HomeMy WebLinkAbout2006 09 25 Reports Handout Given Out By Deputy Mayor Blake
Date: September 25, 2006
The attached was distributed to the City
Commission by Deputy Mayor Blake during
"Reports" at the September 25, 2006 City
Commission Regular Meeting.
Deadline Approaching for GASB 45 Compliance
by Public Entities
The deadline is rapidly approaching for
public entities to comply with Governmental
Accounting Standards Board (GASB)
Statement No. 45. GASB 45 requires that
expenses for retiree health benefits be accrued
over the working lifetime of employees rather
than expensed on a pay-as-you-go basis.
The impact on a public employer's financial
statement can be dramatic.
Effective Dates
For larger public employers, those with
more than $100 million in annual revenues,
GASB 45 is effective for the fiscal year
beginning after December 15, 2006. The
same requirements must be met by smaller
public employers one to two years thereafter,
depending on annual revenues.
Overview
GASB 45, issued in June 2004, established
uniform financial reporting and accounting
standards for state and local governmental
entities related to Other Post-Employment
Benefits (OPEB) other than pensions.
GASB 45 will require retiree health benefits,
including medical, dental, vision, life and
long-term care insurance, to be measured and
reported on an accrual basis.
While direct employer contributions toward
these retiree benefits are to be included, any
implicit subsidies will also be considered an
employer obligation, and are to be included
in these reported liabilities. It is this implicit
subsidy that will greatly expand the reach and
implications ofGASB 45.
Financial Impact
The financial impact on a public employer
can be significant. Depending on plan
design, contribution levels and employee
demographics, the GASB 45 expense can be
as much as two to six times the pay-as-you-
go cost, or a potential liability of as much as
$100,000 per active employee.
GASB 45 ACTION STEPS
· Review practices and documentation
· Conduct actuarial valuation
· Evaluate current plan provisions and
impact of alternatives for:
Eligibility - age/service
Plan design
Contribution methodology
Financing/funding
Medicare D/Medicare Advantage
alternatives
· Develop future plan strategy and design
· Assess and select funding approach
· Finalize financial reporting
GBS Services
Employers should be starting their GASB
valuations soon to give those responsible for
budgets the results well ahead of the beginning
of the year, and to allow time for data
collection, valuation processing and review
of viable plan alternatives. GBS offers these
services to assist with GASB 45 compliance:
· Actuarial valuation, including determination
of direct costs and implicit subsidies
· Plan analysis and review, including plan
design modeling: how changes in plan design,
eligibility and retiree contributions will
impact an employer's liability and expense
· Development of pre-funding strategies to
address unfunded liabilities
· Implementation and communications
assistance
For more information, contact a GBS
representative or visit our website at
www.gallagherbenefits.com.
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