GASB Issues Revised Exposure Draft on Employer Reporting of Other Postemployment Benefits

The Governmental Accounting Standards Board (GASB) has issued a revised Exposure Draft, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The Exposure Draft addresses how state and local governments should account for and report their costs and obligations related to postemployment healthcare and other non-pension benefits provided to retirees (collectively referred to as other postemployment benefits, or OPEB). The GASB is re-exposing the proposed employer standards to provide an opportunity for comment on a change related to accounting for “implicit rate subsidies” to retirees for postemployment healthcare benefits. Comments are required by April 30, 2004.

The original Exposure Draft, issued in February 2003, would have exempted an employer from accounting for the rate subsidy provided to retirees as a result of their participation at a blended premium rate in the same group used to provide healthcare benefits to active employees, under certain conditions. However, after discussion of respondents’ comments, the Board has concluded that to provide more complete and comparable governmental financial statements, employer contributions should be accounted for as OPEB on an accrual basis, without regard to the form—explicit or implicit—in which the contributions are made. For example, if each retiree pays a blended rate of $240 per month, but the rate attributable to those retirees based on expected claims costs for their age is $400 per month per retiree, the employer is actually providing a $160 per month benefit per retiree that the Board believes should be incorporated in the OPEB calculation. The revised proposals generally would require all employers to project future benefit payments based on retiree claims costs, or on age-adjusted premiums approximating claims costs.

The Board concluded that the change would benefit users of financial reports by ensuring the transparent financial reporting of potentially significant OPEB costs and commitments that otherwise could easily be overlooked because of the form in which the employer’s contribution is made," said OPEB Project Manager Karl Johnson.

The Exposure Draft may be obtained by telephoning the GASB Order Department at 800-748-0659 or by placing an order on-line at the GASB website.

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