What we've learned from applying the GASB 75 accounting rules for Other Post-Employment Benefits (OPEB) in California, Minnesota and other states

1. 2018 MASBO Annual Conference
Mark Schulte, FSA, EA, MAAA
Laura Pistotnik, ASA, MAAA
May 9, 2018

2. 1 GASB 75 Background
2 Common Pitfalls … So Far
 Volume of disclosures
 Timing
 Fiduciary Net Position
 Assumptions
 Crossover calculations
 Other Stuff
3 What to do now
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3.  Lots of information about GASB 75 during the past
few years; now it’s finally here
 Substantial changes to volume and content of OPEB
financial reporting
 Unfunded liability on face of financial statements
 Accounting expense (and funded status) likely more volatile
 Potential increased scrutiny on OPEB costs
 Many technical details handled by actuary and
auditor, but need employer understanding too
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4.  Already have experience with new GASB 68 rules,
but districts only reported share of statewide NET
Pension Liability (NPL)
 GASB 75 for OPEB needs to track Total OPEB
Liability (TOL), Fiduciary Net Position (FNP), and Net
OPEB Liability (NOL)
 OPEB will require more disclosure information than
pensions
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5.  GASB statements and Implementation Guides have
good sample note disclosures/RSI – use them!
 CA whitepaper has appendices with instructions on
1st year accounting adjustments and sample
footnotes
 Once set up, the notes/RSI templates should be
fairly recyclable
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6.  Can measure assets/liabilities up to 12 months
prior to fiscal year end (unfunded plans)
 Much easier to use this “lookback” method than to
wait until after year-end to collect data
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Valuation Date &
Measurement Date
Reporting Date
Net amount
Reported at FYE
Calculate liabilities &
Measure assets
6/30/2017 6/30/2018

7.  Lookback method requires making small update to
deferred outflows of resources after fiscal year-end.
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 Adjustment includes payments outside trust (IS + DS)
plus any trust contributions

8.  Biennial actuarial reports with roll-forward updates
in the “off years” (Q&A 4.70)
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Update Item Considerations
Discount rate  Muni bond index rate
 “Crossover” calculation for funded plans
Assets Must reflect actual year-end assets
Benefit payments  Need to use actual direct subsidy benefit payments
 Implicit subsidy payments usually estimated by actuary
Plan changes  What does this encompass?
 Retiree subsidies only; or health plan/premiums in
general?

9.  Often used synonymously with “trust assets” – but
that’s not the whole story
 FNP balance is the TRUST asset balance, but
transactions reflect all PLAN (trust + employer)
cash flows
 Even unfunded plans have an FNP reconciliation
 Offsetting employer-paid contributions and benefit
payments net to $0
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Sample Unfunded Plan

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Sample Funded Plan

12.  Payables and receivables
 Only include receivables if “due pursuant to legal
requirements”
 OPEB payables “should include … benefit payments that are
owed by employers … as the benefits come due”
 Reimbursements from trust are reflected as a
reduction in employer contributions
 Employers with multiple trusts: usually can only
reflect assets of one trust in FNP calculations
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Assumption Considerations
Investment return  Must explain rationale in footnotes
 Ideally based on advice from investment
advisor (if have one)
 Otherwise, actuary runs it through a capital
market assumption model
Municipal bond index rate  This is an input, not an assumption
 Several published indices available
 Will change every year
Cadillac Tax  Must reflect it (GASB 75 par. 32)
 Will affect most plans
 Often delayed, but still law

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 Crossover calculations for discount rate

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 Methods are prescribed and must be followed
 Conceptually straightforward, but several nuances
 GASB process may not match reality
1. Project employer contributions and plan benefit payments
2. Project FNP in future periods
3. Compare projected FNP to benefit payments in each period;
classify future payments as funded or unfunded

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 Some low-funded plans may actually be able to use
expected investment return for discount rate
 MN OPEB investments often invested very
conservatively so may have discount rate lower
than muni bond index rate

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 1. Project employer contributions and offset by
future employee service costs
1 Pay-as-you-go: gross employer “contributions” equal to expected benefit payments
2 Future employee service costs are implicit subsidy only in this example

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 2. Project FNP using net contributions and benefit
payments
 Projected FNP actually increases since net positive
cash flow

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 3. Compare FNP in each period to benefit payments
 If payments < FNP then discount using expected
investment return

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 Different payroll measures for certain calculations
 Present NOL as % of Measurement Year payroll
 Present contributions as % of Reporting Year payroll
 Breakdown of liabilities by bargaining unit
 NOL allocations are straightforward
 Accounting allocations more complex
 Proportionate share calculations for standalone financials
can be very challenging

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 Alternative Measurement Method (AMM)
 Still available but calculations more complex
 Almost a full actuarial valuation
 AMM Prescribed vs. flexible assumptions
Prescribed  Retiree claims costs/aging
 Termination rates (if historical not available)
Flexible  Retirement age
 Marital status/dependent coverage
 Mortality
 Medical trend rates (objective source)

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 AMM accounting is also a little different
 No deferral of experience or assumption gains/losses
 Can make OPEB accounting expense very volatile

23.  Make sure you get a head start on FY2018 GASB 75
reporting
 Evaluate assumptions (discount rate, investment return, &
Cadillac Tax) and consider how they will affect GASB 75
calculations
 Consider OPEB pre-funding if would have a significant effect
on liability discount rate
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25. Mark Schulte, FSA, EA, MAAA
marks@vaniwaarden.com
Laura Pistotnik, ASA, MAAA
laurap@vaniwaarden.com
Van Iwaarden Associates
612.596.5960
All information in this presentation is for general informational purposes only and should
not be relied upon without the express written consent of the authors.
L/D/C/R: 4/ms/sb
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