Tag Archives: accounting

GASB 74/75: Impact on small government employers

GASB Statements No. 74 and 75 have substantially revised the valuation and accounting requirements previously mandated under GASB Statements No. 43 and 45. With implementation required for plan fiscal years beginning after June 15, 2016, for GASB 74 and June 15, 2017, for GASB 75, the time is now for government entities to understand and comply with the new requirements. This article by Milliman’s Joanne Fontana reviews the Alternative Measurement Method, which is used by small government employers in lieu of an actuarial valuation, and discusses the important changes relevant to small government employers as GASB 74/75 takes effect.

GASB 74/75: OPEB expense and balance sheet items

New accounting rules in the United States for postemployment benefits other than pension (OPEB), first implemented in 2016, are now in effect. Successful implementation of the new rules will require an understanding of a variety of technical concepts regarding the newly required calculations.

This article by Milliman actuary Rebecca Ross explores OPEB expenses and balance sheet items. Rebecca discusses the new requirements for disclosing OPEB expense and the effect these changes will have on plan and employer financial statements.

This article is part of the Governmental Accounting Standards Board Statement 74 and 75 miniseries. 

Overview of GASB Statements 73, 74, and 75

In June 2015, the Government Accounting Standards Board (GASB) released new accounting standards for public sector postretirement benefit programs and the employers that sponsor them. GASB Statement 73 is for accounting and financial reporting for pensions not within the scope of GASB Statement 68 and will apply for employer fiscal years beginning after June 15, 2016. GASB Statements 74 and 75 reflect a fundamental overhaul in the standards for accounting and financial reporting for postemployment benefits other than pensions. GASB 74 is effective for plan fiscal years beginning after June 15, 2016, and GASB 75 is effective for employer fiscal years beginning after June 15, 2017. In this article, Milliman’s Daniel Wade provides a summary of GASB Statements 73, 74, and 75.

GASB adopts two OPEB-related statements

The Governmental Accounting Standards Board (GASB) adopted two statements regarding financial reporting by state and local governments related to other postemployment benefits (OPEB). GASB Statement No. 74, “Financial Reporting for Postemployment Benefits Other Than Pension Plans,” replaces the current GASB 43 and addresses 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,” replaces the current GASB 45 and addresses reporting by governments that provide OPEB to their employees and for governments that finance OPEB for employees of other governments. These statements represent a significant change to the methods used to account for postemployment OPEBs.

This PERiScope alert offers more perspective.

GASB 74/75: Are you ready?

Bradley_JeffThe train has left the station and is on its way—the Governmental Accounting Standards Board (GASB) will shortly finalize standards 74 and 75, which will require for the first time that the net liability for publicly sponsored retiree healthcare plans (and other postemployment benefits) be stated on balance sheets.

GASB expects that final rules will be issued close to the end of June 2015.

It is expected that the new accounting treatments will mirror those of GASB 67/68, which require public sector plan sponsors, as well of those of cost-sharing employers, to book an accounting expense for sponsoring the plan and to show net pension liabilities on financial balance sheets.

GASB 67/68 also mandated the use of fair market value of assets and a standard actuarial cost method to be used to value net the net pension liability.

GASB 74, which relates to reporting by benefit plans, is expected to be effective for plans for fiscal years ending June 30, 2017, and later. This will replace the old GASB 43 standard.

GASB 75, which relates to reporting by state and local governments, is expected to be effective for fiscal years ending June 30, 2018, and later. This will replace the old GASB 45 standard.

In this regard, plan sponsors, especially those that have cost-sharing arrangements with contributing employers, should be ready to book a liability for fiscal years ending on or after June 30, 2017. In addition, liabilities and accounting expenses for contributing entities will need to be booked for fiscal years ending on or after June 30, 2018.

For unfunded plans, liabilities will be calculated using a discount rate equal to the yield for 20-year, tax-exempt municipal bonds with an average rating of AA or higher. For well-funded plans, an expected rate of return on assets may be used as long as the plan’s funding policy is expected to make or keep the plan fully funded. For plans in between, a blended discount rate will be used.

Many other changes are expected in the new standards. We recommend you contact your Milliman consultant for more details.

GASB 67/68: Special Funding Situations

In 2014, new accounting rules for U.S. public pension plans took effect. To implement those rules successfully, a variety of technical concepts regarding newly required calculations need to be understood. The Government Accounting Standards Board (GASB) Statements No. 67 and 68 miniseries discusses special funding situations. With special funding situations, major accounting metrics under GASB must be adjusted to reflect the relationship. Milliman’s Jennifer Sorensen Senta provides perspective in this PERiScope article.