The GASB 45 standard is an accounting standard that requires governments to measure Other Post Employment Benefits – usually post retirement health insurance- (OPEB) on an accrual basis. Most governments have never measured these liabilities on a long-term basis. For many, this is their first experience dealing with an actuary.
Bolton Partners has performed GASB 45 actuarial valuations for over 100 government entities in five states, ranging from smaller entities with a few hundred participants to larger counties with over 25,000 participants. The Bolton OPEB team is a multi practice team; our benefit consultants work closely with actuaries to determine OPEB liabilities. Our benefit consultants thoroughly understand the underlying benefits and are experts in clearly communicating benefit related issues to employees and government staff. Our actuaries have years of experience in developing actuarial models, with realistic and defensible assumptions to measure long-term liabilities. We have also presented the results of our valuations at City Council and School Board Meetings and to senior government officials in a clear and understandable manner.
Once we have determined the initial actuarial valuation, what can be done about these results? We have assisted many governments in examining ways that they could amend their programs to make them more affordable in the short- and long-term.
Public Sector Pensions have been getting a lot of attention in the press, as many Governments are seeing their costs skyrocket while tax revenues are at best stagnant. Bolton Partners has been working with public sector plans for 30 years. In addition to serving as the valuation actuary, we also serve as the advisors to the unions of several large pension plans including those of the City of Baltimore and San Jose California.
It’s about to become more exciting over the next few years with the advent of a new GASB 27 accounting standard. The new standard is much more than a “tweak” of the old standard. For cost sharing employers it means the same kind of disclosure as agent plans. For agent plans, it is changing the focus of the standard from budgeting and generational equity to determining liability. That means different things to different plans. For everyone, it means pension plans will have (an often large) liability on the employer’s statement of net financial position with uncertainty as to what impact that might have on bond ratings. Finally, if you are a typical single employer (agent plan), governments will need to take a fresh look at their plan contribution policies. They may find that in doing so their plans are less affordable than they thought.
Our actuaries have already been modeling the impact of the new standard on pension plans. We are closely monitoring what changes governments around the country are considering for their pension plans, and we are also active on several actuarial committees that are looking at public sector pension issues.
The GASB approved Statement No. 67, Financial Reporting for Pension Plans, which applies to pension plans that administer pension benefits, and Statement No. 68, Accounting and Financial Reporting for Pensions, which applies to governments that provide pension benefits to their employees. The Statements are available free at www.gasb.org.
The GASB periodically reviews its existing standards to determine whether they are effective in supporting accountability and providing decision-useful information for financial statement users. The GASB’s pension standards had been in place for more than a decade, and research indicated opportunities for significant improvement. The new Statements should substantially improve the transparency, consistency, and comparability of the pension information reported by state and local governments and pension plans.
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