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Introduction to GASB Statement 45

Introduction to GASB Statement 45. Presented by: Office of the Idaho State Controller Carol Bearce, CGFM 208-332-8815 cbearce@sco.idaho.gov. Test Your Knowledge. Quick Quiz – True or False? GASB is a famous novel by F. Scott Fitzgerald Governmental Accounting Standards Board

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Introduction to GASB Statement 45

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  1. Introduction to GASB Statement 45 Presented by: Office of the Idaho State Controller Carol Bearce, CGFM 208-332-8815 cbearce@sco.idaho.gov

  2. Test Your Knowledge • Quick Quiz – True or False? • GASB is a famous novel by F. Scott Fitzgerald • Governmental Accounting Standards Board • GAAP is a clothing store chain • Generally Accepted Accounting Principles • OPEB is an oil cartel • Other Post-Employment Benefits

  3. OPEB Topics • Definition • Statement 45 Objectives • Need for OPEB Guidelines • Implicit Rate Subsidy • Potential Impacts • How to Get Started • Additional Resources

  4. Other Post-Employment Benefits (OPEB) • GASB Statement No.45: Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions • Post-employment benefits other than pension benefits • Provided separately from pension • Examples: • Healthcare (medical, dental, vision, hearing) • Life insurance, disability, long-term care

  5. Items that are NOT OPEB: • COBRA - Statement 47 • Sick Leave-Insurance Reserve Fund (SLIRF) – Compensated Absence - Statement 16

  6. Why is Stmt 45 Important? • Provide relevant information about: • Benefits promised • Cost of promised benefits • How to pay for promised benefits

  7. Statement 45 Objectives • Recognize OPEB cost during employees’ years of service • ‘Inter-period Equity’ • Fix ‘pay-as-you-go’ approach • Private Sector Experience • 1995 – 43%, 2005 – 26%

  8. Pay-as-you-go Example Jason – Age 30Jane – Age 59 Pay $ 30,000 Pay $ 50,000 Health $ 3,000 Health $ 3,000 Fringe $ 5,000 Fringe $ 5,000 Total $ 38,000 Total $ 58,000

  9. Pay-as-you-go Example Jason – Age 31Jane – Age 60(retired) Pay $ 31,000 Pay $ 0 Health $ 3,300 Health $ 3,300 Fringe $ 5,150 Fringe $ 0 Total $ 39,450 Total $ 3,300

  10. Why Are OPEB GuidelinesNeeded? • Current practice does not reflect true financial impact of future cost • Project cash outflows for benefits • Highlight the true cost to decision makers • Implicit Rate Subsidy

  11. Implicit Rate Subsidy

  12. Implicit Rate Subsidy

  13. Implicit Rate Subsidy

  14. Potential Impacts • New, potentially significant liability • Financial condition and bond ratings • Catches the attention of policy makers (unlike most accounting standards) • Changes to benefit plans? • Do you need a trust? • YOU may need an actuary

  15. Implementation Dates for OPEBGASB Statement 45

  16. How to Get Started • Educate Financial Managers & Policy Makers • Assess Impact to Your Jurisdiction • Additional Considerations • Gather data • Plan Changes? • Union Negotiations • Disclosure in Bond Documents

  17. Additional Resources • GASB – www.gasb.org • Statement 45 • Implementation Guide for Statements 43 & 45 • Technical Inquiries • Documents and Links • GFOA – www.gfoa.org • Related articles • “Elected Official’s Guide to OPEB” • “Governmental Accounting, Auditing, and Financial Reporting” (AKA The Blue Book)

  18. Questions?

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