Accounting For Other Post Employment Benefits (OPEB) Under GASB Rule No. 45

The Governmental Accounting Standards Board (GASB)’s Statement No. 45 requires that state and local government employers record Other Post Employment Benefits (OPEB), such as retiree health care or life insurance, as an accrued liability rather than an annual operating expense. As a result, the size of long-term liabilities has increased dramatically and many governments are taking steps to actively manage their OPEB liabilities.

The following is a list of case studies, surveys and reports that offer public sector plan sponsors information on GASB 45 and what can be done to fulfill its requirements.

Toolkits

• Governmental Financial Officers Association (GFOA) OPEB Toolkit
  A collection of documents, presentations, case studies and templates designed to help government officials manage their OPEB challenges.

Case Studies and Surveys

• Berman, E. S. (2006). The Elephant in the Room: Unfunded Public Employee Health Care Benefits and GASB 45. White Paper, 3(32) Pioneer Institute for Public Policy Research.
  Examines GASB 45’s impact on state and local governments in terms of budgets, operations and bond ratings, and presents brief case studies on changes nine governments have made.
• Center on Budget and Policy Priorities. (2008, Mar. 11). Accounting for the Cost of Retiree Health and Other Benefits (GASB45) Washington, DC: Center on Budget and Policy Priorities.
  Outlines the effects of GASB 45 and spotlights five state governments and their decisions.
• Coggburn, J. D., Daley, D. M. and Kearney, R. C. (2008, Mar) Public Sector Retiree Health Care Benefits: A View from the American States Paper presented at the annual meeting of the WESTERN POLITICAL SCIENCE ASSOCIATION, Manchester Hyatt, San Diego, California School of Public and International Affairs at North Carolina State University in conjunction with the Center for State and Local Government Excellence.
  Reviews the effect of GASB 45 on public sector retiree health care through in-depth surveys of current program structures, state Human Resource departments, and measures being taken or considered to deal with post-employment benefit costs.
• Dr. Paula Sanford. National Center for the Study of Counties. (2007, Dec.). The Implementation of GASB 45: Case Studies of 15 Counties GA: Carl Vinson Institute of Government.
  Discusses challenges posed by GASB 45 and how 15 counties are working to overcome them.
• Fitch Ratings. (2007, Mar. 22). Old Promises, Emerging Bills: Considering OPEB in Public Finance Ratings. New York, NY: Fitch, Inc.
  Details how unfunded OPEB liabilities will affect credit ratings and gives six examples of cities, states and counties that have begun pre-funding these obligations.
• The Pew Charitable Trusts, The Pew Center on the States. (December 18, 2007). Promises with a Price: Public Sector Retirement Benefits. Washington, D.C.: The Pew Charitable Trusts.
  Summarizes current factors determining the cost of pension and other post-employment benefits (OPEB) and how the 50 states are addressing these obligations.
• Polly Scott et al. (2008, Apr.). Retiree Health Savings Plans for Public Sector Employees Washington. Prepared for the National Association of Governmental Defined Contribution Administrators.
  Examines defined contribution retiree health savings vehicles and provides four detailed case studies that show their role in retiree healthcare.
• Public Employee Post-Employment Benefits Commission. (2008). Funding Pensions & Retiree Health Care for Public Employees CA: PEBCA.
  Presents case studies of various cities, counties, and special districts in California and provides recommendations for addressing retiree health care funding.
• Standard and Poor’s. (2007, Nov. 12). U.S. States are Quantifying OPEB Liabilities and Developing Funding Strategies as the GASB Deadline Nears. New York: McGraw-Hill Companies.
  Outlines each of the 50 states’ strategies for managing OPEB liabilities.

Reports

• Brady, Steffanie. New England Public Policy Center. (2007). Other Post- Employment Benefit Promises: The Fog is Clearing. Boston, MA: New England Public Policy Center at the Federal Reserve Bank of Boston.
  Presents an overview of GASB 45 and outlines difficulties with its implementation.
• David Zion and Amit Varshney. Credit Suisse Securities, LLC. (2007, Mar. 22). You Dropped a Bomb on Me, GASB Credit Suisse Securities, LLC.
  Discusses the effects of GASB 45 and how state and local governments will likely respond.
• Governmental Accounting Standards Board. Summary of State No.43: Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. Washington, April 2004.
  Provides a summary of statement No. 43, as well as the reasoning behind its creation.
• Governmental Accounting Standards Board. Summary of State No.45: Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. Washington, June 2004.
  Provides a summary of statement No. 45, as well as the reasoning behind its creation.
• Hewitt Associates. (2006, Nov.). The Retiree Health Care Challenge. Presented at the Symposium for the TIAA-Cref Institute – Seeking Remedies to the Retiree Health Care Challenge
  Details the various aspects of health benefit plan design and funding decisions when attempting to strategically meet post-employment healthcare obligations.
• Kelley, A. G. & Ruggieri, M. P. (2007). Municipalities Get a Healthy Dose of Reality on Postemployment Benefits: The Effects of GASB43 and 45 on Government Finances. The CPA Journal, p. 28-36. Retrieved May 29, 2007, from Publication of the New York State Society of CPAs
  Article focuses on how GASB 43 & 45 have forced governments to address and re-evaluate their management of OPEB liabilities, as well as the regulations’ impact on credit ratings.
• Moody’s Investors Service. July 2005. Other Post-Employment Benefits (OPEB): New Accounting Requirements to Shed Light on Cost of State and Local Retire Health Benefits
  Explains how GASB 45’s spotlight on unfunded OPEB liabilities will affect credit ratings, and how governments have responded and will respond.
• Richard Cauchi. National Conference of State Legislatures Health Program. (2008, Apr. 24). State Employee Health Benefits Denver, CO: National Conference of State Legislatures.
  Lists modifications to each of the 50 states’ health benefit policies over the past four years.
• U.S. General Accountability Office (GAO). (2008, Jan.). State and Local Government Retiree Benefits: Current Funded Status of Pension and Health Benefit. Washington, D.C.: Government Printing Office. (GAO-08-223).
  Examines OPEB funding levels of state and local governments by focusing on governments’ annual contributions, the ratio of actuarial value of assets to actuarially accrued liabilities, and the size of unfunded liabilities.
• U.S. General Accountability Office (GAO). (2007). State and Local Government Retiree Benefits: Current Status of Benefit Structures, Protections, and Fiscal Outlook for Funding Future Costs. Washington, D.C.: Government Printing Office. (GAO-07-1156)
  Examines how benefits offered by state and local governments are provided, managed and protected, and considers the long-run and what actions governments are taking to meet their future obligations.