3.4.16 Other Postemployment Benefits (OPEB)
OPEB refers to benefits, other than pensions, that are paid in the period after employment. OPEB includes:
- Post-employment healthcare benefits such as medical, dental, vision, hearing, etc., whether provided through a pension plan or separately; and
- Other benefits such as death benefits, life insurance, disability, long-term care, etc., when provided separately from a pension plan.
OPEB includes the direct payment of benefits (e.g., LEOFF 1 medical benefits) and also explicit and implicit rate subsidies (e.g., the state’s PEBB plan).
The explicit rate is the rate participating employers pay as part of the monthly premiums that subsidizes the retiree monthly premiums. This subsidy reduces the monthly premiums paid by the retiree. The explicit rate is applied to each active employee of the government, therefore it doesn't matter how many retirees the government may have. The explicit rate is set for the pool as a whole and all participating employers share in the cost.
An implicit rate subsidy is also referred to as a “blended premium rate.” It is caused by the inclusion of retirees in the same cost pool as active employees. As a result, retirees have the same premium rates as active employees and the rates for active employees implicitly subsidize the rates for retirees. This implicit subsidy is OPEB – even if retirees pay 100 percent of their premiums.
OPEB does not include termination benefits or termination payments for compensated absences.
18.104.22.168 Examples of OPEB benefits
Some common examples of OPEB benefits include:
- Participating employers in the state’s Public Employees Benefits Board (PEBB) program.
- LEOFF 1 employers who pay the healthcare costs of LEOFF 1 retirees.
- Employers who pay all or part of their retirees’ healthcare premiums.
- Employers with employees who are members of OPEB plans that are not state or local government sponsored – example, a union sponsored defined contribution health plan.
If you are uncertain about whether or not an arrangement qualifies as OPEB, please contact the SAO HelpDesk.
22.214.171.124 OPEB reporting requirements
Defined benefit OPEB plans:
Defined benefit plans are those for which the benefits the employee will receive at or after separation from employment are defined by the benefit terms. OPEB may be stated as:
- A specific dollar amount.
- An amount that is calculated based on one or more factors such as age, years of service, and compensation, or
- A type or level of coverage such as prescription drug coverage or a percentage of health insurance premiums.
See the sample OPEB note disclosure for cash-basis local governments here.
Unlike pension plans, most OPEB plans in the state are not centrally administered and there is no single actuarial valuation like the DRS PEFI for the state’s pension plans. The only way to determine an OPEB liability is through an individual employer actuarial valuation or by using the Alternative Measurement Method if you have less than 100 participants in your plan.
If you are a participating employer in the PEBB plan or provide OPEB benefits to LEOFF 1 retirees, you may use the on-line calculation tools provided by the Office of the State Actuary (OPEB Tools) to calculate your OPEB liability. These tools are designed only for PEBB or LEOFF 1 employers with less than 100 plan members, which includes all active employees and retirees participating in the plan (excludes spouses and dependents).
Note: If your entity provides PEBB benefits and has 100 or more plan members, OSA has created a specialized tool for you to estimate your liability. To obtain this tool, please contact the SAO HelpDesk.
Defined benefit plans result in liabilities that must be reported on the Schedule of Liabilitites (Schedule 09).
Note: If you provide OPEB through another plan (e.g. LEOFF 2) or contract with an actuary for your own valuation, the liability amount should be determined based on an actuarial valuation done by a qualified actuary using Actuarial Standards of Practice, including a roll-forward from an actuarial valuation done in the previous year.
Reminder – Even though accounting and reporting standards require you to get a valuation only every two years, you must still roll-forward the valuation to the updated measurement date in the off years.
Defined contribution OPEB plans:
Defined contribution plans have terms that:
- Provide an individual account for each employee;
- Define the contributions that an employer is required to make to an active employee’s account for the periods in which the employee renders service; and
- Provide that the OPEB an employee will receive will depend only on the employee’s account balance.
Defined contribution OPEB plans do not result in a liability to be reported on the Schedule of Liabilities. If the government contributes to the OPEB Plan, it must be disclosed in the Notes to the Financial Statements. See requirements at Note X – OPEB.
If the government does not contribute to the plan (i.e., only employees contribute), no disclosures are required. The government may elect to disclose the plan in the notes but must clearly state that it does not contribute.
Disclaimer: The following links are to non-authoritative resources and are not prescribed as part of the BARS Manual requirements.
- OPEB for Cash Basis Governments, SAO eLearnings video