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1. GASB 16, 27, 45, and 47: How to Deal With Them MASBO Fall Conference November 13, 2009 Mark Schulte, FSA, EA, MAAA
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11. Classifying Benefits Under GASB What is purpose of benefit? Compensated Absence Termination Benefit Employee Service GASB 16 Pension Payment OPEB Payment Enhance OPEB Enhance Pension GASB 47 GASB 45 GASB 27 New Term Benefit
12. Classifying Benefits Under GASB Compensated absence – GASB 16 Compensated absence – GASB 16 Classification Cash payment Form of Payment 50% x USL (max 90 days) x pay rate Severance Benefit Example 1 Classification Payment to Health Care Savings Plan (HCSP) Form of Payment 50% x USL (max 90 days) x pay rate Severance Benefit Example 2
13. Classifying Benefits Under GASB Pension – GASB 27 OPEB – GASB 45 Classification Cash payment Form of Payment 4 days of pay per yr of svc (max 100 days) Severance Benefit Example 3 Classification Payment to HCSP Form of Payment 4 days of pay per yr of svc (max 100 days) Severance Benefit Example 4
14. Classifying Benefits Under GASB OPEB – GASB 45 with termination benefit footnote OPEB – GASB 45 Classification Subsidized healthcare coverage Form of Payment District currently offers 5 years of free retiree healthcare coverage. If retire before July 1, 2010 with 20 years of service, then get additional 5 years free. Severance Benefit Example 5 Classification Conversion of unused sick leave to retiree health premiums. Form of Payment 1 month of retiree medical premiums for each day of unused sick leave at retirement. Severance Benefit Example 6
15. Classifying Benefits Under GASB 25% of B is Pension (GASB 27) 75% of B is OPEB (GASB 45) Operation of 150 day limit on C is undefined, so we cannot definitely determine allocation of benefit between A and B. A is a compensated absence benefit (GASB 16) Classification 25% paid as cash, 75% paid to HCSP Form of Payment A = 50% x USL (max 90 days) x pay rate B = 4 days of pay per yr of svc (max 100 days) C = A + B (max 150 days) D = C – 403(b) contributions, with offset applied to B first Severance Benefit Example 7
16. Dealing with GASB Statements Monitor and Adapt Measure Benefit Promises Understand GASB Requirements
23. Additional Information Contact Information: Mark Schulte, FSA, EA, MAAA [email_address] 612.596.5971 Van Iwaarden Associates 840 Lumber Exchange 10 South Fifth Street Minneapolis, MN 55402 www.vaniwaarden.com 1.888.596.5960
Editor's Notes
Welcome My name and I am an actuary at VIA in Minneapolis. Given speech topic by MASBO, fairly vague on what was meant by “dealing” with GASB statements.
What our collective experience has been; what we’ve learned; what we can do better – process oriented. Know your enemy and understand what they are thinking. Context and expectations. Scope; how similar; how different; how to know when each applies; go over examples. Would like to be definitive, but is my interpretation and auditors are all different. How we can work within the GASB framework to make sure that valuations are as accurate as possible; don’t overestimate liabilities.
Questions: How many are phase 2 (FY08),3? Second round? Bonded? Utilized actuarial report for purpose other than just completing accounting disclosures? Never knew so much about retiree bft programs – that’s a good thing! As discuss GASB disclosures are one facet of financial transparency expected in today’s world. Understand of both statements and the benefit plans have improved. See it most in severance benefits. Actuaries, auditors (and plan sponsors) are not perfect: constant refining. What “levers” are at our disposal for “improving” liability results? What changes need to make everyone aware of? Trusts? Utilize knowledge in negotiations. Was timing convenient for all parties? Acceleration make things run more smoothly?
Many headlines about OPEB since GASB 45 was announced. Pensions have taken the brunt of criticism recently. Recession depleted funding levels, but OPEB was generally not prefunded anyways. Good time to start? More malleable than pensions.
Fair to have race to the bottom? What is reasonable and fair? Promises made, and its fair to force measurement of those promises. Example: Subsidy = $300 per month + 50% of increase in premiums. Difficult to know how expensive premium increases are: Estimate may be dependent upon current experience. Everything has a maintenance cost.
Established (spreadsheet) methods may be perfectly adequate. GASB 16 doesn’t say you can’t use actuarial methodology.
May not be used to dealing with GASB 27 since is for “DB pension plans” and TRA/PERA/MSRS usually takes care of this. GASB 27 has been around for years, but some auditors are just starting to force Districts to use it for things such as severance benefits. May have used GASB 16 for years, but now forcing to update.
Inclusive an exclusive classification rules.
NEED TO ADD ACCOUNTING REQUIREMENTS!!!
Retirement income/unrestricted payment vs. enhancement to retiree medical plan. Contract split benefits between insurance and severance, but GASB thinks in terms of pension vs. OPEB vs. compensated absence. GASB 47 utilizes calculation methods of other statements, but requires at least a footnote disclosure explanation of effect of termination benefit.
NEED TO ADD ACCOUNTING REQUIREMENTS!!!
NEED TO ADD ACCOUNTING REQUIREMENTS!!!
What if cash payment? Payment to HCSP? Use “already doing GASB 45 reporting” instead?
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