Norwalk, Conn. (Feb. 5, 2004) -- The Governmental Accounting Standards Board has issued a revised exposure draft on a rule that would address how state and local governments should account for and report on retiree benefits costs and obligations.

The revised draft would require all employers to project future benefit payments based on retiree claims costs or on age-adjusted premiums approximating claims costs. Comments on the revised draft must be submitted by April 30, 2004.

The original exposure draft, issued in February 2003, would have exempted an employer from accounting for a rate subsidy provided to retirees as a result of their participation at a blended premium rate in the same group used to provide health care benefits to active employees.

After reviewing respondents' original comments, GASB concluded that employer contributions should be accounted for on an accrual basis, regardless of how the contributions are made. For example, if each retiree pays a blended rate of $240 per month, but the rate attributable to those retirees based on expected claims costs for their age is $400 per month per retiree, the employer is actually providing a $160 per-month benefit per retiree and should be incorporated in the post-employment benefit calculation.

-- WebCPA staff

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