Survey finds concerns about changes in reporting retiree health benefit costs under GASB’s accounting changes

Few public sector organizations have taken action to mitigate the impact of Government Accounting Standards Board (GASB) new retiree health care and Other Postemployment Benefits (OPEB) accounting requirements. That’s according to a survey conducted by Segal Consulting and co-sponsored by the State and Local Government Benefits Association and the Public Sector HealthCare Roundtable.

Of the state and local governments that completed the survey, 91% were aware of the financial disclosures that would be required with the changes, and 87% are aware that changes could possibly result in using a lower investment return assumption to calculate liabilities and report assets at market rate. However, less than a quarter of those surveyed have completed changes that address the impact of the new rules.

“Concern about the new OPEB accounting requirements is warranted,” commented Cathie Eitelberg, senior vice president and National Public Sector Practice Leader with Segal. “Financing large and likely growing liabilities will have implications for most jurisdictions’ budgeting and possibly bond ratings. Once an entity reflects these values in a more direct manner on its financial reports, it may be faced with tough choices to redesign, fund or cut benefits.”

Planned strategies for mitigating the impact of GASB’s new OPEB accounting requirements may include:

 Making plan design changes — such as revising eligibility requirements,

 Increasing cost sharing for retiree and/or dependent coverage,

 Changing benefit levels and introducing different coverage for future retirees, and

 Using alternative methods for delivering retiree health coverage, such as consideration of a private health insurance exchange.

“The bottom line is that the new statements are likely to result in many entities taking a new look at their retiree health benefits, and that examination may result in substantial changes,” said Segal Senior vice president Richard Ward.

SOURCE: https://www.segalco.com/media/2614/summer2016-survey-finds-concerns-gasbs-opeb.pdf

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