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| Posted on: Wednesday, March 16, 2005 |
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Governmental Accounting Standards Board (GASB) rules apply to state, city and county governments. On August 2, 2004, GASB issued Statement 45, Accounting and Financial Reporting by Employers for Post-employment Benefits other than Pensions. The Goal of the new rule is to provide information in the financial statement about the cost of providing other post-employment benefits (OPEB), and the extent to which those commitments have been funded. Prior to GASB 45, government employers typically recorded OPEB when the benefits were paid. GASB stated this method did not accurately reflect the true costs that governments were accumulating for future benefits of current employees.
GASB 45 requires employers report OPEB, which include medical, dental, vision and life insurance, the same way as they report pensions. The costs of OPEB will be allocated over the working life, not to exceed 30 years, of an employee. It is important to note that the employer will not have to fund OPEB, just book the liability. GASB 45 will be phased in over three years starting in 2006 based on annual revenue. Public employers with annual revenues in excess of $100 million will be subject to GASB 45 for fiscal years after December 15, 2006. Public employers with annual revenues between $10 million and $100 million will be subject to GASB 45 for fiscal years after December 15, 2007. Public employers with annual revenues less than $10 million will subject to GASB 45 for fiscal years after December 15, 2008.
A significant increase of OPEB liability could impact credit ratings.
Should you have any additional employee benefit questions or would like to discuss this material in detail, please don’t hesitate to call the Denman Team.
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