Other Postemployment Benefits (OPEB)

What is OPEB?

Other Postemployment Benefits (or OPEB) are benefits (other than pensions) that U.S. state and local governments provide to their retired employees.

These benefits principally involve health care benefits, but also may include life insurance, disability, legal and other services.


Why Do We Need a New Standard On OPEB?

In June 2015, the GASB approved the issuance of two new Statements that are designed to improve the usefulness of information about OPEB in the general purpose external financial reports of state and local governmental plans for making decisions and assessing accountability:
  • Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, addresses financial reporting by plans that administer OPEB benefits on behalf of governments.
  • Statement No 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, addresses accounting and financial reporting by government employers.
The new OPEB Statements includes requirements for defined benefit OPEB plans that replace the requirements of Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans.

They also include requirements for defined contribution OPEB plans that replace the requirements of Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, Statement 43, and Statement No. 50, Pension Disclosures.


Core Principles and Key Issues

The OPEB standards are designed to improve the information reported on OPEB for decision-making and accountability purposes, comparability across governments, and transparency for those who avail themselves to it.

They also are designed to equip state and local government policy makers and all users of governmental financial reports with information that would allow them to obtain a more comprehensive understanding of a government’s financial portrait.

Like the 2012 pension standards, the new standards are intended to bring about fundamental changes in how OPEB is accounted for and reported. Similar to the changes made to the pension standards, these new OPEB standards provide a more comprehensive picture of what state and local governments have promised and the actual associated costs.

The standards address a number of important issues. They include:
  • Changes that affect how the long-term obligation and the annual costs of OPEB are measured,
  • A requirement to recognize the net OPEB liability on the face of the financial statements, and
  • A requirement to present more extensive note disclosures and related schedules.
Some governments have already expressed concerns about displaying the OPEB liability on the face of the financial statement.

For example, some argue they don’t have an OPEB liability because they can choose to stop providing benefits whenever they wish. In some circumstances, OPEB is not a legal or contractual obligation of the government. Consequently, the benefits, or an employee’s eligibility to receive them, could change in the future.

Regardless, the GASB believes that a government has an obligation to pay OPEB based on the level of retirement benefits promised to an employee in exchange for his or her services.

Even though the obligation is constructive and not legal, a reduction in OPEB could result in adverse consequences for the government or increases in other compensation costs.

Additionally, by making the OPEB liability readily apparent, the GASB enables users of governmental financial statements to have access to information that provides a more comprehensive, easily understandable snapshot of a government’s financial position at a given moment in time. Without it, users are left with an incomplete picture.


What Are the Next Steps?

Statements 74 and 75 are available for download at no charge from the GASB website. Printed copies of the Statements are also available for purchase in the GASB Store.

The provisions in Statement 74 are effective for fiscal years beginning after June 15, 2016. The provisions in Statement 75 are effective for fiscal years beginning after June 15, 2017. Earlier application is encouraged.