GASB Proposals Address Chapter 9 Bankruptcies, Retiree Health Plans

GASB acknowledged the precarious fiscal health of state and local governments around the country as it issued an exposure draft intended to give guidance on the effects of Chapter 9 bankruptcies. Chapter 9 of the U.S. Bankruptcy Code applies to filings by governmental entities. The standard setter also issued an ED intended to improve consistency in the financial reporting and measurement of retiree health insurance and other postemployment benefits (OPEB).

“With the current economic environment putting stress on state and local government resources, it became necessary for the GASB to address the financial reporting issues associated with local governments filing for bankruptcy protection under Chapter 9,” GASB Chairman Robert Attmore said in a press release.

The proposed Accounting and Financial Reporting for Chapter 9 Bankruptcies would provide guidance to state and local governments that petition for protection from creditors. It would establish requirements for recognizing and measuring the effects of the bankruptcy process on assets and liabilities, and for classifying changes in those items and related costs.

The proposed OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans would address issues related to measurement of OPEB obligations by employers participating in agent multiple-employer OPEB plans. The proposal would amend GASB Statement no. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and Statement no. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. An agent multiple-employer plan calculates separate liabilities and keeps separate asset accounts for each participating government, as opposed to a cost-sharing plan, which is administered and accounted for as a single plan. The proposal addresses the circumstances in which certain agent employers are eligible to use the alternative measurement method; the requirement that a defined benefit OPEB plan obtain an actuarial valuation; and requirements in Statement no. 43 and Statement no. 45 regarding the frequency and timing of determining OPEB measures by agent multiple-employer plans and participating employers.

Written comments on each ED are due Aug. 28. More information is available at the GASB Web site.