September 2014

GASB Exposure Drafts Propose New Disclosures for Other Postemployment Benefits (OPEB)

In the interest of improving the transparency of financial reporting by public sector employers and health plans, the Governmental Accounting Standards Board (GASB) has issued two Exposure Drafts1 that would amend GASB Statements: No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans. The Exposure Drafts also would supersede the requirements of Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 50, Pension Disclosures, for defined contribution OPEB plans.

This Bulletin summarizes the key proposed changes in the Exposure Drafts, which are intended to provide a more comprehensive picture of the costs associated with state and local governments’ OPEB promises. If GASB decides to include the changes it has proposed in final Statements, sponsors of public sector plans will face significant additional work in order to prepare their financial statements. Segal Consulting’s comments to GASB on the Exposure Drafts2 suggested several modifications to ease that burden.


Frequency of Actuarial Valuations

Actuarial valuations would be required at least biennially for plans with 100 or more participants. Current standards require plans with fewer than 200 participants to perform triennial valuations. Plans with fewer than 100 participants would be offered an alternative measurement method to do their calculations.

Calculation and Recognition of OPEB Liabilities

GASB is proposing the following changes for plans and sponsoring employers:

  • The net OPEB liability, defined as the actuarial accrued liability offset by the OPEB plan’s fiduciary net position (if assets exist), would have to be recognized.
  • The actuarial accrued liability would have to be determined using the entry age actuarial cost method with a level percentage of pay. Under current accounting standards, plans and employers could choose among six different actuarial cost methods for determining their accrued OPEB liability.
  • The Affordable Care Act’s excise tax on high-cost health plans3 would have to be taken into consideration in calculating the net OPEB liability.

New Definition of OPEB Expense

The OPEB expense would be defined as the change in the net OPEB liability from year to year with some limited deferrals allowed.

For employers that provide insured benefits through an arrangement where premiums are paid to an insurance company while employees are in active service and the insurance company takes on the obligation to pay OPEB in retirement, the Exposure Draft requires recognition of OPEB expense equal to the amount of annual contributions or premiums required by the agreement with the insurance company. In addition to the amount of OPEB expense/expenditures recognized in the current period, a brief description of the benefits provided through the arrangement are required to be disclosed.

New Disclosures for Cost-Sharing Employers

Cost-sharing employers4 would be required to disclose their proportionate share of the collective net OPEB liability and expense and their contributions to the Plan. Cost-sharing employers must also disclose all of the items listed in the next section for their proportionate share.

Notes to Financial Statements

Notes to financial statements would be required to include:

  • A description of the OPEB plan,
  • Significant assumptions and other inputs, including sources of assumptions and dates of different experience studies,
  • Information about assets (i.e., investments, investment policy, and methods to determine fair value of assets),
  • Information about the selection of the discount rate and how it was determined,
  • The net OPEB liability under nine possible combinations of discount rate, the discount rate plus/minus 1 percent, the health care trend rate, and the health care trend rate plus/minus 1 percent,
  • The OPEB plan’s net fiduciary position (if the plan has assets),
  • A schedule of changes in net OPEB liability in which plan changes are recognized immediately and other gains/losses are amortized,
  • The measurement date,
  • A narrative about the actuarial measurement process and changes, and
  • A schedule showing the subsequent five years of amounts currently deferred to be recognized in expense and the aggregate amount thereafter.

Required Supplementary Information

Required Supplementary Information would have to include the following information, determined as of the measurement date, for each of the 10 most recent fiscal years:

  • The sources of changes in the net OPEB liability,
  • The components of the net OPEB liability and related ratios, including the OPEB plan’s fiduciary net position as a percentage of the total OPEB liability, and the net OPEB liability as a percentage of covered employee payroll, and
  • A schedule of contributions, if actuarially determined, statutorily or contractually required, and the amounts recognized by the OPEB plan and covered employee payroll.


The proposed effective date for the Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans Exposure Draft is for fiscal years beginning after December 15, 2015. The proposed effective date for the Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions Exposure Draft is for fiscal years beginning after December 15, 2016. Early implementation is encouraged, but the changes will not take place until GASB releases final Statements in June 2015.

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For more information about GASB’s OPEB Exposure Drafts or assistance in working with auditors to determine the potential impact of the proposed requirements on plans and practices, contact your Segal Consulting benefits consultant or one of the following experts:


1 Both Exposure Drafts — “Accounting and Financial Reporting for  Postemployment Benefits Other Than Pensions” and “Financial Reporting for  Postemployment Benefit Plans Other Than Pension Plans.” — can be accessed from  GASB’s website: http://www.gasb.org/cs/ContentServer?c=Page&pagename=GASB%2FPage%2FGASBSectionPage&cid=1175804830991

2 See the following page of Segal's website.

3 Beginning in 2018, the Affordable Care Act imposes a 40 percent excise  tax on the cost of high-cost health plans above a certain threshold. The base  thresholds for 2018 are $10,200 for self-only coverage and $27,500 for all  other coverage tiers, with higher thresholds available for certain participants.

4 Cost-sharing employers are those whose employees are provided a defined  benefit OPEB plan through a multiple employer plan in which the OPEB  obligations to the employees of more than one employer are pooled and plan  assets can be used to pay the benefits of the employees of any employer that  provides OPEB through the OPEB plan.


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