Download GASB 45

Brevard Public Schools
School Board Meeting
September 16, 2008
Other Post-Employment Benefits (OPEB)
Financial Reporting
under GASB Statement No. 45
Prepared by
James J. Rizzo, ASA, MAAA
Senior Consultant & Actuary
Gabriel, Roeder, Smith & Company
Copyright © 2008 GRS – All rights reserved.
Government Accounting Standards Board (GASB)
 GASB accounting standards apply to financial statements of state and local
governments.
 Statement No. 45 deals with medical insurance for retirees.
 The long term cost of employer subsidies for retirees must be reflected in the
government-wide financial statements.
 BPS provides its employees with the minimum required subsidy under Ch.
112.0801, F.S.
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Guaranteed access to coverage with a cap on the price tag equal to the blended group rate
This is the so-called “Implicit Rate Subsidy”.
Currently, the Board is already subsidizing the retiree medical costs with approximately
$ 4.2 million for the year (total current cost of $8.3 mill with retirees paying $4.1 mill)
How that is expected to grow over time is presented on Page 7 of our Report
Government Accounting Standards Board (GASB)
 Record the actuarial values of the subsidies in the government-wide financials.
No Pre-Funding
(Pay as You Go)
Pre-Funding
(Trust Fund)
Unfunded Actuarial Accrued Liability – Disclosed in the Notes
to Financial Statement
$ 110.1 mill
$ 76.3 mill
Annual OPEB Cost – Expense charged to the books for the year
$ 9.6 mill
$ 7.5 mill
Per Covered Active Employee
$1,523
$1,178
As % of Expected Payroll
4.0%
3.1%
Estimated Employer Contribution Toward the OPEB Cost –
Actual current year’s subsidy offsets the current year’s Expense
$ 4.2 mill
$ 7.5 mill
Estimated Net OPEB Obligation – Actual difference appears as
a long term liability in government-wide Statement of Net Assets
(balance sheet liability)
$ 5.4 mill
None
The “No Pre-Funding” column is applicable to 2008 fiscal year. The “Pre-Funding” column would have been applicable to
2008 fiscal year if a qualifying OPEB Trust had been established and $7.5 million had been contributed by the District.
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How will this affect our budget situation?
 This new GASB accounting standard does not itself require any new costs.
 Just record the actuarial values of the subsidy in the financials.
 Liability will impact Net Assets on the Government-wide Statements, but
will not affect the Fund Balance of any individual Fund.
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What are other Florida Districts doing?
 Districts in Miami-Dade, Broward, Hillsborough, Orange and Indian River
Counties also provide only the minimum required subsidy, like Brevard.
Many other Districts do the same as well.
 But some other Districts provide direct subsidies, including St. Johns,
Martin, and Hendry Counties.
 Few, if any, Florida School Districts are establishing and funding OPEB
Trusts at this time.
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How will this affect our credit rating?
 At this time there does not appear to be any significant effect. Credit
agencies just want to be sure governments have a plan for measuring the
liability and addressing it.
 If unaddressed for very many years, it could begin to have an effect on credit
ratings.
 All government agencies are going through this.
 BPS is not overly generous, since you require retirees to pay the full blended
group premium.
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What are our options to reduce costs and liabilities?
 Continued attention to cost containment in general.
 Consider establishing an OPEB trust to pre-fund this long term obligation.
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Not necessarily recommended.
Would lower the liabilities reported, and lower the actual long term costs.
BUT would require annual cash payments into the trust.
Approximately an extra $3 to $4 million at first, in addition to the $4 to $5 million BPS
is currently paying.
Circular 230 Notice: Pursuant to regulations issued by the IRS, to the
extent this presentation concerns tax matters, it is not intended or
written to be used, and cannot be used, for the purpose of (i) avoiding
tax-related penalties under the Internal Revenue Code or (ii) marketing
or recommending to another party any tax-related matter addressed
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circumstances from an independent tax advisor.
This presentation shall not be construed to provide tax advice, legal
advice or investment advice.
This presentation expresses the views of the author and does not
necessarily express the views of the employer, Gabriel, Roeder, Smith &
Company.
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