{"id":4145,"date":"2019-06-21T20:05:56","date_gmt":"2019-06-21T20:05:56","guid":{"rendered":"http:\/\/63.247.133.14\/~vaniwaar\/?p=4145"},"modified":"2019-06-21T20:05:56","modified_gmt":"2019-06-21T20:05:56","slug":"top-4-gasb-75-opeb-reporting-pitfalls","status":"publish","type":"post","link":"https:\/\/viaactuarial.com\/2019\/06\/21\/top-4-gasb-75-opeb-reporting-pitfalls\/","title":{"rendered":"Top 4 GASB 75 OPEB Reporting Pitfalls"},"content":{"rendered":"

Now that the first round of GASB 75 OPEB valuations are complete (and some are already onto their 2nd<\/sup> or 3rd<\/sup> rounds), it\u2019s time to take a quick look at some common actuarial pitfalls. These are gotchas that employers and auditors may not be expecting, or notice, when reviewing a GASB 75 report.<\/p>\n

\"Pitfall\"<\/p>\n

    \n
  1. Unsupported actuarial assumptions.<\/strong> ASOPs 27 and 35 require actuaries to disclose the rationale for selecting the assumptions used in an actuarial valuation. Look for it in your GASB 75 or OPEB funding reports – it\u2019s helpful for employers and auditors because it provides assurance that the actuary has carefully considered the underlying assumptions.<\/li>\n
  2. Not estimating the \u201cCadillac Tax\u201d effect on OPEB liabilities.<\/strong> Although this is usually a relatively small adjustment to liabilities, it\u2019s very clear that GASB 75 expects it to be included in an actuarial valuation. Look for it in the actuarial report\u2019s assumption summary section.<\/li>\n
  3. Not updating GASB 75 results in the \u201coff years\u201d between valuations.<\/strong> Many GASB 45 reports used to provide 2 or 3 years of accounting results in a single document. However, the new GASB 75 rules require updated liabilities in the \u201coff years\u201d between biennial valuations.<\/li>\n<\/ol>\n

    This means that employers should receive some type of GASB 75 report every year \u2013 either a full actuarial valuation or a roll-forward report where the liabilities have been updated for new discount rates and actual prior year payments. For unfunded and partially-funded OPEB plans, the discount rate is based on a municipal bond index rate that will change every year and liabilities must be updated for this change.<\/p>\n

      \n
    1. Not calculating an implicit subsidy liability.<\/strong> The implicit subsidy is the additional employer cost incurred when retirees participate in a group health plan but are only required to pay the same blended premium rate as active employees. It may seem like a nebulous cost, but it\u2019s real. For almost all employers, the true cost of health care for non-Medicare retirees is higher than for (younger) active employees. If retirees are paying only the blended rate, then you\u2019ve got an implicit subsidy liability.<\/li>\n<\/ol>\n

      GASB 75 (and even GASB 45) defers to actuarial standards of practice (ASOPs) when deciding whether to value an implicit subsidy liability. ASOP 6 was revised to measure an implicit subsidy for community rated plans, effective in 2015. Under the revised ASOP 6, an implicit subsidy exists whenever retirees pay the same non-age-based premiums as active employees.<\/p>\n

      Bonus: Using the GASB 75 OPEB accounting expense as a funding policy target.<\/strong> The GASB 45 ARC (Annual Required Contribution) was a convenient funding policy target \u2026 even if the methods used to determine the ARC weren\u2019t based on sustainable funding practices. Well, surprise, GASB 75 eliminated the ARC so employers that want to prefund their OPEB need to develop their own Actuarially Determined Contribution (ADC).<\/p>\n

      Although the GASB 75 accounting expense may seem like a convenient successor to the ARC, it\u2019s really not intended for that purpose. If the ARC is extinct and the GASB 75 OPEB expense isn\u2019t appropriate, then what\u2019s a good measure for OPEB funding policy decisions? Stay tuned \u2013 we\u2019ll devote a series of future blog posts to this topic. In particular, we\u2019ll discuss several important ways that OPEB funding policies should be approached much differently than pension funding policies.<\/p>\n","protected":false},"excerpt":{"rendered":"

      Now that the first round of GASB 75 OPEB valuations are complete (and some are already onto their 2nd or 3rd rounds), it\u2019s time to take a quick look at some common actuarial pitfalls. These are gotchas that employers and auditors may not be expecting, or notice, when reviewing a GASB 75 report. Unsupported actuarial […]Read More… from Top 4 GASB 75 OPEB Reporting Pitfalls<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[75,76,16,17,1],"tags":[],"acf":[],"yoast_head":"\nTop 4 GASB 75 OPEB Reporting Pitfalls - Via Actuarial Solutions<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/viaactuarial.com\/2019\/06\/21\/top-4-gasb-75-opeb-reporting-pitfalls\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Top 4 GASB 75 OPEB Reporting Pitfalls - Via Actuarial Solutions\" \/>\n<meta property=\"og:description\" content=\"Now that the first round of GASB 75 OPEB valuations are complete (and some are already onto their 2nd or 3rd rounds), it\u2019s time to take a quick look at some common actuarial pitfalls. 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