OPEB accounting tips for preparers

Here’s how to book a fairly stated liability under new GASB standards.
By Ken Tysiac

GASB’s new standards on accounting for other post-employment benefits (OPEB) are similar in many ways to the board’s new standards for pension accounting for state and local governments.

Despite this, the benefit underlying these standards is very different, said Bob Scott, CPA, the CFO and assistant city manager for Carrollton, Texas, and a member of the AICPA State and Local Governments Expert Panel.

“Preparers need to understand the differences in order to properly prepare and book the OPEB liability,” he said.

Here are Scott’s tips for recording an OPEB liability that’s fairly stated and auditable as governments implement GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions:

Synchronize your assumptions

The actuary the government preparer hires to work on the OPEB liability probably will be different from the actuary the pension plan uses for pension accounting. “If he or she uses a different mortality table, how is it that somebody is going to die at one age for pensions and at a different age for OPEB? How do you justify that?” Scott asked. Preparers are dealing with this challenge by specifying that the OPEB actuary will use the assumptions used in the pension accounting where it makes sense, he said.

Have firm, written documentation of the OPEB benefit

“It’s incredibly important to make sure you know what your plan is and that your understanding is the same as HR’s understanding and the administrator’s or insurance company’s understanding,” Scott said. OPEB plans change frequently, so it is essential to have current, correct documentation to give to the actuary.

Understand which assumptions are the most critical

In pensions, the long-term rate of return and the mortality rate often are the most significant assumptions. In OPEB, rate of participation (number of employees choosing to stay on the plan after retirement) and projected retirement age are likely to be much more important assumptions.

Prepare your stakeholders

The OPEB liability may be significantly larger than it was under the previous standard (GASB Statement No. 45), and it will be disclosed in the statement of net position rather than in the notes to the financial statements. Governing boards, elected officials, employees, and citizens’ groups are among the constituents that preparers may need to warn and educate about the increase in the liability that’s reported.

Be ready for new audit requirements

Audit requirements are likely to be strengthened because of the implementation of the OPEB standards, Scott said, but the nature of additional audit procedures has not been determined.

Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.

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