GASB 45 OPEB Assistance

GASB 45 OPEB Actuarial Services for Member Cities


GASB 45 OPEB Overview

The Governmental Accounting Standards Board (GASB) in 2006 issued Statement No. 45, which requires public-sector entities to account for the promise to provide other post-employment benefits (OPEB) over the working life of the employee rather than on a pay-as-you-go basis, which was common practice before GASB 45.

Minnesota cities that do not contribute directly toward retiree benefits have some GASB 45 OPEB liability because of the provisions of Minnesota Statutes, section 471.61. This statute requires that early retirees be pooled with active employees for continued health benefits. The pooling creates an "implicit subsidy" that under GASB 45 should be calculated and accounted for on city financial statements.

In addition to the implicit subsidy, Minnesota cities are required under Minnesota Statutes, section 299A.465 to contribute directly toward the benefits of public safety officers disabled in the line of duty. This statute requires the employer to continue paying until age 65 the same premium portion that was paid before the employee become disabled. If your city pays any part of public safety employees’ premiums, then those disabled in the line of duty create a direct subsidy liability.

Minnesota cities with 50 or fewer employees offering health plans with age-banded rates will not have an implicit subsidy or GASB OPEB liability. However, if the city "blends" the age-banded rates into a single/family rate, then the implicit subsidy exists.

There have also been questions about whether GASB 45 applies to small cities. Based on informal discussions with the Office of the State Auditor, these requirements apply to any governmental entity offering OPEB that prepares financial statements in accordance with generally accepted accounting principles. However, for cities under 2,500 in population that are on a cash basis of accounting, payments of these benefits should already be recognized in the city's financial statements and no additional financial presentation would be required for the cash basis—but disclosure of the plan could be required (e.g., plan description, number of retirees on the plan, amount of city contribution for single and family, total amount paid in benefits, etc.). Cities under 2,500 in population with questions or concerns about accounting for post-employment benefits should contact the Office of the State Auditor at (651) 296-2551.

Minnesota cities are allowed, but not required, to pre-fund OPEB in a trust. Guidance on the establishment and maintenance of such trust are provided under Minnesota Statutes, section 471.6175.

Additional GASB 45 OPEB Information:

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Partner for Actuarial Services

The League of Minnesota Cities has partnered with Van Iwaarden Associates to offer GASB 45 actuarial valuation and consulting services. Through this partnership, Member cities selecting Van Iwaarden will receive substantial discounted fees.

To see a list of our GASB 45 OPEB services and to get a fee quote, read the section below on Discounted Actuarial Services.

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Financial Statement Pitfalls

Actuarial valuations are required every two years if you have 200 or more participants, and every three years if not. However, valuations are required earlier if there have been changes that significantly affect your GASB 45 OPEB liability.

Van Iwaarden has completed many cities’ second valuation and discovered changes that should be addressed. Here are the most common areas to be addressed:

  • Changing plan design, benefits, and cost-sharing.
  • Implementing an OPEB trust.
  • Changing the method of recognizing the liability.
  • Methods of disclosing GASB 45 results on financial statements.

If any of these apply to your city, we recommend contacting an LMC Van Iwaarden resource consultant (see right) and your auditor.

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Discounted Actuarial Services

The League has contracted with Van Iwaarden Associates to provide member cities actuarial valuation and consulting services at discounted fees.

Alternative Measurement Method (AMM) Actuarial Valuations:
The AMM actuarial valuation is a streamlined valuation approach that uses simplified assumptions and valuation techniques. GASB developed this method to assist small employers with their valuations at affordable costs. To be eligible for an AMM actuarial valuation, your city must have fewer than 100 participants.

Eligible cities that require retirees to pay the full premium for coverage (i.e., implicit subsidy only) receive AMM actuarial valuations for less than $1,500. Please contact Van Iwaarden to discuss your city’s OPEB and to get your member discounted fee quote.

Cities eligible for the AMM receive a certified actuarial valuation and up to one hour of telephone consultation to review and discuss the report.

Cities must provide census data, plan provisions, and general assumption information using the AMM Actuarial Valuation Data Request.

Full Actuarial Valuations:
Member cities not eligible for the AMM actuarial valuation receive a full actuarial valuation at a discounted rate. Full valuation fees for most cities range from $4,000 to $15,000 depending on the number of participants, number of plans offered, and the complexity of the benefit arrangements.

Cities receive a certified actuarial valuation and up to two hours of telephone consultation to review and discuss the report.

Census data, plan provisions, and general assumption information are required to begin the full actuarial valuation. Cities must provide this information using the Full Actuarial Valuation Data Request.

Consulting Services:
Cities receive additional consulting services at discounted fees. The following list includes some of the more common consulting services:

  • Cost-reduction strategies, including plan design, eligibility, and cost sharing.
  • Cost analysis for contract negotiations.
  • Funding analysis for OPEB trust implementation or issuing OPEB bonds.
  • Reconciliation of liability for off valuation year financial statements.
  • Forecasting future OPEB benefit payments, liabilities, expenses, and contributions.
  • Allocation of results by internal service groups.
  • Analysis of alternative methods for recognizing the liability.
  • Review OPEB Notes to Financial Statements.
  • Severance benefit liability calculations under GASB 16 and GASB 27.

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