Other Post-Employment Benefits (OPEB) Overview

 

OPEB refers to benefits other than pension benefits. OPEB typically consists of health-care benefits, but might include other benefits such as life insurance, long-term care and similar benefits. Historically, these benefits have been administered on a pay-as-you-go basis and have not been reported as a liability on municipal financial statements. In Florida, state statutes require that the employer make health coverage available to retirees at the employer’s group rate. This creates an implicit cost that must be accounted for, potentially making this a financial issue for every municipality in Florida.

One of the largest changes is that previously under GASB 45 the unfunded actuarial accrued liability was reported in the footnotes of the balance sheet.  As of any fiscal year end after June 15, 2017, GASB 75 will now require employers to account for net OPEB liabilities on the face of the balance sheet.

Another important change is that while GASB 45 allowed governments to amortize the unfunded liability over a period of up to thirty years (approximately equal to a typical public employee’s term of employment), GASB 75 requires employers to report the entire OPEB liability.  This will have a significant impact on the employer’s net position for employers that previously elected to amortize the liability.

While the previous standard allowed governments to choose from one of six different “cost methods,” the new standard establishes one cost method for attributing the present value of benefit payments to specific years. This will allow for more comparability and create more transparency when surveying like plans, or plans within your region of the country.  Current pay-as-you-go expenses might be significantly lower than the ARC (annual required contribution).  After a period of time, however, it is estimated that pay-as-you-go costs are expected to far exceed the ARC. This is largely because of factors such as increasing number of retirees and inflation in health-care costs.

GASB 75 also changes the frequency of how often an actuarial valuation is required.  GASB 45 required every two years for employers with more than 200 employees, or every three years if there are less than 200 employees. GASB 75 requires an actuarial evaluation every 2 years no matter the employee size although there will still be an AMM (Alternative Measurement Method) option for plans with less than 100 employees.

Below is the additional information required under Statement 75:

  • Reconciliation of changes in deferred outflows and inflows.
  • Impact on the OPEB liability of a 1% increase and decrease in the discount rate; and the healthcare cost trend rate.
  • The effects of changes during the period on the total OPEB liability (changes in service costs, benefit changes, investment earnings).
  • Past 10 years beginning and ending OPEB liability.
  • OPEB plan’s fiduciary net position.
  • Components of the OPEB liability and related ratios, including covered employee payroll; OPEB liability as a % of covered payroll, % of net OPEB to total OPEB.

Sample GASB 75 Report

Click here to view OPEB options. For more information, contact Jeremy Langley at 850.552.5224 or Nicolle Bournival at 850.701.3630.


Public Record Request