GASB 45 Application
Public sector employers must comply with Governmental Accounting Standards Board (GASB) Statement 45 over the next three years.Implementation is phased in based on the public entities’total revenue.The GASB statement requires “more complete,reliable,and decision-useful financial reporting”with regard to retiree health and welfare benefits. These benefits, called Other Post-Employment Benefits (OPEB), include medical,dental,vision,life,long-term care and other insurance and benefits.
The OPEB liability is many times not obvious yet generates a significant financial impact on the financial statements. Many public employers subsidize the state wide retiree medical plan by providing benefits during periods not covered by the state wide plan such as early retirement. Even if the retiree pays all of the coverage, there could still be an OPEB liability to be reflected on the financial statements. The premiums paid by retirees tend to be the same regardless of their age even though medical costs increase as the retiree ages. This liability, known as an implicit rate subsidy, can create significant OPEB liabilities.
SMART has been assisting public entities in preparing for and complying with GASB Statement 45 by valuing the OPEB liabilities, providing assistance to interpret and understand the results and developing strategies to manage the costs.