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Introduction to GASB Statement 45

This presentation, led by Idaho State Controller Carol Bearce, provides an overview of GASB Statement No. 45, which outlines accounting and financial reporting standards for post-employment benefits other than pensions (OPEB). It covers essential topics such as the definition and importance of OPEB, objectives of Statement 45, potential liabilities, and the need for guidelines. Additionally, it offers practical steps to get started, assess impacts on jurisdictions, and gather necessary data to comply with these standards.

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Introduction to GASB Statement 45

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  1. Introduction to GASB Statement 45 Presented by: Office of the Idaho State Controller Carol Bearce, CGFM 208-332-8815 cbearce@sco.idaho.gov

  2. Test Your Knowledge • Quick Quiz – True or False? • GASB is a famous novel by F. Scott Fitzgerald • Governmental Accounting Standards Board • GAAP is a clothing store chain • Generally Accepted Accounting Principles • OPEB is an oil cartel • Other Post-Employment Benefits

  3. OPEB Topics • Definition • Statement 45 Objectives • Need for OPEB Guidelines • Implicit Rate Subsidy • Potential Impacts • How to Get Started • Additional Resources

  4. Other Post-Employment Benefits (OPEB) • GASB Statement No.45: Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions • Post-employment benefits other than pension benefits • Provided separately from pension • Examples: • Healthcare (medical, dental, vision, hearing) • Life insurance, disability, long-term care

  5. Items that are NOT OPEB: • COBRA - Statement 47 • Sick Leave-Insurance Reserve Fund (SLIRF) – Compensated Absence - Statement 16

  6. Why is Stmt 45 Important? • Provide relevant information about: • Benefits promised • Cost of promised benefits • How to pay for promised benefits

  7. Statement 45 Objectives • Recognize OPEB cost during employees’ years of service • ‘Inter-period Equity’ • Fix ‘pay-as-you-go’ approach • Private Sector Experience • 1995 – 43%, 2005 – 26%

  8. Pay-as-you-go Example Jason – Age 30Jane – Age 59 Pay $ 30,000 Pay $ 50,000 Health $ 3,000 Health $ 3,000 Fringe $ 5,000 Fringe $ 5,000 Total $ 38,000 Total $ 58,000

  9. Pay-as-you-go Example Jason – Age 31Jane – Age 60(retired) Pay $ 31,000 Pay $ 0 Health $ 3,300 Health $ 3,300 Fringe $ 5,150 Fringe $ 0 Total $ 39,450 Total $ 3,300

  10. Why Are OPEB GuidelinesNeeded? • Current practice does not reflect true financial impact of future cost • Project cash outflows for benefits • Highlight the true cost to decision makers • Implicit Rate Subsidy

  11. Implicit Rate Subsidy

  12. Implicit Rate Subsidy

  13. Implicit Rate Subsidy

  14. Potential Impacts • New, potentially significant liability • Financial condition and bond ratings • Catches the attention of policy makers (unlike most accounting standards) • Changes to benefit plans? • Do you need a trust? • YOU may need an actuary

  15. Implementation Dates for OPEBGASB Statement 45

  16. How to Get Started • Educate Financial Managers & Policy Makers • Assess Impact to Your Jurisdiction • Additional Considerations • Gather data • Plan Changes? • Union Negotiations • Disclosure in Bond Documents

  17. Additional Resources • GASB – www.gasb.org • Statement 45 • Implementation Guide for Statements 43 & 45 • Technical Inquiries • Documents and Links • GFOA – www.gfoa.org • Related articles • “Elected Official’s Guide to OPEB” • “Governmental Accounting, Auditing, and Financial Reporting” (AKA The Blue Book)

  18. Questions?

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