GASB 45 Impact
For many public sector organizations, Governmental Accounting Standards Board (GASB) Statement 45 reporting will cause a significant increase in the expenses and liabilities that a public employer is required to recognize in its financial statements for Other Post-Employment Benefits (OPEB). These benefits include medical, dental, vision, life, long-term care and other insurance and benefits. Further, public employers will need to establish liabilities on their balance sheets equal to any of the recognized expenses that has not been funded.
Funding of OPEB obligations increasingly is becoming a credit concern due to (1) increasing cost of healthcare; (2) providing a high level of benefits to employees; and (3) reporting substantial OPEB liabilities on financial statements.The new GASB 45 reporting will make any disparities between public sector organizations apparent and easy to quantify. In some instances, the new reporting may reveal cases in which the actuarial funding of OPEB obligations would seriously strain operations, or further, may uncover conditions under which employers are unable to fulfill these obligations. In such cases, OPEB liabilities may adversely affect the credit worthiness of the organization because the overall liabilities, such as OPEB, would be increased and the ability/flexibility to address future expenditures would be reduced.
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.