Statement Number 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, offers a road map to governments not only in how to account for postemployment healthcare and other nonpension benefits -commonly referred to as other postemployment benefits (OPEB) – but also how those results should be reported. Under the mandate, state and local governmental employers would account for and report the annual cost of OPEB in essentially the same manner as they currently do for pensions, according to a news release.
Additionally, Statement 45 establishes disclosure requirements for information about the plans in which an employer participates, the funding policy followed, the actuarial valuation process and assumptions, and, for certain employers, the extent to which the plan has been funded over time. Annual OPEB cost for most employers will be based on actuarially determined amounts that generally would provide sufficient resources to pay benefits as they come due, the GASB said.
Further, the GASB said the provisions of accounting standard can be applied prospectively and do not require governments to fund their OPEB plans. An employer may establish its OPEB liability at zero as of the beginning of the initial year of implementation; however, the unfunded actuarial liability is required to be amortized over future periods.
The effective date for compliance is dependant upon the government’s total annual revenues. The largest employers would be required to implement the requirements of Statement 45 afterDecember 15, 2006. Medium-sized employers have one additional year to implement the standards, and the smallest employers have two additional years. Statement 45 can be ordered at www.gasb.org .