GASB on Tuesday took another big step in its efforts to provide accounting and financial reporting guidance that more accurately portrays the liabilities that state and local governments face in funding retiree benefits.
GASB approved three new standards—two that address post-employment benefits other than pensions (OPEB), primarily retiree health insurance, and one that establishes requirements for pensions and pension plans beyond the scope of guidance GASB issued in 2012.
The two new OPEB standards are as follows:
- GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, which establishes rules on reporting by OPEB plans that administer benefits on behalf of governments.
- GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which outlines reporting by governments that provide OPEB to their employees and for governments that finance OPEB for employees of other governments.
The new OPEB standards are designed to bring greater clarity to post-employment benefit liabilities, the most significant of which is retiree health insurance. The new standards parallel the pension standards issued in 2012: GASB Statement No. 67, Financial Reporting for Pension Plans, and GASB Statement No. 68, Accounting and Financial Reporting for Pensions (see “GASB Pension Changes: Are You Ready?”).
Together, the OPEB and pension standards provide accounting and reporting rules that give state and local governments, their employees, and constituencies a more accurate picture of the true cost of pensions and other post-employment benefits promised to retirees. Previous guidance took a funding approach to accounting that did not reflect the extent of the future cost for post-employment benefits.
“These OPEB standards usher in the same fundamental improvements in accounting and financial reporting that were previously introduced for pensions,” GASB Chairman David Vaudt said in a news release. “Because OPEB promises represent a very significant liability for many state and local governments, it is critical that taxpayers, policymakers, bond analysts, and others are equipped with enhanced information, which will enable them to better assess the related financial obligations and annual costs of providing OPEB.”
The third statement approved Tuesday, GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, sets rules for pensions not covered by Statements No. 67 and No. 68.
The provisions in Statement No. 73 are effective for fiscal years beginning after June 15, 2015—except those provisions that address employers and governmental nonemployer contributing entities for pensions that are not within the scope of Statement No. 68, which are effective for financial statements for fiscal years beginning after June 15, 2016.
The provisions in Statement No. 74 are effective for financial statements for periods beginning after June 15, 2016.
The provisions in Statement No. 75 are effective for fiscal years beginning after June 15, 2017. GASB encourages earlier application of all three new standards.
GASB said that Statements No. 73, No. 74, and No. 75 would be available for free download from the GASB website in late June.
—Jeff Drew ( email@example.com ) is a JofA senior editor.