The Governmental Accounting Standards Board has published two proposed statements to improve financial reporting by state and local governments of other post-employment benefits, such as retiree health insurance.
GASB also published a third exposure draft that would establish requirements for pensions and pension plans that are outside the scope of the pension standards that GASB released in 2012.
The three proposals, which were approved on May 28, are available to download at no charge on GASB’s Web site.
The proposed standards “will provide a better picture of the costs and liabilities of these benefit promises,” said GASB chairman David Vaudt. He believes they will make the long-term costs and liabilities clearer to all stakeholders. The proposals also bring the standards for other postemployment benefits into line with those for the 2012 pension standards, requiring state and local governments to use the same actuarial method as is now required for pension reporting (see GASB Proposes Imprvements in Reporting Health Insurance and Other retiree Benefits).
The first exposure draft related to other postemployment benefits, or OPEB, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (OPEB Employer Exposure Draft), proposes guidance for reporting by governments that provide OPEB to their employees and for governments that finance OPEB for employees of other employers.
The second exposure draft related to OPEB, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (OPEB Plan Exposure Draft), addresses the reporting by the OPEB plans that administer those benefits.
The third exposure draft, Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans That Are Not Administered through Trusts That Meet Specified Criteria, and Amendments to Certain Provisions of GASB Statements 67 and 68, would complete the pension standards by establishing requirements for those pensions and pension plans that are not administered through a trust meeting specified criteria.
The benefits covered by the new proposed standards mainly involve health care benefits, but also can include life insurance, disability, legal and other services.
Vaudt noted that the primary OPEB liability is for retiree health care. The other liabilities vary from government to government, although the others are small in comparison to retiree health insurance.
Asked about the decision by some governments, such as the state of New Jersey, to back away from promises of more fully funding their pension obligations, Vaudt responded, “The funding is a policy decision, but I do think these standards will highlight whether these liabilities are growing or shrinking.”
To help users, preparers, and auditors of financial statements familiarize themselves with the proposals, the GASB developed an OPEB web page that features new “plain English” resources, including an article outlining the key ways that the OPEB proposals will change how governments calculate and report the costs and obligations associated with OPEB; an article oriented to financial statement users that addresses how the proposed changes would affect the information that users receive about a government’s OPEB; a video featuring GASB chairman David Vaudt discussing the key principles of the OPEB proposals; a fact sheet answering frequently asked questions; along with a summary and the full text of the proposals.
Stakeholders are encouraged to review the proposals and provide comments by Aug. 29, 2014.
GASB plans to host public hearings on the exposure drafts on Sept. 10, 11, and 12, 2014. Locations and other details, including instructions for registering to participate, are highlighted in the exposure drafts.
GASB will be conducting two webinars about the proposals: a CPE webinar on July 30, 2014, beginning at 1:00 pm Eastern Time, and a webinar for financial statement users on August 8, 2014, beginning at 1:00 pm Eastern Time, that will be followed by a survey to collect feedback from users on the proposed standards.
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