3.4.17 Other Postemployment Benefits (OPEB)
184.108.40.206 Key reporting information:
- The accounting and financial reporting for OPEB aligns with that of pensions.
- An OPEB liability (rather than an OPEB obligation) is reported on the Statement of Net Position.
- Deferred outflows and inflows related to OPEB, in the same categories as those reported for pensions, are reported on the Statement of Net Position.
See the GASB OPEB Implementation Guide for further information.
OPEB refers to benefits, other than pensions, that are paid in the period after employment. OPEB includes:
- Postemployment 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 and must be included in the OPEB liability – even if retirees pay 100 percent of their premiums.
OPEB does not include termination benefits or termination payments for compensated absences.
220.127.116.11 Defined benefit OPEB vs. defined contribution OPEB
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 specified 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.
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
- Provide that the OPEB an employee will receive will depend only on the employee’s account balance.
For defined contribution plans, there is no liability (other than amounts payable to the plan), deferred outflows, or deferred inflows to report. OPEB expense is the net amount of employer contributions made to the plan. If only employees contribute to a defined contribution plan (and not the employer), the employer is not a participant and no disclosures are required. However, if the employer continues the plan, there are required disclosures. See Note X – Pension and/or OPEB Plans - Defined Contribution.
18.104.22.168 Qualifying vs. non-qualifying trust
The accounting and financial reporting requirements for defined benefit OPEB plans is dependent on whether the plan is administered through a qualifying trust. A qualifying trust (or equivalent arrangement) is one that meets all three of the following criteria (see GASBS 75, paragraph 4):
a) Contributions to the plan and earnings are irrevocable – Refunds and withdrawals are consistent with this criterion.
b) Plan assets are dedicated to providing OPEB to plan members in accordance with the benefit terms – This is the criterion most often violated by the old, pre-LEOFF police and fire pension plans. Pension and OPEB assets cannot be commingled in the same trust fund as this indicates that plan assets are not dedicated solely to either pensions or OPEB. Pension and OPEB assets can be partitioned in the same fund, but this partition cannot be arbitrarily determined; it requires an actuarial determination.
c) Plan assets are legally protected from creditors.
Pay-as-you-go type plans (for example – the state’s PEBB plan) are not a qualifying trust.
22.214.171.124 Plan types
The accounting and financial reporting requirements for defined benefit OPEB plans also vary depending upon plan type. Defined benefit plans are classified in one of the following categories:
- Single-employer plan – those in which OPEB benefits are provided to the employees of only one employer. The primary government and its component units are considered to be one employer. Each employer requires an individual actuarial valuation. This is the most common type of OPEB plan in the state. All pay-as-you-go plans (e.g., the state's PEBB plan) are considered single-employer plans.
- Agent, multiple-employer plan – OPEB plan assets are pooled for investment purposes, but separate accounts are maintained for each individual employer so that each employer’s share of the pooled assets is legally available to pay the benefits of only its employees. Each individual employer requires an individual actuarial valuation.
- Cost-sharing, multiple-employer plan – OPEB obligations to the employees of more than one employer are pooled and OPEB plan assets can be used to pay the benefits of the employees of any employer that provides OPEB through the plan.
Regardless of plan type, if the plan is not administered through a qualifying trust, each individual employer is considered to be a single employer participating in their own plan, and each individual employer must obtain their own actuarial valuation.
126.96.36.199 Measurement of the OPEB liability, deferred outflows, deferred inflows, and OPEB expense
The amounts to be reported in the financial statements for the OPEB liability, deferred outflows, deferred inflows, and OPEB expense are determined through an actuarial valuation. The valuation report generally also includes relevant information for the note disclosures such as actuarial assumptions used, sensitivity analysis of the discount rate and the health care cost trend rate (if applicable), and the amortization of the deferred outflows and deferred inflows.
Actuarial valuations should be performed at least biennially. The valuation date can be no more than 30 months and 1 day prior to the employer’s reporting date. The Total OPEB Liability should be measured as of a date (the measurement date) no earlier than the end of the employer’s prior fiscal year, consistently applied from year to year. When the valuation date is before the measurement date, update procedures must be used to roll forward the valuation to the measurement date for the employer’s reporting. There is no requirement to roll forward from the measurement date to the employer reporting date; neither is it prohibited. Professional judgment should be used to determine the specific update procedures to be used (the roll forward is usually done by the actuary).
In the first year of implementation of GASBS 75, employers need both beginning and ending OPEB amounts. A single actuarial valuation may be used to determine both the ending and beginning balances (by rolling back from the ending balances). See GASB OPEB Implementation Guide 2017-3, Q&A 4.499.
188.8.131.52 Measurement date
The OPEB amounts are reported in the employer’s financial statements as of the measurement date. The earliest measurement date that can be used by an employer is one up to 12 months earlier than the reporting date. The following table shows the timing relationships between the valuation date, the measurement date, and the employer reporting date.
|Earliest Available Valuation Date||Earliest Available Measurement Date Employer Can Use||Employer Reporting Date|
184.108.40.206 Alternative measurement method
Plans with fewer than 100 participants (actives + retirees) as of the beginning of the fiscal year, have the option to use the alternative measurement method (see GASB OPEB Implementation Guide, Illustration B7) in lieu of a professional actuarial valuation. Under this method, only the OPEB liability is calculated. There are no deferred outflows and inflows other than the deferred outflow for payments subsequent to the measurement date.
PEBB member employers or LEOFF 1 employers with fewer than 100 participants (actives + retirees) as of the beginning of the fiscal year may use the on-line calculation tools provided by the Office of the State Actuary (OSA). These tools are the alternative measurement method. They are only available for use by PEBB and LEOFF 1 employers, and should only be used by those with fewer than 100 participants. For additional information on these tools, go to the OSA website.
Note: When using the OSA tools, active member data should be based on the number of employees eligible to participate, even if some have currently waived participation in the plan.
Plans, including PEBB and LEOFF 1, with 100 or more participants (actives + retirees) as of the beginning of the fiscal year, must obtain a professional actuarial valuation.
220.127.116.11 Financial statements
In the year of implementation of GASBS 75, employers made a direct adjustment to equity for the net effect of beginning balances of the OPEB liability and any relevant deferred inflows and outflows. This adjustment also included the removal of any existing OPEB Obligation that existed prior to this implementation.
Year 1 – Beginning Balances:
DR – OPEB obligation (old balance – if applicable)
DR – Deferred outflows (payments subsequent to the measurement date – if applicable)
DR – Net difference to unrestricted net position
CR – Total (or Net) OPEB liability
At year-end, employers adjust the OPEB liability and the related deferred outflows and deferred inflows to actual as of the measurement date per the valuation. Also, adjust for payments subsequent to the measurement date. The net difference is an adjustment to OPEB expense. Do this at each subsequent year-end.
Year 1 – Ending Balances (and future year-ends):
DR/CR – Adj. OPEB liability and relevant DO/DI to actual per measurement date
DR/CR – Net change to OPEB expense
Plans administered through a qualifying trust report “net OPEB liability” because there is fiduciary net position (in the trust) to net against the total OPEB liability. The entire net OPEB liability is a non-current liability.
Plans not administered through a qualifying trust report “total OPEB liability” because there are no plan assets or fiduciary net position.
The “total OPEB liability” should be allocated between current and non-current liabilities in the financial statements. Since there is no trust fund to make the benefit payments, the employer is making the payments. So the amounts expected to be due within one year are current liabilities.
For GAAP statements that include multiple opinion units, the OPEB liability, and deferred outflows and deferred inflows related to OPEB, should be allocated between governmental and business-type activities in the government-wide statement of net position. OPEB expense should be allocated to the appropriate activities in the government-wide statement of activities. For proprietary and fiduciary funds, OPEB amounts should be reported in the specific funds they are related to and expected to be paid from. OPEB amounts, other than actual payments, should not be reported in governmental-type funds.
18.104.22.168 Fiduciary fund financial statements
- Qualifying trusts – If the plan is administered through a qualifying trust, then the government is holding monies on behalf of someone else, which requires fiduciary reporting. The employer should report a statement of fiduciary net position (examples of reportable items: cash/investments set aside to pay benefits. Liabilities are only reported when the government is compelled to disburse the resources when no further action, approval or condition is required to be taken or met by the beneficiary to release the resources) and a statement of changes in fiduciary net position (examples of reportable items: contributions from the employer/government, contributions from employees, investments earnings, benefit payments made) for the plan. The net OPEB liability is a liability of the employer, not the plan. Since the OPEB liability is reported in the government-wide financial statements and proprietary fund statements, it should not be reported in the fiduciary statements.
- No qualifying trust – When there is no qualifying trust, the employer cannot report a trust. There should be no fiduciary fund statements presented for the plan. Any assets accumulated in a fund should be reported as assets of the employer. In these circumstances, any OPEB fiduciary funds should be treated as managerial funds and rolled into the appropriate fund (e.g., the general fund) for financial statement reporting.
22.214.171.124 Note disclosures and Required Supplementary Information (RSI)
Many of the significant note disclosures, such as the sensitivity analysis of the discount rate and the health care cost trend rate (if applicable) and the amortization of deferred outflows and inflows are provided by the actuary in the actuarial valuation report. There are different reporting requirements for plans administered through qualifying trusts versus those not administered through a qualifying trust.
See the BARS Manual for note and RSI instructions:
- Note X – OPEB Plans – No Qualifying Trust
- Note X – OPEB Plans – Qualifying Trust
- RSI – OPEB Plan RSI Instructions
- RSI – OPEB Plan Templates
126.96.36.199 Non-governmental OPEB plans
Some local governments may provide OPEB to their employees through a cost-sharing, multiple-employer defined benefit pension plan that:
(1) is not a state or local governmental plan,
(2) is used to provide defined benefit OPEB to both employees of state or local governmental employers, and
(3) has no predominant state or local governmental employer (either individually or collectively with other state or local governmental employers that provide OPEB through the plan).
A union sponsored OPEB plan is an example of a plan meeting these criteria. Participating employers report no OPEB liability, deferred outflows, or deferred inflows. OPEB expense is equal to contributions to the plan.
Note disclosures for defined benefit are at Note X – Pension and/or OPEB Plans – Nongovernmental Plans. The only RSI required is a ten-year schedule of employer contributions.
For employers who contribute to non-governmental defined contribution plans, see Note X – Pension and/or OPEB Plans – Defined Contribution.
188.8.131.52 OPEB – Frequently asked questions
Q - Does GASBS 74 apply to my local government?
A – Probably not. Statement 74 is the financial reporting requirements for OPEB plans that are administered through a qualifying trust or equivalent arrangement. A qualifying trust is one in which all of the following criteria are met:
- Contributions to the plan and earnings on those contributions are irrevocable
- Plan assets are dedicated to providing benefits to plan members in accordance with the benefit terms.
- Plan assets are legally protected from creditors.
Most plans in our state are not administered through a qualifying trust.
Q – Does GASBS 75 apply to my local government?
A – If you provide OPEB to retirees, then the requirements of GASBS 75 are applicable for the years ended 2018 and after.
Just like pensions, the new OPEB standards require local governments to report their OPEB liabilities and related deferred outflows and deferred inflows on the face of the financial statements.
Q – Where do I get my numbers?
A – From an actuarial valuation. 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. Many employers who provide OPEB will need to arrange for their own actuarial valuations.
For employers participating in the Public Employees Benefits Board (PEBB) program and LEOFF 1 employers, the Office of the State Actuary provides on-line valuation tools. These tools should only be used by employers with fewer than 100 participating plan members (includes active employees and retirees).
Employers participating in the Association of Washington Cities (AWC) or Washington Counties Insurance Fund (WCIF) programs, or other plans should contact those programs directly. Employers who need individual valuations should contact their own actuaries to arrange for a valuation under the new standards.
Q – I am a participating employer in the state’s Public Employees Benefits Board (PEBB) plan. Do I provide OPEB?
A – Yes. Participating employers provide OPEB through the plan’s implicit and explicit rate subsidies for retirees. These subsidies lower the monthly premiums for retirees, and that is the OPEB benefit.
Q - What is an “implicit rate subsidy?”
A – This is also known 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 and must be included in your OPEB liability – even if retirees pay 100% of their premiums.
Q - What is the Alternative Measurement Method?
A – This is an alternative to a professional actuarial valuation and is specified by paragraphs 225 and 226 of GASBS 75. It uses simplified assumptions and calculations. It can be used to measure the total OPEB liability if you have fewer than 100 plan members (includes active employees and retirees) as of the beginning of the year.
To determine your member count, consider each plan subscriber to be one member. For example:
- An active employee = 1
- An active employee and dependents = 1
- A retiree and spouse = 1
Q – What is “census data?” Will there be census data testing?
A – Census data is information about plan members, such as birthdate, gender, years of service, compensation, etc. Actuaries use census data to perform the valuation that determines the total OPEB liability.
Auditors will test the completeness and accuracy of census data provided by employers to the actuary.