GASB Rules Require States to Record Future Retiree Benefits
Maryland, one of 41 states that provide some health insurance for retirees, and one of 30 that record these costs on a pay-as-you-go basis, may have to direct its current budget surplus to fund health care benefits for future retirees, the Associated Press reports. The Government Accounting Standards Board’s (GASB) statements 43, Reporting for Postemployment Benefit Plans Other Than Pension Plans and 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other that Pensions, will require government entities to record Other Post-employment Benefits (OPEB) as accrued liabilities, similar to pension plans, according to the Economist.
Warren Deschenaux, the Maryland legislature’s chief fiscal adviser, said that the hit may not be as great as some people fear. He says that Maryland just needs to keep pace with other AAA-rated states, the AP reports.
The new rules make the costs of retiree-health obligations clearer, Karl Johnson of the GASB told the Economist. “These costs were always there,” he says. “They just weren’t disclosed and often were not measured.”
The private sector has had similar rules since 1992, the Economist reports, but the costs to governments are likely to be higher. Public sector employers are more likely to provide health care benefits and the benefits are usually more generous.
The annual OPEB costs will be based on actuarial valuations, and failure to adhere to the GASB statements can affect bond ratings and the quality of audits, the Economist says
The GASB has issued an Implementation Guide to Statements 43 and 45 that answers questions about actuarial issues, insurance rate subsidies and definitions of OPEB benefits, according to a press release. The statements will be implemented over three years with implementation for Statement 43 beginning December 15, 2005. Implementation of Statement 45 begins on December 15, 2006.