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OPEB.ppt Presentation Transcript

  • 1. COMMUNITY COLLEGE BUSINESS OFFICERS ANNUAL CONFERENCE Accounting and Financial Reporting for Other Post-employment Benefits (OPEB) The next Big Bang
  • 2. OPEB
    • The next big bang in the State and Local Government Industry
      • No more pay as you go accounting
        • Cash basis
        • Accrual basis
        • Private sector impact
  • 3. OPEB
    • GASB Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pensions
      • Issued in April 2004
      • Accounting and financial reporting and disclosures requirements for reporting by administrators or trustees of OPEB plan assets or by employer’s or sponsors that include OPEB plan assets as trust or agency funds in their financial reports.
        • S-43 supersedes the guidance contained in GASB Statement No. 26, Accounting and Financial Reporting for Postemployment Healthcare Plans Administered by Defined Benefit Pension Plans.
        • S-43 is consistent with the guidance contained in GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plan
  • 4. OPEB
    • GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pension
      • Issued in June 2004
      • Employer’s accounting and financial reporting for OPEB costs, whether or not those costs are advance funded.
        • S-45 supersedes the guidance contained in GASB Statement No. 12, Disclosure of Information on Postemployment Benefits Other Than Pension Benefits by State and Local Governmental Employers.
        • S-45 is generally consistent with GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers
  • 5. OPEB
    • Implementation dates for GASB S-45
      • Three phases
      • Same phases as GASB S-34
      • Phase I - periods beginning after December 15, 2006 (fiscal years ending December 31, 2007 and thereafter)
      • Phase II - periods beginning after December 15, 2007 (fiscal years ending December 31, 2008 and thereafter).
      • Phase III - periods beginning after December 15, 2008 (fiscal years ending December 31, 2009 and thereafter)
  • 6. OPEB
    • Implementation dates GASB S-45
      • Blended and/or discretely presented component units are required to use the same implementation date as the primary government
      • Early implementation is encouraged, but not required.
        • If comparative financial statements are presented, the prior year figures should be restated.
    • Implementation dates GASB S-43
      • One year prior to implementation of GASB S-45
      • Actuarial valuation done at beginning of year of implementing S-45 (end of previous year S-43)
  • 7. OPEB
    • Do I have an OPEB?
    • What is OPEB?
      • Post employment benefits other than pensions
      • After termination, whether or not retired
      • Health care benefits, regardless of who provides them
        • Medical, dental, vision, hearing, other
        • Provided by a pension plan
          • Account for separately
      • Life insurance, disability, long-term care
        • Unless provided by a pension plan
          • Treated as a pension benefit
  • 8. OPEB
    • What is OPEB?
      • Exchange of benefits for employee services performed
      • Part of compensation package provided by employer
      • All or portion of the cost paid by the employer
        • Exception for implicit subsidy
        • Retiree pays equivalent to active employee
          • Required by Statute in many states
        • Implicit subsidy creates an OPEB
          • Exception for “Community Rated Plans”
        • Does not include special termination benefits
  • 9. OPEB
    • Differentiate from Special Termination Benefits
    • GASB Statement No. 47, Accounting for Termination Benefits
      • Issued in July 2004
      • Effective for fiscal years ending June 30, 2006 and thereafter.
    • What is a special termination benefit?
      • An offer made by an employer for a short period of time to encourage employees to retire.
      • Inducement to leave employment prior to retirement.
        • Includes both voluntary and involuntary retirement early retirement programs.
  • 10. Special Termination Benefits
    • S-47 requires the government to recognize a liability as soon as employees accept the offer, and the liability can be reasonably estimated for both voluntary and involuntary termination benefits.
      • Liability and expense in all financial statements using the accrual basis of accounting.
      • expenditure in governmental funds as payments are made to or on-behalf of the former employees.
    • Sick leave conversions do not create an OPEB
      • Guidance contained in GASB S-16
      • Liability as earned by employee
  • 11. OPEB
    • Now that I have an OPEB, what do I do?
      • Determine type of OPEB provided to employees
      • Determine type of plan used to provide benefits to employees
    • Two types of OPEB
      • Defined contribution
        • Employee bears risk
      • Defined benefit
        • Employer bears risk
  • 12. OPEB
    • Three types of OPEB Plans
      • Single employer
        • One employer contributes
        • Special funding situations
      • Multiple employer
        • Cost-sharing
          • One actuarial valuation
        • Agent
          • Separate actuarial valuation for each employer
  • 13. OPEB
    • Oakton Community College
      • Two types of benefits
        • Senior Service Program
          • Deferred salary
          • GASB S-47
        • Retiree health and Life insurance
          • 5 years of benefits
          • Cap on amounts
          • Provided through a state-wide pool
          • Determined to be a single employer plan
  • 14. OPEB
    • Oakton Community College
      • Required Implementation June 30, 2009
        • Phase II
        • June 30, 2008 (comparative)
      • Chose to early implement
        • June 30, 2006 (June 30,2005)
        • Previous termination benefit
  • 15. OPEB
    • Oakton Community College
      • Single employer/agent multiple employer
      • Need to hire an actuary
        • Annual Required Contribution (ARC)
        • Actuarial valuation
          • Future cash flows of benefits
          • Discount to present value
          • Allocate costs to specific years
          • Using one of five actuarial cost methods
  • 16. OPEB
    • Accounting and financial reporting
      • Actuarial Valuations
        • >200 members, biennially
        • <200 members, triennially
        • <100 members, be your own actuary
        • Members
          • Employees in active service
          • Terminated but not yet receiving benefits
          • Retired employees and beneficiaries
        • Valuation in off years required if significant changes occur
  • 17. OPEB
    • Accounting and financial reporting
      • Actuarial Valuations
        • Actuarial Accrued Liability (AAL)
          • Present value of promise to pay
        • Actuarial Value of Assets (AVA)
          • Market related
        • Unfunded or Over funded AAL
          • UAAL or OAAL
            • Notes
            • RSI
  • 18. OPEB
    • What to look for in an actuary
      • Specific GASB S-45 experience
      • FASB experience not required
      • Department of Labor not applicable
    • Actuarial Assumptions
      • Health care rate
      • Investment (discount rate)
        • Advance funded in a trust
        • Not advance funded
  • 19. OPEB
    • Oakton Community College’s Assumptions
      • Entry age normal actuarial cost method
      • Investment rate – 4%
      • Health care rate – 8%
      • Inflation rate – 3%
      • Amortization period
        • 15 years blended
        • Closed
        • Level percentage of projected payroll
  • 20. OPEB
    • Oakton Community College’s cost of OPEB?
      • Actual claim costs
      • Age-adjusted premiums
        • Need to convert from single premium
        • Can not use single premium
      • Actual costs used
        • 2,249 Faculty; 2,211 non-faculty
        • 1,805 Faculty, 1,75 non-faculty
      • Amount of employer contribution (paid on behalf of retirees)
      • Census information
        • Active employees
        • Retirees and terminated employees
  • 21. OPEB
    • Oakton Community College’s First Actuarial Valuation
        • June 30, 2005
          • ARC
          • Net OPEB Obligation
          • Funded status
        • June 30, 2006
          • Annual OPEB Cost (ARC adjusted for NOPEBO)
          • Net OPEB Obligation
          • Funded status
  • 22. OPEB
    • Oakton Community College
      • Sample note disclosure
      • Sample required supplementary information
  • 23. Frederick G. Lantz, CPA Partner, Director of Government Services Sikich LLP 998 Corporate Boulevard Aurora, Illinois 60502 direct phone - 630-566-8557 direct fax - 630-499-7557 email - [email_address]