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View More Press Releases by Scenic Valley Associates

Press release:

GASB 45 for the Masses--Welcome to the "Party"

Issued by: Scenic Valley Associates

Date: Mar. 25, 2009

GASB 45 for the Masses--“Welcome to the Party”

While the GASB 45 “party” started for many large governmental entities for periods beginning after mid December 2006 and for mid-size government entities for periods beginning after mid December 2007,  the fun is just beginning for the thousands of small-size governments. These “Phase 3” governments (as defined by GASB 45) are just starting to feel the effects of the “party” as they are required to comply with GASB 45 for the first time for fiscal periods starting after December 15, 2008.  

GASB 45 requires accounting and financial reporting by employers for Postemployment Benefits Other Than Pension (referred to as OPEB).  This is most commonly retiree medical coverage—other coverages such as dental and vision are often included.  The cost of these benefits is typically paid out of the organization’s operating budget, instead of being pre-funded.  These benefits aren’t cheap and will cost the governmental entities plenty in the future.  GASB 45 requires recognition of these liabilities (luckily, funding isn’t required-GASB 43 comes into play then)  in the financial statement of the public entities—just as FASB 106 did for private entities several years ago.  While estimates of upwards of 100,000 of these valuations may be required, the vast majority of the valuations have yet to be performed as likely the largest number of entities fall under this Phase 3 definition.  These include municipalities, counties, school districts, public utilities, and non-profits.

Costs of the GASB 45 actuarial valuations for the largest entities have been significant.  Six figure costs were possible with the largest entities. The costs of hiring a GASB 45 actuary for the mid size employers have ranged up into five figures.  Now, it’s the Phase 3 governments turn to have valuations done.  While the first “guests” were often apprised of the “party” by consultants, many of these smaller governments (many of them cash-strapped with recent economic conditions) are now reluctantly finding themselves as invited guests to a complex unwanted “surprise party”.  Others knew of the “party” but were glad they weren’t on the “A“ invite list, or even the “B” list for that matter. Nevertheless, it’s their turn to attend.  Fortunately for those with less than 100 members under their OPEB plans, their entrance requirements have been lightened.  They aren’t required to have an expensive actuarial valuation and they only have to estimate the benefit costs every three years in most cases. The GASB 45 Alternative Measurement Method (AMM) is a streamlined approach for these late entrants.

Some firms(ran by actuaries) proudly specialize in providing the GASB Alternative Measurement Method for mainly Phase 3 employers.  They want to act as long term valued resource to Phase 3 employers. They encourage these employers to get an early start and not wait until their required valuation date is past.  In fact, now is the best time to have the AMM performed as GASB 45 allows the AMM as of a date not more than twenty-four months prior to the beginning of the fiscal year for which GASB 45 is required. Why the hurry? Avoid the last minute rush to the entry-way by the thousands of required “guests”. The cost of $1,200 is believed to be the most competitive rate available from a firm with a Fellow of the Society of Actuaries. Some firms charge up to $4-5,000 for the same work product.    

View More Press Releases by Scenic Valley Associates

This is a press release issued by the company named above. BenefitsLink is not the author. Use of any information obtained from this release is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by BenefitsLink.

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