Project Pages

Other Postemployment Benefit Accounting and Financial Reporting

Project Description: The Board will consider the possibility of improvements to the existing standards of accounting and financial reporting for other postemployment benefits (OPEB) by state and local governmental employers and by the trustees, administrators, or sponsors of OPEB plans. One objective of this project is to improve accountability and the transparency of financial reporting in regard to the financial effects of employers’ commitments and actions related to OPEB. Another objective of this project is to improve the usefulness of information for decisions or judgments of the various users of the general-purpose external financial reports of governmental employers and OPEB plans. This project also will address accounting and financial reporting for postemployment benefits that are not provided through a qualified trust (as defined in paragraph 4 of GASB Statement No. 68, Accounting and Financial Reporting for Pensions).

Status:
Currently being deliberated
Exposure Drafts Approved May 2014
Added to Current Agenda: April 2011

Other Postemployment Benefit Accounting and Financial Reporting—Project Plan


Background: This project will assess the effectiveness of the OPEB standards by examining the related OPEB standards—Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The Board’s approach to date has been to apply a common framework to accounting and financial reporting for all postemployment benefits, including both pensions and OPEB. This project will consider many of the same developments and issues encompassed by the pension project.

Conceptual Developments. Relevant conceptual points of reference that were not available when the pension standards were developed were not applied as Statements 43 and 45 were being developed in order to align the pension and OPEB standards. These concepts include:
  • The definition of a liability in Concepts Statement No. 4, Elements of Financial Statements
  • The definition of communication methods—including recognition/display in basic financial statements, notes to basic financial statements, and required supplementary information (RSI)—in Concepts Statement No. 3, Communication Methods in General Purpose External Financial Statements That Contain Basic Financial Statements.
Other OPEB Accounting Standards. Other standards identified by the project staff as part of the research include:
  • Financial Accounting Standards Board (FASB)—Statement No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, as amended by Statement No. 158, Employers’ Accounting for Defined Benefit Pension Plans and Other Postretirement Plans
  • Federal Accounting Standards Advisory Board—Statement of Federal Financial Accounting Standards 5, Accounting for Liabilities of the Federal Government
  • International Public Sector Accounting Standards Board—International Public Sector Standard 25, Employee Benefits
  • International Accounting Standards Board—International Accounting Standard 19, Employee Benefits
  • Accounting Standards Board (ASB) of the United Kingdom—Financial Reporting Standard 17, Retirement Benefits
  • Public Sector Accounting Board of the Canadian Institute of Chartered Accountants—Public Sector Accounting Handbook Section PS 3250, Retirement Benefits
  • Australian Accounting Standards Board (AASB)—AASB 119, Employee Benefits.
Other Literature. Prominent in some discussions of OPEB accounting issues in accounting and actuarial arenas has been a view of OPEB reflecting the discipline of financial economics. Actuaries and financial analysts of that school of thought have expressed a distinctive analysis of OPEB benefits, the relationships among key parties having an interest in OPEB benefits, and the effects of accounting and financial reporting standards on decision making and the investment of plan assets. This view also has stimulated spirited response within the United States from some public OPEB actuaries that favor the traditional actuarial funding model.

State commissions, research groups, and consultants in various parts of the country have issued a number of studies of OPEB funding, governance, and other OPEB issues or problems that also may be useful as reference material for this project. The findings and recommendations of studies of this nature focus on particular facts and circumstances.

Accounting and Financial Reporting Issues
: The scope of this project includes issues (a) raised in the OPEB research and by participants in the pension accounting and financial reporting research project, (b) identified in literature on the subject, or (c) identified through the staff’s review of transactions and other events affecting OPEB in the application of existing standards by OPEB plans and employers, and the way that annual financial reports have reflected the effects of events in years since the effective dates of Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. It also includes consideration of relevant conceptual developments by the Board subsequent to the issuance of Statements 43 and 45 in Concepts Statements No. 3, Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements, and No. 4, Elements of Financial Statements. The scope of the project also includes consideration of more specific issues and potential improvements related to measurement, recognition, and disclosure of information about OPEB by employers and by OPEB plans. Tentative decisions reached with regard to pensions also will be considered in relation to postemployment benefits generally, consistent with the objective of maintaining a common approach and similar standards for all postemployment benefits to the extent appropriate.

The project also includes consideration of potential issues related to small governments, including issues related to the cost of implementation, and issues related to special-purpose entities, including comparability of accounting and financial reporting among governmental entities versus comparability among publicly and privately owned entities engaged in the same types of economic activity.

Project History:
  • Added to pre-agenda research: April 2011
  • Added to current technical agenda: April 2012
  • Task force established? Yes
  • Deliberations began: July 2012
  • Exposure Drafts approved: May 2014
  • Comment period: June–August 2014
Current Developments:

In May 2014, the Board approved the following three Exposure Drafts for public comment:
  • Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions
  • Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans
  • 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.
The public comment period ends August 29, 2014.

Work Plan:
December 2014: Redeliberate timing and frequency of valuations and measurements, expense recognition, number of plans, and plan reporting issues.
January 2015 (T/C): Redeliberate expenditure recognition and other modified accrual accounting issues and review alternative measurement method field test results.
January 2015: Redeliberate cost-sharing and special funding situation issues and alternative measurement method issues.
February 2015 (T/C): Redeliberate component unit-related issues.
March 2015: Redeliberate note disclosures, required supplementary information, defined contribution, and other issues.

April 2015:

Review preballot drafts of final Statements.

June 2015:

Review ballot drafts and issue final Statements.


Other Postemployment Benefit Accounting and Financial Reporting—Recent Minutes


Minutes of Meetings, November 11-13, 2014

The Board reviewed and deliberated on issues discussed in the Exposure Drafts, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (Employer Exposure Draft), Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (Plan Exposure Draft), and 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 (Pension Exposure Draft). The Board’s deliberations included consideration of comment letters received in response to the Exposure Drafts and testimony provided at the public hearings.

The Board began deliberations by discussing concerns raised by respondents to the Employer and Plan Exposure Drafts regarding the timeframe in which the final Statements are scheduled to be issued. The Board tentatively decided that the project timeline for issuing the final Statements should not be extended at this time.

The Board then discussed certain issues related to the scope and applicability of the Exposure Drafts. The Board considered a question raised by a respondent regarding whether the final Employer and Pension Statements should specifically address how the involvement of a component unit that does not report under GASB standards should be viewed for purposes of applying the provisions of the Employer and Pensions Exposure Drafts. The Board tentatively decided that the final Employer and Pension Statements should not address this specific circumstance, but it concluded that this issue should be included on the list of potential items to consider in an Implementation Guide. The Board then discussed whether the scope of the Postemployment Benefits project should be expanded to reexamine the requirements of Statement No. 16, Accounting for Compensated Absences. The Board tentatively decided that the scope of the project should not be expanded to include accounting for compensated absences.

The Board discussed a clarification requested by a respondent to reiterate that healthcare benefits paid through a pension plan are required to be accounted for and reported separately from pensions. The Board tentatively decided to include this clarification in each final Statement. The Board then discussed a suggestion for clarification raised by a respondent regarding the applicability of the Employer and Pension Exposure Drafts to nonemployer contributing entities in circumstances in which the nonemployer contributing entity makes benefit payments to third-parties. The Board tentatively decided to clarify the applicability of the final Employer and Plan Statements in these circumstances. The Board also discussed a request by a respondent to identify the applicability of requirements for accounting and financial reporting by governmental nonemployer contributing entities that have a legal requirement to provide financial support directly to a postemployment benefits other than pensions (OPEB) plan that is used to provide OPEB to employees of another entity but do not meet the criteria for a special funding situation for entities participating in defined benefit OPEB plans and for entities participating in defined contribution OPEB plans. The Board tentatively concluded that the clarification should be included in the final Employer and Pension Statements.

The Board discussed whether the definition of insured plan should be included in the scope and applicability section of the final Plan Statement and tentatively concluded that the definition should be included. The Board also discussed whether benefits that are provided through plans that are administered through trusts that meet the specified criteria should continue to be separately reported from those that are not in the Employer, Plan, and Pension Exposure Drafts. The Board tentatively concluded that this approach should be maintained for each final Statement.

The Board considered certain issues raised by respondents regarding employer liability recognition. The Board discussed whether the requirements for a single or agent employer to recognize a liability for its OPEB obligation as the net OPEB liability (if provided through an OPEB plan that is administered through a trust that meets the specified criteria) or as the total OPEB liability (if provided through an OPEB plan that is not administered through such a trust) should be carried forward to the final Employer Statement. The Board tentatively decided to carry forward the provisions for recognition of a single or agent employer’s obligation for OPEB from the Employer Exposure Draft. The Board then discussed respondent requests to present an employer’s liability for OPEB as a contingent liability in the employer’s financial statements. The Board tentatively decided that an employer’s liability for OPEB should not be presented in the employer’s financial statements using the term contingent. The Board also discussed the requirement that an employer that provides pensions through a pension plan that is not administered through a trust that meets the specified criteria recognize a liability for pensions equal to the total pension liability. The Board tentatively decided to carry forward this requirement to the final Pension Statement.

The Board discussed concerns raised by respondents regarding whether the OPEB plan’s fiduciary net position component of the net OPEB liability should be determined using the same valuation methods that are required to be used by the OPEB plan for purposes of reporting the OPEB plan’s statement of fiduciary net position. The Board tentatively decided that the OPEB plan’s fiduciary net position should be determined using the same valuation methods that are required to be used by the OPEB plan for purposes of reporting the OPEB plan’s statement of fiduciary net position.

The Board then discussed issues related to the projection of benefits in the measurement of the total OPEB liability and the total pension liability. The Board began by considering whether the projection of OPEB should include taxes or other assessments on benefit payments. The Board tentatively decided to carry forward to the final Employer and Plan Statements the provision that the projection of benefit payments for purposes of measuring the total OPEB liability should incorporate the projected effects of taxes or other assessments on benefit payments.

The Board tentatively decided that the excise tax imposed as a result of the Patient Protection and Affordable Care Act should not be explicitly identified in the standards section of the Employer and Plan Statements. The Board also discussed whether projected benefit payments should be reduced for subsides expected to be received for making benefit payments other than those received for providing Medicare benefits. The Board tentatively concluded that projected benefit payments for purposes of measuring the total OPEB liability should not be reduced for amounts expected to be received for making payments other than those received for providing Medicare benefits.

The Board discussed the use of claims costs, or age-adjusted premiums approximating claims costs, to project OPEB. The Board tentatively decided that the projection of benefit payments for purposes of measuring the total OPEB liability should be based on claims costs, or age-adjusted premiums approximating claims costs. The Board also tentatively decided that the term implicit rate subsidy should not be used in the standards section of the final Employer and Plan Statements. The Board also tentatively concluded that the glossaries of the final Employer and Plan Statements should not include a definition of age-adjusted premium. As part of this discussion, the Board also considered whether to modify references to the term claims costs to retiree claims costs. The Board tentatively decided not to make this modification. The Board also tentatively decided not to include an example of what is meant by claims costs and how claims costs should be determined in the final OPEB statements but to instead include this issue on a list of items to consider in an Implementation Guide.

The Board discussed whether the final Employer and Plan Statements should carry forward the provision that the projection of benefit payments for purposes of measuring the total OPEB liability include the effects of an established pattern of practice with regard to the sharing of benefit-related costs with inactive employees. The Board tentatively decided to carry forward this provision. The Board then discussed whether to include clarification that the projection of benefit payments for purposes of measuring the total liability should not include administrative expense. The Board tentatively concluded that this clarification should be included in each final Statement. The Board also discussed whether the requirements for projection of benefit payments for purposes of measuring the total OPEB liability should include explicit references to the need to consider the trend in future healthcare costs as part of the projection of healthcare-related benefits in the final Employer and Plan Statements. The Board tentatively decided that no reference should be included.

The Board discussed a request by a respondent that the requirements for projection of benefit payments for purposes of measuring the total OPEB liability not include an assumption for the healthcare trend rate. The Board tentatively concluded that the requirements for the projection of benefit payments should include consideration of the healthcare trend rate. The Board also discussed whether the projection of benefit payments for purposes of measuring the total liability should be made in accordance with the benefit terms and any additional legal agreements to provide benefits that are in force at the measurement date. The Board tentatively concluded that this requirement should be carried forward in each final Statement. The Board then considered whether the provisions for projection of benefit payments for purposes of measuring the total liability should include the consideration of the potential future effects of limitation of resources or caps on funding. The Board tentatively decided not to include this provision in each final Statement. The Board also tentatively decided that the requirements for projection of benefit payments for purposes of measuring the total pension liability in a qualified excess benefit arrangement should not be limited to the projection of benefit payments to employees receiving benefit payments.

Minutes of Teleconference, October 20, 2014

The Board reviewed a summary of the results of the field test conducted during the comment period for the Exposure Drafts, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, and Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. These results did not include the field test for the alternative measurement method, which will be reviewed by the Board at a future meeting.

Minutes of Meetings, September 30-October 1, 2014

The Board reviewed and deliberated on issues discussed in the 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. (Pension Exposure Draft). The Board’s deliberations included consideration of comment letters received in response to the Pension Exposure Draft and testimony provided at the public hearings.

The Board began deliberations by discussing the overall approach taken in the Pension Exposure Draft. The Board tentatively decided that the overall approach taken, which bases the accounting and financial reporting requirements on the requirements in Statement No. 68, Accounting and Financial Reporting for Pensions, continues to be appropriate.

Next, the Board considered a respondent’s request to require information about federal Social Security coverage to be provided in a note disclosure or in required supplementary information. The Board tentatively decided that these potential disclosures are outside the scope of the Postemployment Benefit Accounting and Financial Reporting project. However, the Board agreed to add this potential disclosure to the list of potential projects as part of its technical plan.

The Board then discussed a suggestion to issue the amendments to Statement No. 67, Financial Reporting for Pension Plans, and Statement 68 separate from the requirements for pensions and pension plans not administered through trusts that meet the criteria in paragraph 4 of the Pension Exposure Draft. The Board tentatively decided to issue one final Statement that includes all of the issues that were included in the Pension Exposure Draft.

The Board concluded by discussing general structure, organization, and format comments received in regard to the Pension Exposure Draft and the Exposure Drafts, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions and Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans.

Minutes of Meetings, May 28-29, 2014

The Board reviewed the ballot drafts of three proposed Statements: 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, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions.

The Board tentatively agreed on various clarifying changes to the Exposure Drafts. Finally, the Board unanimously agreed to move forward with the issuance of the three Exposure Drafts for comment.

Minutes of Meetings, April 8-10, 2014

The Board reviewed a ballot draft of an 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, tentatively agreeing on various clarifying changes to the draft.

Minutes of Meetings, March 3-5, 2014

The Board continued its discussion of the alternative measurement method to measure postemployment benefits other than pensions (OPEB) in relation to (1) default probabilities of an employee remaining employed until the assumed retirement age to use as turnover assumptions and (2) default factors for calculating age-adjusted premiums when the same premiums are charged to active and inactive employees and the employer or plan sponsor is unable to obtain age-adjusted premium information for inactive employees from the insurer or service provider. The Board tentatively agreed that when experience data on the covered group is not available, default probabilities for the turnover assumption in applying the alternative measure should be withdrawal rates by gender, age, and years of service in the most recently available annual report of the Civil Service Retirement and Disability Fund. The Board also tentatively agreed that project staff should continue to further explore options in relation to use of default probabilities in calculating age-adjusted premiums used in applying the alternative measurement method.

Next, the Board discussed expected benefits and perceived costs from proposed standards for (1) accounting and financial reporting for OPEB, (2) financial reporting for OPEB plans, and (3) accounting and financial reporting for pensions and financial reporting for pension plans that are not administered through trusts that meet specified criteria. The Board tentatively agreed that subject to additional information that will be obtained as the result of due process, including a scheduled field test, the expected benefits of information to stakeholders from the proposed standards exceed the anticipated costs to preparers and users.

The Board then discussed potential clarifying amendments to Statements No. 67, Accounting for Pension Plans, and No. 68, Accounting and Financial Reporting for Pensions, addressing requirements related to (1) notes to required supplementary information schedules for pension plans, (2) payables to the pension plan, (3) employers that have a special funding situation and receive support from nonemployer contributing entities that are not in a specific special funding situation, and (4) revenue recognition for the support of nonemployer contributing entities that make contributions that are not legally required. The Board discussed requirements for notes to required supplementary information schedules for pension plans and determined that Statement 67 should be amended to clarify that information presented in these notes related to factors that significantly affect trends in the annual money-weighted rate of return on pension plan investments is limited to factors within the control of management. Next, the Board agreed to amend Statements 67 and 68 to remove contractually deferred contributions with separate payment schedules from the category of separately financed specific liabilities to a pension plan.

The Board also tentatively decided Statements 67 and 68 should clarify that amounts to reduce payables for contractually deferred contributions with separate payment schedules should be excluded from measures of actuarially determined contributions, contractually required contributions, and statutorily required contributions that are required to be presented in schedules of required supplementary information. The Board also tentatively decided that Statement 68 should be amended to adjust the amounts recognized as revenue and expense by an employer that has a special funding situation for a separately financed liability. For employers that provide pensions through a cost-sharing plan, the Board tentatively agreed that Statement 68 should be amended to require the employer to recognize revenue and pension expense equal to the support provided by the nonemployer contributing entity. For employers that provide pensions through single or agent employer plans, Statement 68 should be amended to require the employer to recognize revenue for the support of the nonemployer contributing entity. The Board also tentatively agreed that Statement 68 should be amended to adjust the amounts recognized as expense by each employer and nonemployer contributing entity that does not have a separately financed liability by reducing expense in an amount equal to its proportionate share of the contributions recognized by the pension plan for separately financed specific liabilities of other employers or nonemployer contributing entities. Next, the Board tentatively decided that guidance should be added to the Comprehensive Implementation Guide to clarify the accounting and financial reporting for an employer that has a special funding situation and also receives support from a nonemployer contributing entity that is not in a special funding situation. The Board also tentatively decided that Statement 68 should be amended to clarify that revenue should be recognized in the period in which the change in the net pension liability is reported for the support of nonemployer contributing entities that are not in a special funding situation, rather than in conformity with the revenue recognition requirements of Statement No. 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance.

The Board also reviewed preballot drafts for proposed Statements on (1) accounting and financial reporting for OPEB, (2) financial reporting for OPEB plans, and (3) accounting and financial reporting for pensions and financial reporting for pension plans that are not administered through trusts that meet specified criteria. The Board tentatively agreed to various clarifying changes to the drafts and directed the project staff to prepare ballot drafts for the proposed Statements.

Minutes of Meetings, January 27-29, 2014

The Board continued a discussion from its December Board meeting on the effective date for the implementation of the proposed Statement on accounting and financial reporting for postemployment benefits other than pensions (OPEB). Project staff presented feedback from the OPEB Accounting and Financial Reporting Task Force regarding proposing an effective date for employers that administer OPEB outside of qualifying trusts, or equivalent arrangements, one year earlier than for those employers that administer OPEB through trusts. The Board tentatively decided to propose that the proposed Statement for OPEB accounting and financial reporting be effective for fiscal years beginning after December 15, 2016, with earlier implementation encouraged, for all employers regardless of whether or not a trust is used to administer the OPEB. The Board also changed its previous tentative decision for the effective date of the proposed Statement for OPEB plans from fiscal years beginning after June 15, 2016, to fiscal years beginning after December 15, 2015, with earlier implementation encouraged. In addition, the Board tentatively decided to propose that the proposed Statement for accounting and financial reporting for pensions that are not administered through trusts be for fiscal years beginning after June 15, 2016, with earlier implementation encouraged.

The Board also reviewed preliminary draft standards sections of the Exposure Drafts for (1) accounting and financial reporting for OPEB and (2) accounting and financial reporting for pensions that are not administered through trusts. The Board provided recommendations and suggestions for clarification on the draft documents. Subject to those clarifications and revisions, the Board directed the project staff to prepare a preballot draft for consideration at the March 2014 Board meeting.

The Board also reviewed proposed illustrations for the proposed Statement for OPEB plans and provided recommendations and suggestions for clarification on the illustrations.

Minutes Archive
 

Other Postemployment Benefit Accounting and Financial Reporting—Tentative Board Decisions


These tentative decisions have been made since the issuance of the Exposure Drafts and in anticipation of a final Statement. The Board tentatively agreed on the following:

Project Scope
  • Potential disclosures about federal Social Security coverage should be excluded from the Postemployment Benefit Accounting and Financial Reporting project.
Pensions That Are Not Administered Through Trusts
  • The overall approach taken in the 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 (Pension Exposure Draft), which bases the accounting and financial reporting requirements on the requirements in Statement 68, continues to be appropriate.
  • An employer that provides pensions through a pension plan that is not administered through a trust that meets the specified criteria to recognize a liability for their total pension liability should be carried forward to the final Employer Statement.
Postemployment Benefits Other Than Pensions (OPEB)

Scope and Applicability
  • The approach should be maintained to separately report benefits that are provided through plans that are administered through trusts that meet specified criteria from those that are not in the final Employer, Plan, and Pension Statements.
Liability Recognition
  • For single or agent employers:
    • Recognition of a liability for its obligation related to OPEB should be determined as:
      • The net OPEB obligation (the total OPEB liability less OPEB plan fiduciary net position) if provided through an OPEB plan that is administered through a trust that meets specified criteria
      • The total OPEB liability if provided through an OPEB plan that is not administered through a trust that meets the specified criteria
  • OPEB plan fiduciary net position should be determined using the same valuation methods that are required to be used by the OPEB plan for purposes of preparing the OPEB plan’s statement of fiduciary net position.
     
  • Projected benefit payments in the measurement of the total OPEB liability should:
    • Include the projected effects of taxes or assessments on benefit payments.
    • Not be reduced by subsidies expected to be received for making benefit payments other than those received for providing Medicare benefits.
    • Be based on claims costs, or age-adjusted premiums approximating claims costs.
    • Include the effects of an established pattern of practice with regard to the sharing of benefit-related costs with inactive employees.
    • Be made in accordance with the benefit terms and any additional legal agreements to provide benefits that are in force at the measurement date.
    • Not include consideration of the potential future effects of limitation of resources or caps on funding.