The following questions and answers provide additional detail regarding GASB 43
and 45 and the actions that governmental employers can take to address these requirements.
Who is GASB?
The Government Accounting Standards Board (GASB) defines standards for external financial reporting for state and local governments.
What is GASB 45?
The Government Accounting Standards Board issued Statement 45 to require all governmental employers to quantify and disclose the value of non-pension, post-employment benefits [also known as "other post-employment benefits" (OPEBs)] offered to retired employees.
What is GASB 43?
GASB Statement 43 defines the financial reporting and disclosure requirements for OPEB plans that are administered as trusts or equivalent arrangements.
What are OPEBs?
OPEB stands for "other post-employment benefits." The "other" refers to post-employment benefits other than pensions and includes medical, prescription drug, vision, hearing, death and long-term care benefits that are provided following active employee service.
What will GASB 43 and 45 require?
To satisfy the applicable reporting requirements, financial statements will be required to report the value of benefits and measure actuarial liabilities for the promised OPEB benefits. In general, benefit costs are allocated over periods of employee service.
To whom do these requirements apply?
The reporting requirements of GASB 43 apply to plans that provide OPEB benefits from a trust or other arrangement. The reporting requirements of GASB 45 apply to the state and local governments that extend benefits to employees following active service.
When do these requirements apply?
Effective dates for the accounting and reporting requirements of GASB 43 and 45 are based on the government employe's total annual revenues for the first fiscal period ending after June 15, 1999. The reporting requirements of GASB 45 apply to periods a year later.
As defined by GASB 34 for the first fiscal period ending after June 15, 1999
What can you do to prepare?
- Identify the benefit plans to which these requirements apply
- Discuss the requirements with your auditor
- Engage an actuarial consultant to value the OPEB obligations
What is an actuarial consultant?
An actuarial consultant will be engaged to value future cash flows and to identify the current cost of benefits to satisfy GASB 43 and/or 45 accounting and reporting requirements.
What is the Alternative Measurement Method (AMM)?
Government entities with fewer than 100 plan members are eligible to complete their OPEB valuation under GASB 45 using the Alternative Measurement Method (AMM). Under AMM, the same broad measurements are used to project future cash outlays for benefits, discount projected benefits to present value and allocate the present value of projected benefits to periods using an actuarial cost method. Various assumptions and calculations have been simplified to enable non-specialists to perform the OPEB valuation. The AMM was developed by GASB so that smaller governmental agencies wouldn't be encumbered with the costs of an actuarial valuation every 3 years.
How do I define a plan member?
A plan member is considered one of the following:
- An employee who is currently entitled to receive post-employment benefits upon retirement
- An employee who will be eligible to receive such benefits upon retirement if he/she continues working
- Retired employees and their spouses who currently receive post-employment benefits
- Terminated employees who do not currently receive post-employment benefits but are entitled to benefits in the future
Is my agency automatically eligible to use the AMM if I have fewer than 100 total plan members?
The requirement is that the employer be the sole employer and have fewer than 100 active and retired plan members. You may also use the Alternative Measurement Method if you are an agent employer with fewer than 100 plan members whose plan is:
- not required to obtain an actuarial valuation under the guidelines of GASB Statement 43
- not required to issue a financial report prepared in conformity with GASB Statement 43
If you do not meet the requirements for using the AMM, GASB Assist can perform an actuarial valuation of your OPEB liabilities and provide all required GASB reports. Click here to learn more about our actuarial valuation services.
How frequently do I need to perform a GASB 45 valuation?
Governmental employers with fewer than 200 plan members are required to complete an actuarial valuation of their OPEB plan at least every 3 years. Those with greater than 200 plan members must complete an actuarial valuation at least every 2 years.
How do I request a proposal?
If you would like to request a proposal for an actuarial valuation, please click on our Proposal Request form. Be sure to indicate your interest in the Alternative Measurement Method question towards the bottom of the form. Once your information has been submitted, someone from the GASB Assist team will return a proposal to you within 7 business days.
What if I need my AMM report more quickly than your standard 4 week delivery time frame?
We do offer expedited service for an additional fee. However, because every client situation is unique, our actuaries will decide whether it is possible to comply with your time constraints. Please contact 877.217.5539 or email@example.com for immediate assistance.
How long will it take to complete an OPEB actuarial valuation?
Our typical work plan allows for a twelve week process that commences when we have received all plan and participant detail.
What is an OPEB actuarial valuation?
An OPEB actuarial valuation is a financial model that places a value on the obligations of the OPEB plan. The valuation places a value on the benefits of retired employees as well as the benefits that are expected to be provided to eligible active employees who will retire in the future. The values assigned will reflect the eligibility and benefit provisions of the OPEB plan as well as assumptions about current and future benefit costs, ages at which employees will retire and other related assumptions.
What information do we need to provide to complete an OPEB actuarial valuation?
We will need detailed information about the eligibility and benefit provision of the plan, census information regarding eligible active employees and covered retired employees and eligible spouses, as well as plan experience that will help us define the assumptions reflected in the actuarial valuation. This information will be assembled using reporting forms and instructions that we will provide.
Do you offer discounts to purchasing coalitions?
We offer discounts to purchasing groups of six or more who share the same benefit plan and administrator. Please contact 877.217.5539 or firstname.lastname@example.org for further information. If you do not meet this criterion, please take note of our "Referral Rewards" discount program.
Can GASB Assist help establish a trust for pre-funding our obligations?
Yes, GASB Assist can help you with the establishment of a trust.
What if we determine that we can't afford our OPEB liabilities?
Many agencies may not be aware of the true costs of their post-employment benefit packages, and concerns may be raised when these liabilities are quantified. GASB Assist can help you forecast future budget needs and the required annual contributions needed to ensure that you meet your obligations.
What planning options are available?
- Plan Design -- To start, governmental employers will need to carefully evaluate the benefit structures that are reflected in the plans they maintain. Plan documents and benefit descriptions provided to employees should be examined to confirm that they accurately reflect existing practices and desired objectives.
- Funding -- Funding adds security for retired and active employees, generally improves the balance sheet presentation of these obligations and can reduce long-term funding requirements with the addition of investment returns.
For additional information on how GASB Assist can help with regard to Plan Design and/or Funding, please contact us at 877.217.5539 or email@example.com.
To learn more about GASB financial reporting and disclosure requirements, go to www.GASB.org. Select Summaries/Status and then GASB Statements.