NEWS RELEASE 06/30/06

GASB Issues Technical Bulletin That Clarifies Reporting of Medicare Part D Payments to State and Local Governments

Norwalk, CT, June 30, 2006—The Governmental Accounting Standards Board (GASB) today issued a Technical Bulletin that clarifies how state and local governmental entities should report payments received from the federal government under the retiree drug subsidy provisions of Medicare Part D.

Medicare Part D is a federal program that provides prescription drug benefits to eligible Medicare recipients. Among other options, the law that created the program provides for payments to certain employers and plans that provide prescription drug benefits to persons who otherwise would be eligible to participate in Medicare Part D; the payments can be as much as 28 percent of eligible costs.

Specifically, the Technical Bulletin clarifies:

  1. How an employer should account for and report Medicare Part D retiree drug subsidy payments from the federal government to the employer

  2. How such payments to an employer affect the accounting for the transaction and financial reporting by a defined benefit OPEB plan

  3. How an employer should account for and report such payments to the plan

  4. How a defined benefit OPEB plan should account for and report such payments to the plan.

"A number of questions have arisen from constituents seeking guidance on how government employers and related plans should account for retiree drug subsidy payments associated with Medicare Part D," said Karl Johnson, GASB Project Manager. "The Technical Bulletin provides guidance on how existing standards should be applied to those transactions."

Today’s Technical Bulletin is effective immediately, except for portions of answers pertaining specifically to measurement, recognition, or required supplementary information requirements of Statement No. 43, Financial Reporting for Postemployement Benefit Plans Other Than Pension Plans, or Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. Those provisions should be applied simultaneously with the implementation of Statement 43 or Statement 45.


About the Governmental Accounting Standards Board

The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board’s diverse constituency, including preparers and auditors of government financial statements, users of those statements, and members of the academic community. More information about the GASB can be found at its website www.gasb.org.