Statement: Implementation of GASB 45

OPEB (other postemployment benefits) refers to postemployment benefits other than pension benefits and includes (a) postemployment healthcare benefits and (b) other types of postemployment benefits if provided separately from a pension plan.  This statement provides standards for the measurement, recognition, and reporting of OPEB expenses, liabilities (assets), note disclosures, and required supplementary information (RSI).

OPEB Measurement

Employers are required to measure and disclose an amount for annual OPEB cost on the accrual basis of accounting.  Annual OPEB cost is equal to the employer’s annual required contribution to the plan (ARC) with certain adjustments if the employer has a net OPEB obligation for past under- or overcontributions.

The ARC is defined as the employer’s required contributions for the year, and includes (a) the normal cost for the year and (b) a component for amortization of the total unfunded actuarial accrued liabilities (or excess) of the plan over a period not to exceed 30 years.

For financial reporting purposes, an actuarial valuation is required at least biennially for OPEB plans with a total membership of 200 or more.  Membership includes active employees, terminated employees who have accumulated benefits but are not yet receiving them, and retired employees currently receiving benefits.  Costs should include all benefits covered by the current plan at the time of each valuation and should take into consideration the pattern of sharing benefit costs between employer and employee.  The current plan is defined as the plan as understood by the employer and the employee.

Net OPEB Obligation

An employer’s net OPEB obligation is defined as the cumulative difference between annual OPEB costs and the employer’s contributions to a plan, including the OPEB liability or asset at transition, if any. (Since this statement provides for prospective implementation, employers generally set the OPEB obligation at zero in the year of implementation.) An employer with a net OPEB obligation is required to measure annual OPEB costs equal to (a) the ARC, (b) one year’s interest on the net OPEB obligation, and (c) an adjustment to the ARC to offset the effect of actuarial amortization of past under- or overcontributions.

Financial Statement Recognition and Reporting

OPEB expense in an amount equal to annual OPEB cost should be recognized in the financial statements. 

OPEB expenditures should be recognized on a modified accrual basis in governmental fund financial statements.  Net OPEB obligations, if any, including amounts associated with under- and overcontributions from governmental funds, should be displayed as liabilities (or assets) in government-wide financial statements and in proprietary and fiduciary funds.  Employers are required to disclose descriptive information about each defined benefit OPEB plan in which they participate, including the name of the plan; identification of the public employee retirement system; identification of the plan as a single-employer, agent multiple-employer, or cost-sharing multiple-employer defined benefit OPEB plan; a brief description of the types of benefits and the authority under which benefit provisions are established; and whether the OPEB plan issues a stand-alone financial report.  Employers are required to disclose the funding policy followed, including the authority under which the obligations of the plan members and employer to contribute to the plan are established; the required contribution rates of the plan members and employers; and the required contributions in dollars and percentage contributed for the current year and each of the two preceding years..  In addition, employers are required to disclose information about contributions made in comparison to the annual OPEB cost, changes in the net OPEB obligation, the funded status of each plan as of the must recent actuarial valuation date, and the nature of the actuarial valuation process and significant methods and assumptions used.  Employers are also required to present as RSI a schedule of funding progress for the most recent valuation and the two preceding valuations, accompanied by notes regarding factors that significantly affect the identification of trends in the amounts reported.

Effective Date

This statement provides for prospective implementation—employers will set the beginning net OPEB obligation at zero as of the beginning of the initial fiscal year.  This statement is effective for FY 2008.