ABSTRACT
Besides traditional pension benefits, retirees in the public sector also enjoy many other postemployment benefits (OPEB). While healthcare subsidy remains the largest part of OPEB by far, OPEB can also include dental and vision care as well as life, disability, and long-term care insurance. Since OPEB is also tied to employment, it shares one important characteristic with pension benefits, namely the benefit is earned during one’s working years, but will not be paid until after retirement. OPEB, therefore, should be funded and reported in a way that is similar to pension benefit, meaning OPEB costs should be recognized and funded in the period when it is earned by the employee rather than when it is paid to her during retirement. While the Government Accounting Standards Board (GASB) issued Statements 25 and 27 in 1994 to set the standards for financial reporting on pension benefits that require actuarially determined information, no such information was required of financial reporting on OPEB, which was administered on a pay-as-you-go basis in most states. In 2004, GASB issued two statements: Statement 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and Statement 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, to set standards for financial reporting on OPEB. These two statements are substantially similar to Statements 25 and 27 in terms of reporting standards.
