Certain Implementation Issues Related to Other Postemployment Benefits

Primary Objective: The objective of this project is to consider whether to modify certain requirements related to the measurement of actuarial liabilities for other postemployment benefits (OPEB) by agent employers.  

Status: The Board reviewed the ballot draft of the Statement on OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans at the December 2009 teleconference. The Board approved the release of the Statement.

Project Staff:

Lisa Parker
Michelle Czerkawski

Background: The proposed issues came to the Board’s attention through the technical inquiry process and subsequent expressions of disagreement with or requests for the Board to review certain requirements. The proposed issues are believed to affect significant numbers of governments and OPEB plans, including many small governments, based primarily on technical inquiries. Consideration of and action on the proposed issues needs to be accomplished on an expedited basis in order to benefit Phase 2 and Phase 3 implementers of Statements 43 and 45, should the Board conclude that the benefits would exceed the costs, considering not only the needs of preparers but also the needs of financial report users and the integrity of the OPEB standards (and postemployment benefits standards) as a whole.

The proposed issues relate primarily to the interface between the accounting and financial reporting requirements of Statements 43 and 45 in regard to agent multiple-employer and single-employer OPEB plans.

1. Frequency of actuarial valuations for smaller plans and employers within an agent multiple-employer plan. Parameters related to the minimum frequency of actuarial valuations apply both to plans and to employers. For employers in an agent multiple-employer plan that have individual plans with fewer than 200 total plan members, and would qualify for a triennial valuation schedule if considered separately, consideration of the plan’s minimum frequency generally results in a requirement to obtain valuations on a biennial schedule. Some constituents suggest that the Board consider changing the parameter or its application to such employers to permit such employers to obtain actuarial valuations triennially. This could disengage the coordination between employer and plan financial reporting in regard to agent multiple-employer plans. However, there may be reasons to reconsider the validity or usefulness of the aggregated actuarial information currently reported by agent multiple-employer plans, given that there are no requirements (a) that all individual employer plans be measured using the same actuarial methods and assumptions or (b) that all actuarial valuations be performed as of the same date.
    
2. Eligibility of smaller plans and employers within an agent multiple-employer plan to use the alternative measurement method. Current standards for sole and agent employers provide that an employer may use the alternative measurement method if (a) the employer is a sole employer with fewer than 100 total plan members, or (b) the employer is an agent employer with fewer than 100 plan members and, for some reason, the agent multiple-employer plan either is not required to or does not choose to issue annual financial reports that include actuarial information at the plan administrative level. The latter stipulations effectively disqualify agent employers from using the alternative method if the agent multiple-employer plan as a whole has 100 or more total plan members, is administered as a qualifying trust, and issues an annual financial report prepared in conformity with Statement 43. Some constituents have requested lifting of those stipulations in order to permit employers who otherwise would qualify because of size to use the alternative measurement method on a triennial schedule. The effects would be to permit aggregation of information derived in part from actuarial valuations and in part from use of the alternative measurement method, and to permit some employers to measure on a triennial schedule different from the plan’s two-year schedule. Considerations related to this issue are generally similar to those related to the request to permit some employers to obtain actuarial valuations on a triennial schedule. 

Accounting and Financial Reporting Issues: This project includes consideration of (1) the timing and frequency of the measurement of actuarial liabilities for OPEB by agent employers and (2) the guidelines regarding use of the alternative measurement method by agent employers with small individual OPEB plans.

Certain Implementation Issues Related to Other Postemployment Benefits—Minutes for Deliberations

Minutes of Teleconference, December 8, 2009

The Board reviewed and provided comments on a ballot draft of Statement No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans. The Board members suggested changes to further clarify the draft material. After discussion, the Board voted unanimously to issue the final Statement.

Minutes of Meeting, November 18-20, 2009

The Board reviewed and provided comments on a preballot draft of a final Statement, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans. The Board primarily made editorial suggestions to the draft material.

The Board also tentatively decided to add a parenthetical to the definition of agent multiple-employer plan in the glossaries of GASB 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, to provide a linkage between the terminology currently used in those Statements and the term individual-employer OPEB plan introduced in the draft material.

A ballot draft of a final Statement will be reviewed and considered for approval at the December 2009 teleconference.

Minutes of Meeting, October 6-8, 2009

The Board reviewed and discussed comments received in response to an Exposure Draft of the proposed Statement, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans. The Board tentatively decided to retain in the final Statement a proposed amendment to GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, that would permit an agent employer that has an individual-employer OPEB plan with fewer than 100 total plan members to use the alternative measurement method, at its option, regardless of the number of total plan members in the agent multiple-employer OPEB plan in which it participates.

To conform with this change to Statement 45, the Board also tentatively decided to retain the Exposure Draft proposal to amend GASB Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, to permit an agent multiple-employer plan to meet its disclosure requirements by presenting aggregated individual-employer plan information resulting from a combination of actuarial valuations and measurements using the alternative measurement method, in cases in which the individual-employer plan is eligible.

In addition, the Board considered comments received in response to the proposal in the Exposure Draft to clarify the requirements in Statements 43 and 45 that the employers in an agent multiple-employer plan obtain actuarial valuations as of the same date and at the same minimum frequency as the plan. The Board tentatively decided to retain this clarification in the final Statement.

The Board also discussed the proposed effective date of the final Statement. In the Exposure Draft, the Board proposed that the Statement’s provisions be effective “for actuarial valuations first reported in OPEB plan or employer financial statements for periods beginning after June 15, 2010,” with earlier application encouraged. After deliberating on this proposal, the Board tentatively decided that (1) the provisions of the final Statement related to the alternative measurement method should be effective immediately upon the issuance of the Statement and (2)  the provisions of the final Statement related to the coordination of actuarial valuation dates should be effective for actuarial valuations first used to report funded status information in agent multiple-employer plan financial statements for periods beginning after June 15, 2011.

Minutes of Teleconference, June 23, 2009

The Board approved for issuance an Exposure Draft of the proposed Statement, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans. The Board balloted the document out of session and voted 7-0 to approve the issuance of the due process document.

Minutes of Meeting, June 2-4, 2009

The Board considered feedback on project issues and discussed a preballot draft of the Exposure Draft, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans. The Board made editorial changes to the proposed Exposure Draft and tentatively agreed that its provisions would be effective for actuarial valuations first reported in plan or employer financial statements for periods beginning after June 15, 2010.

The Board is scheduled to discuss a ballot draft of the proposed Statement and vote on the issuance of this Exposure Draft at the teleconference on June 23, 2009.

Minutes of Teleconference, May 12, 2009

The Board discussed issues related to the use of the alternative measurement method and the frequency and timing of measurements by certain employers in agent multiple-employer other postemployment benefit (OPEB) plans. The Board had first considered whether to expand the eligibility criteria for the use of the alternative measurement method by agent employers. The Board tentatively decided that Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, should be amended to permit an agent employer with fewer than 100 total plan members in its individual plan to apply the alternative measurement method, at its option, regardless of the size of the (aggregate) agent multiple-employer plan in which it participates. To conform with this proposed change to Statement 45, the Board also tentatively agreed that Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, should be amended so that the requirement that defined-benefit OPEB plans obtain an actuarial valuation is considered satisfied for an agent multiple-employer plan by a combination of individual-employer plan actuarial valuations and, for those individual-employer plans that are eligible, measurements using the alternative measurement method.

The Board also deliberated whether Statement 45 should be amended to permit triennial measurements of an agent employer’s individual OPEB plan regardless of the size of the (aggregate) agent multiple-employer plan in which it participates. The Board tentatively decided to retain the current requirement that an agent plan and its participating employers report OPEB measures determined at the same frequency. In addition, the Board discussed and tentatively agreed to retain the current requirement that actuarial measurements reported by an agent plan and its participating employers be determined as of a common date. With regard to the frequency and timing issues, the Board directed the staff to include in the text of the Exposure Draft a clarification of the existing requirements.

A preballot draft of the proposed Statement will be discussed at the June meeting.

Certain Implementation Issues Related to Other Postemployment Benefits—Major Tentative Decisions to Date

Statement No. 57 , OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, was approved in December 2009.