for pensions that are not within the scope of Statement 68, which are effective for financial statements for fiscal years beginning after June 15, 2016. The provisions in Statement 74 are effective for financial statements for periods beginning after June 15, 2016. The provisions in Statement 75 are effective for fiscal years beginning after June 15, 2017. Earlier application is encouraged.
Statements 73, 74, and 75 will be available for download at no charge from the GASB website in late June. Printed copies of the statements will be available for purchase soon after. Other related resources also will be available on the website at that time.