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Business and Policy Areas
Business and Policy Areas

GASB Issues OPEB Proposal

June 26, 2014

On June 16 the Governmental Accounting Standards Board (GASB) issued an Exposure Draft (ED) that addresses measurement and financial reporting by governmental employers for other postemployment benefits (OPEB). The ED for employers, "Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions," proposes that OPEB be accounted for and reported based on essentially the same approach and methods as GASB recently required for pension benefits under GASB Statement No. 68, "Accounting and Financial Reporting for Pensions."


OPEB is composed of all benefits—other than pensions and termination benefits—that are provided to retirees after employment. OPEB is a form of compensation, like salaries and pensions, governments provide to their employees in return for work. Consequently, like salaries, the costs and obligations associated with OPEB should be recorded as they are earned by the employees, rather than when contributions are made by the government to an OPEB plan or when benefit payments are made to retirees.

The proposed Statement would supersede the requirements of Statements No. 45, "Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions"as amended, and No. 57, "OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans," for postemployment benefits other than pensions. The ED is being issued together with a related proposal, "Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans,"which proposes new requirements for measurement and financial reporting by OPEB plan administrators.


Public colleges and universities with employees and retirees who are eligible for OPEB should pay attention to the ED for governmental employers. The proposal would establish standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses. The ED also explains:

  • Methods and assumptions that would be used to project benefit payments
  • Discounting projected benefit payments to their actuarial present value
  • How to attribute present value to periods of employee service
  • Disclosure and required supplementary information requirements

The ED also distinguishes certain requirements based upon (a) the structure of the OPEB plans as either defined benefit or defined contribution and (b) whether the OPEB plans (through which the benefits are paid) are administered through trusts or other arrangements. These are important differences from current pension plan guidance because unlike pensions, (a) defined contribution OPEB plans require a service period analysis that can result in additional expense and liability recognition and (b) many governments do not provide OPEB through a trust (rather, OPEB benefits can be paid to retirees by employers or an insurance company).

For OPEB that is administered through a trust, all of the following conditions must be met:

  1. Contributions to the trust from the employer government or other entities (such as in special funding situations) are irrevocable; and once the government transfers resources to the trust, the resources cannot revert back to the employer.
  2. The sole purpose of the assets in the trust is to provide benefits under the terms of the OPEB plan.
  3. Assets in the trust are protected from creditors of (a) the employer government, (b) other contributing entities, (c) the plan administrator, and (d) the plan members (for defined benefit plans).

For employers who provide insured benefits, where the insurance company unconditionally undertakes an obligation to pay employee OPEB benefits, the proposed guidance would require OPEB expense recognition that equals the annual contributions or premiums in accordance with the insurance company's agreement.

For defined benefit OPEB, other than insured benefits that are provided through OPEB plans that are not administered through trusts that meet the above criteria, the ED proposes application of the same measurement methodology that trusts would follow. Consequently OPEB liabilities, expense, and deferred outflows of resources and deferred inflows of resources are measured as if there is a trust. However, lack of a trust's dedicated resources may produce larger amounts for employers to recognize.

The ED uses terminology, analogy and definition that is similar to Statement 68, such as single employer OPEB plans, agent employer OPEB plans, multiple employer cost sharing OPEB plans, and special funding situations. The proposal reveals a good deal of information about OPEB that may not be common knowledge to college and university employers. Public institutions will need to determine the type of OPEB plan offered and whether or not there is a trust or insurance.

Feedback to GASB

The proposal's requirements are effective in fiscal years beginning after December 15, 2015, which is FY17 for the vast majority of public colleges and universities. The ED is available on GASB's Web site. Comments on the proposal are due by August 29, 2014. GASB has also scheduled several public hearings in September 2014. NACUBO encourages public institutions to comment individually or pass observations along to NACUBO for inclusion in the industry comment letter and public testimony. 


Sue Menditto
Director, Accounting Policy