GASB Issues Proposed Technical Bulletin Addressing Medicare Part D

February 23, 2006

On February 17, the Governmental Accounting Standards Board (GASB) published a proposed Technical Bulletin clarifying the proper reporting of payments that an employer or a defined benefit “other post-employment benefit" (OPEB) plan receives from the federal government under Medicare Part D.

Medicare Part D is the federal program that provides prescription drug benefits to eligible Medicare recipients. The federal law provides for payments to employers and those health plans providing prescription drug benefits to retirees. The bulletin clarifies the application of existing standards of accounting and financial reporting for payments received pursuant to the provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

The bulletin examines four specific questions:

How should an employer account for and report a Medicare Part D payment from the federal government?
How does a Medicare Part D payment from the federal government affect the accounting for the transaction and financial reporting by a defined benefit OPEB plan?
How should an employer account for and report a Medicare Part D payment from the federal government to the plan?
How should a defined benefit OPEB plan account for and report a Medicare Part D payment from the federal government to the plan?

Public institutions offering OPEB plans -- and specifically prescription drug benefits -- to retirees should know that the bulletin considers federal Medicare Part D payments voluntary nonexchange transactions. As such, an asset and revenue are recognized per the requirements of GASB Statement 33. In addition, the OPEB measurement requirements of Statement 45 are applicable.

NACUBO encourages members from public institutions to read the technical bulletin and reply to GASB with written comment by April 17. Public institutions will need to quickly understand the impact of the bulletin because requirements would be effective for financial statements issued after June 30, 2006.

Send questions to Sue Menditto, director, accounting policy.