1. OPEB Communication Resources
10/28/2014
National Conference on Public Employee Retirement Systems
OPEB Communication Resources
March 13, 2018
Dean Michael Mead, GASB Senior Research Manager & GASAC Coordinator
Emily Paul, GASB Project Manager
Mr. Mead and Ms. Paul.

2. Presentation Overview
Background
Overview of OPEB communication resources
Questions

3. Background on the Standards
Pre-agenda research evaluating the effectiveness of existing standards on postemployment benefits began in 2006
Project added to current technical agenda in 2008
Two-phased project
Pensions administered through trusts
Statements 67 and 68 issued in June 2012
Implementation Guides issued in June 2013 (Statement 67) and January (Statement 68)
OPEB and pensions not within scope of Statements 67/68
Statements 73, 74 and 75 issued in June 2015

4. When Changes Will Occur
Statement 74 (reporting by OPEB plans) is effective for periods beginning after June 15, 2016
First year-end: June 30, 2017
Statement 75 (reporting by employers that provide OPEB) is effective for periods beginning after June 15, 2017
First year-end: June 30, 2018

5. OPEB Communication Resources
Offered to stakeholders to use in communicating financial statement effects of new OPEB standards
Focus is on major changes from prior accounting standards and new information that will be provided
Question and answer format
Nonauthoritative
Available on the GASB website (

9. Topics Covered by Materials
Did implementing the accounting standards create the OPEB liability?
Why did the size of the OPEB liability change?
Will governments in cost-sharing OPEB plans report OPEB liabilities?
How is the calculation of OPEB expense changed by the new accounting standards?
What information is included in notes and required supplementary information?
Has the annual required contribution (ARC) disappeared?
How does the OPEB liability affect net position?

10. 1. Did Accounting Standards Create the OPEB Liability?
Other postemployment benefits (OPEB)
Retiree healthcare benefits
Other retirement benefits not provided through a pension plan
Liability is a result of formal or informal agreement to provide OPEB to its employees
New accounting standards did not create the OPEB liability; they improved the approach to measuring the liability that is reported in the financial statements

11. 1. Key Questions and Answers
Why does the government report an OPEB liability if the government can modify the benefits it provides at any time?
What is an implicit rate subsidy and how is it related to a government’s OPEB liability?
What is the relationship between accounting standards for OPEB and a government’s liability for OPEB?
What are the benefits of an accounting-based approach for reporting OPEB activities?
What are the accounting numbers intended to convey?

12. 1. Fundamental Approach
Fundamental approach for OPEB is the same as required for pensions in Statement 68
Viewed in the context of an ongoing, career-long employment relationship
Focus on the cost to taxpayers over time of providing government services
Accounting-based versus funding-based approach to measurement

13. 2. Why Did the Size of the OPEB Liability Change?
New accounting standards include changes in the methods that governments may use to measure their OPEB liability
OPEB liability might be significantly larger than the liability previously reported on face of financial statements (net OPEB obligation)
OPEB liability might be different than liability previously reported in notes to financial statements (UAAL)
New accounting standards improve comparability across governments
New accounting standards do not change amount that governments are required to contribute to their OPEB plans or amount needed to pay for benefits as they come due

14. 2. Key Questions and Answers
How is the measurement of the OPEB liabilities changing?
What are the components of the OPEB liability?
What changes in the accounting standards may increase or decrease the size of the total OPEB liability?
If the government’s OPEB liability changes, does that mean that governments will need to contribute more or less for OPEB?

15. 2. Changes in Reported Amounts
10/28/2014
2. Changes in Reported Amounts
Statement 45
Statement 75
Face of financial statements
Net OPEB obligation
Net or total OPEB liability
Notes to financial statements
Information about the unfunded actuarial accrued liability (UAAL)
Information about the net or total OPEB liability

16. 2. Components of the OPEB Liability
10/28/2014
2. Components of the OPEB Liability
Net OPEB liability
Total OPEB liability less OPEB plan net position
If OPEB plan is not administered through a trust that meets the specified criteria, total OPEB liability is recognized

17. 2. How Is the Long-Term Obligation Measured?
10/28/2014
2. How Is the Long-Term Obligation Measured?
Project cash outflows for benefits
Discount projected benefits to actuarial present value (APV)
Allocate the APV of projected benefits to periods

18. 2. Key Changes in Measurement
10/28/2014
2. Key Changes in Measurement
Statement 45
Statement 75
Discounting
Expected long-term rate of return on investments expected to be used to pay benefits
Long-term rate if plan assets projected to be sufficient; otherwise, municipal bond rate is incorporated
Allocation to periods
Choice of six methods, applied as level dollar amount or level percentage of pay
One method (entry age) applied as a level percentage of pay
Plan assets
Actuarial value of assets (smoothed)
Fair value of assets (no smoothing)
Standards do not address how much governments need to contribute to their OPEB plan or how much they would need to finance their OPEB on a pay-as-you-go basis.

19. 10/28/2014
3. Will Governments in Cost-Sharing OPEB Plans Report OPEB Liabilities?
Cost-sharing multiple-employer OPEB plan
Administered through a trust that meets the specified criteria
Plan assets and liabilities to employees are shared among participating employers
Governments in cost-sharing plans will recognize their proportionate share of the collective net OPEB liability for the first time

20. 3. Key Questions and Answers
What is a cost-sharing multiple-employer OPEB plan?
Do governments in cost-sharing OPEB plans really have an OPEB liability?
What do new accounting standards require for cost-sharing OPEB employers?
Why are governments in cost-sharing plans required to report their OPEB liabilities?

21. 3. Requirements for Cost-Sharing Employers
10/28/2014
3. Requirements for Cost-Sharing Employers
Governments in cost-sharing plans will report their portion of collective net OPEB liability
Each participating employer determines their proportion based on a comparison of their contribution effort with the collective contribution effort of all participating employers and nonemployer contributing entities
Each employer multiplies the collective Net OPEB Liability, by their proportion to determine their proportionate share
The proportionate share of the collective net OPEB liability is what the employer reports in its own financial statements
Employer proportionate share $
Employer proportion %
Collective amount $

22. 4. How Is Calculation of OPEB Expense Changing?
New accounting standards no longer based on a financing approach for postemployment benefits
Many events that affect the OPEB liability will be recognized immediately in OPEB expense
Effects of other events will be recognized in expense over fewer years than in the past

23. 4. Key Questions and Answers
How was the annual OPEB expense measured under prior accounting standards?
How do the new accounting standards measure annual OPEB expense?
What types of changes in the OPEB liability are recognized immediately?
What types of changes in the OPBE liability are recognized in subsequent periods?
What is a deferred outflow of resources or deferred inflow of resources?
How do contributions or amounts paid for benefits affect OPEB expense?

24. 4. OPEB Expense—Immediate Recognition
10/28/2014
4. OPEB Expense—Immediate Recognition
Report in OPEB expense immediately:
Service cost
interest on the beginning balance of the Total OPEB Liability
Effect of changes in benefit terms

25. 4. OPEB Expense—Deferrals
Reported initially as a deferred inflow or outflow and introduced into OPEB expense over a period equal to the average remaining service period of all members of the plan, both active and inactive:
The effects on the Net OPEB Liability of (1) changes in economic and demographic assumptions and (2) the difference between assumed and actual economic and demographic assumptions (experience gains and losses)
For cost-sharing governments, the effects of changes in proportions
Reported initially as a deferred inflow or outflow and introduced into OPEB expense over a five-year closed period:
The effect on the Net OPEB Liability of the difference between the assumed and actual return on plan investments

26. 4. OPEB Expense v. Employer Contributions
10/28/2014
4. OPEB Expense v. Employer Contributions
The amount contributed by the employer not intended to be the OPEB expense amount
Even if a government contributes based on an actuarially determined amount (such as the Annual Required Contribution or ARC), generally it is calculated differently from OPEB expense
Contributions from employers in cost-sharing plans generally are based on statute or contract, not on actuarial calculations
Statutory and contractual contributions are likely to be considerably less than what an actuarially determined contribution would be

27. 5. What Information Will Be Included in Notes and RSI?
Expanded note disclosures and RSI will provide more comprehensive reporting of a government’s OPEB liabilities and expense
Expanded RSI schedules will provide information for trend analysis

28. 5. Key Questions and Answers
How will the new standards enhance the usefulness of information presented in notes?
How will the new standards enhance the usefulness of trend information about the OPEB liability?
Will users of financial reports still be able to obtain information about plan funding?
How will the new standards affect the RSI that was previously required to be reported?

29. 5. Notes: Descriptive Information
10/28/2014
5. Notes: Descriptive Information
Members by type
Assumptions used to measure the liability
Members by type disclosed for single and agent plans

30. 5. Notes: Sensitivity Analysis
10/28/2014
5. Notes: Sensitivity Analysis
Cont

31. 5. Notes: Changes in the Net OPEB Liability
10/28/2014
5. Notes: Changes in the Net OPEB Liability
Single and agent employers only

32. 5. Notes: Changes in the Total OPEB Liability
10/28/2014
5. Notes: Changes in the Total OPEB Liability
If there is no fiduciary net position

33. 5. RSI: Changes in Liability and Ratios
5 years shown for illustrative purposes

34. 5. RSI: Actuarially Determined Contributions
10/28/2014
5. RSI: Actuarially Determined Contributions
Covered payroll instead if OPEB is based on a measure of pay
5 years shown for illustrative purposes

35. 6. Has the ARC Disappeared?
OPEB accounting is no longer based on the ARC
Some governments will continue to present information about contribution measures

36. 6. Key Questions and Answers
What happened to the ARC?
Why not continue to require governments to provide information on the ARC?

37. 7. How Does the OPEB Liability Affect Net Position?
Residual of all other elements presented in a government’s statement of financial position for government-wide activities, proprietary funds, and fiduciary funds
Changes in the way government report OPEB-related measures might have a significant effect on net position

38. 7. Key Questions and Answers
What is net position and how is it measured?
How will recognizing the OPEB liability affect the net position of a government?

39. Questions?
For more information, check out the OPEB pages at

40. Website Resources
Free download of Statements, Interpretations, Concepts Statements and other pronouncements
Free access to the basic view of the Codification of governmental accounting standards
Free copies of proposals
Up-to-date information on current projects
Articles and Fact Sheets about proposed and final pronouncements
Form for submitting technical questions
Educational materials, including podcasts
Electronic newsletter and other resources for users

41. Plain-Language Materials
The GASB is committed to communicating in plain language with constituents about its standards and standards-setting activities.
Plain-language articles accompany major proposals and final pronouncements
Fact Sheets are prepared for complex projects to answer commonly raised questions
Articles discussing the Board’s consideration of cost- benefit issues when developing major Statements

42. GASB Members David A. Vaudt (Chairman)
Jeffrey J. Previdi (Vice Chairman)
James E. Brown
Brian W. Caputo
Michael H. Granof
Kristopher E. Knight
David E. Sundstrom
7 members, 5-year terms (except chair, who is serving a 7-year term)
David A. Vaudt (Chairman)
Former State Auditor of Iowa and partner, KPMG
Jeffrey J. Previdi (Vice Chairman)
Former Director at Standard and Poor’s Ratings Services
James E. Brown
Former Audit Partner, BKD
Brian W. Caputo
VP & CFO, DuPage College, former Municipal Government Finance Officer
Michael H. Granof
EY Distinguished Centennial Professor of the McCombs School of Business at the University of Texas
Kristopher E. Knight
Deputy Secretary of State of Delaware
David E. Sundstrom
Former county auditor/controller/treasurer

43. GASB 2017 Accounting Support Fee Assessment
How Is the GASB Funded?
2017
GASB 2017 Accounting Support Fee Assessment
Approx. 440 municipal bond broker-dealers
(per Dodd-Frank)
$8.3 million (approx. $52 per firm per day)