United States

Changes to reporting health insurance and other retiree benefits

FINANCIAL REPORTING INSIGHTS  | 

The Governmental Accounting Standards Board (GASB) recently voted to approve two Statements to improve the reporting of health insurance and other retiree benefits:

  • Statement 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans 

    Statement 74 addresses the financial reporting of defined benefit other postemployment benefits (OPEB) plans that are administered through trusts that meet specified criteria. The Statement also includes financial statement footnote disclosure requirements for defined contribution OPEB plans. Statement 74 is effective for financial statements for periods beginning after June 15, 2016.  
  • Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions 

    Statement 75 provides guidance for reporting by state and local governments that provide OPEB, such as retiree health insurance, to their employees and for governments that finance OPEB for employees of other governments. This standard requires governments to report a liability on the face of their financial statements for the OPEB they provide as follows:
    • Governments that are responsible only for OPEB liabilities related to their own employees and that provide OPEB through a defined benefit OPEB plan administered through a trust that meets specified criteria will report a net OPEB liability, which is the difference between the total OPEB liability and assets accumulated in the trust and restricted to making benefit payments.
    • Governments that participate in a cost-sharing OPEB plan that is administered through a trust that meets the specified criteria will report a liability equal to their proportionate share of the collective OPEB liability for all entities participating in the cost-sharing plan.
    • Governments that do not provide OPEB through a trust that meets specified criteria will report the total OPEB liability related to their employees.

Some governments are legally responsible to make contributions directly to an OPEB plan or make benefit payments directly as OPEB comes due for employees of other governments. In certain circumstances, Statement 75 requires these governments to recognize in their financial statements a share of the other government’s net OPEB liability. Also, Statement 75 requires governments in all types of OPEB plans to present more extensive note disclosures and required supplementary information about their OPEB liabilities. Statement 75 is effective for fiscal years beginning after June 15, 2017. 

The GASB also recently approved Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Statement 73 establishes requirements for pensions and pension plans that are not administered through a trust meeting specified criteria, and thus are outside the scope of the pension standards the GASB released in 2012. The requirements in Statement 73 for reporting pensions generally are the same as those in Statement 68; however, the lack of a pension plan that is administered through a trust that meets specified criteria is reflected in the measurements. Statement 73 is effective for fiscal years beginning after June 15, 2015 — except those provisions that address employers and governmental nonemployer contributing entities for pensions that are not within the scope of Statement 68, which are effective for financial statements for fiscal years beginning after June 15, 2016.