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Minutes Archive

Other Postemployment Benefit Accounting and Financial Reporting


Minutes of Meetings, May 14-16, 2013

The Board discussed issues related to employer accounting and financial reporting for other postemployment benefits (OPEB) that contain an implicit rate subsidy. An implicit rate subsidy is the difference between a blended premium rate charged to retirees participating in a pool with active employees for a particular benefit and the rate that would be applicable to those retirees if that benefit was acquired for them as a separate group. The Board tentatively decided to propose that an implicit rate subsidy be included in the projection of OPEB for the measurement of a governmental employer’s OPEB liability.

Minutes of Meetings, April 2-4, 2013

The Board discussed issues related to the timing and frequency of the measurement of a single or agent employer’s defined benefit other postemployment benefits (OPEB) liability. The Board tentatively decided to propose that an employer’s net OPEB liability be measured as of a date no earlier than the single or agent employer’s prior fiscal year-end, consistently applied from period-to-period. The Board also tentatively decided to propose that the frequency of actuarial valuations used to determine a single or agent employer’s net OPEB liability be at least biennial. In addition, the Board tentatively decided to propose that the timing of actuarial valuations used to determine a single or agent employer’s net OPEB liability be no more than 30 months and 1 day earlier than the employer’s most recent fiscal year-end. In circumstances in which the actuarial valuation date is not the measurement date, the Board tentatively decided to propose that update procedures be used to roll forward the information to the measurement date.

The Board also discussed issues related to the recognition of expense related to a single or agent employer’s defined benefit OPEB obligations. The Board tentatively decided to propose that contributions to an OPEB plan trust from an employer be considered a liquidation of the employer’s liability and contributions from employees be considered a reduction in the employer’s expense related to OPEB. The Board also tentatively decided to propose that the difference between the projected and actual investment return on OPEB plan assets be recognized as a deferred outflow of resources or as a deferred inflow of resources and be recognized as OPEB expense over a closed five-year period, beginning in the current period.

For effects of changes in the total OPEB liability on the measurement of a single or agent employer’s net OPEB liability, the Board tentatively decided to propose that differences between expected and actual experience with regard to economic or demographic factors (differences between expected and actual experience) and changes of assumptions about future economic or demographic factors or of other inputs (changes in assumptions) be recognized as deferred outflows of resources or deferred inflows of resources. The Board tentatively decided to propose that deferred outflows of resources and deferred inflows of resources resulting from differences between expected and actual experience and changes in assumptions be recognized as OPEB expense, beginning in the current reporting period, using a systematic and rational method over a closed period equal to the average of the expected remaining service lives of all OPEB plan participants, determined as of the beginning of the measurement period. The Board tentatively decided to propose that the effects of all other changes in the total OPEB liability on the measurement of the net OPEB liability be recognized in OPEB expense in the current reporting period.

The Board also tentatively decided to propose that contributions to an OPEB plan from a single or agent employer subsequent to the measurement date of the net OPEB liability and before the end of the employer’s reporting period be reported as a deferred outflow of resources.

Minutes of Meetings, February 19-21, 2013

The Board discussed issues related to the attribution of the present value of expected benefits in the measurement of an other postemployment benefits (OPEB) liability. The Board tentatively decided to propose that the method to attribute the actuarial present value of projected benefit payments to periods of service in the measurement of an OPEB liability be the entry age actuarial cost method with each period’s service cost determined as a level percentage of pay. The Board also tentatively decided to propose that benefits be attributed to periods beginning in the first period in which the employee’s service accrues OPEB benefits in accordance with the OPEB arrangement, notwithstanding vesting or similar terms, through all assumed exit ages.

The Board also discussed issues related to the reliability of the measurement of a net OPEB obligation for recognition in the financial statements of a state or local government. The Board tentatively decided that an employer’s net OPEB obligation is measurable with sufficient reliability for recognition as an element of the financial statements and that the measurement sufficiently reflects the qualitative characteristics of understandability, relevance, timeliness, consistency, and comparability.

Minutes of Meetings, January 8-9, 2013

The Board discussed issues related to the discount rate to be used to calculate the present value of projected future other postemployment benefits (OPEB) in the measurement of an OPEB liability. The Board tentatively decided to propose that the discount rate used in the measurement of an OPEB liability be the single rate reflecting (1) the long-term rate of return on plan investments that are expected to be used to finance the payment of benefits, to the extent that (a) the plan’s fiduciary net position is projected to be sufficient to make projected benefit payments and (b) plan assets are expected to be invested using a strategy to achieve that return and (2) a yield or index rate for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher (or equivalent quality on another rating scale), to the extent the conditions in (1) are not met.

The Board also discussed the effect of the use of an irrevocable trust on the measurement of an employer’s OPEB liability. Specifically, the Board considered the ability of a trust to return assets to the employer in circumstances in which assets accumulated in the trust are in excess of the projected benefits to be paid. The Board tentatively decided to propose that trusts that allow excess assets to be returned to the employer when the total OPEB liability has been legally defeased should be considered a trust in the measurement of an OPEB liability, However, trusts that allow assets accumulated in excess of the present value of projected benefits to be paid to be returned to the employer should not be considered a trust in the measurement of an OPEB liability.

Minutes of Meetings, November 28-30, 2012

The Board continued its discussion on the items to be included in the projection of benefits for the measurement of an employer’s OPEB liability in a defined benefit OPEB arrangement.

The Board discussed the effects of future events that impact the ultimate benefits that may be paid to a beneficiary such as automatic postemployment benefit changes, ad hoc postemployment benefit changes (to the extent they are considered substantively automatic), projected salary changes, and projected service credits. The Board tentatively decided that OPEB benefits that are based on a formula that includes the effects of future events should include the effects of these future events in the projection of benefits for the measurement of an employer’s OPEB liability.

The Board also discussed the effect of compensated absences on an employer’s OPEB liability, and whether the guidance in Statement No. 16, Accounting for Compensated Absences, should be continued. Specifically, the Board considered the requirement to include accrued sick leave that may only be used to receive additional service credits, and the requirement not to include an employer’s payment to a third party to satisfy an accrued sick leave liability in the projection of an employer’s OPEB liability for a defined benefit OPEB arrangement. The Board tentatively decided to make no change to these requirements in Statement 16.

The Board also discussed the inclusion of taxes or other assessments on providing OPEB benefits in the projection of benefits for the measurement of an employer’s OPEB liability. The Board considered certain potential effects of the Patient Protection and Affordable Care Act (Act), including an excise tax on employer-provided health insurance benefits that are determined to be an excess benefit by the Act. The Board tentatively decided to include the consideration of taxes or other assessments on providing the benefits in the projection of benefits in the measurement of an employer’s OPEB liability.

Minutes of Meetings, October 2-4, 2012

The Board discussed the inclusion of OPEB provided outside of a formal, written document in the projection of benefits for the measurement of an employer’s OPEB liability. The Board tentatively decided to propose that benefits provided outside of a formal, written document should be included in the projection of benefits for the measurement of an employer’s OPEB liability when the benefits are understood by both the employer and employees to be part of the employment exchange transaction.

The Board also discussed the consideration of “cost-sharing” provisions between the employer and benefit recipients in the projection of benefits for the measurement of an employer’s OPEB liability. The Board tentatively decided to propose that employers should consider the pattern of practice with regard to the sharing of benefit costs between an employer and benefit recipients and include the employer’s cost from that pattern in the projection of benefits for the measurement of an employer’s OPEB liability.

The Board also discussed the consideration of an employer’s ability to modify benefits in the future and the impact of that ability on the projection of benefits in the measurement of an employer’s OPEB liability. The Board tentatively decided to propose that only those benefits that have been formally approved and communicated to employees be considered in the projection of benefits for the measurement of an employer’s OPEB liability.

The remaining OPEB topics from the October staff paper will be discussed at the October teleconference.

Minutes of Meeting, August 22-24, 2012

The Board discussed the differences between pensions and other postemployment benefits (OPEB) not provided through qualifying trusts, and pensions and OPEB provided through qualifying trusts, as well as the various approaches of accounting for pensions and OPEB not provided through qualifying trusts used by standards setters. The Board also considered the appropriateness of accounting for pensions and OPEB not provided through qualifying trusts using an approach similar to that in Statement No. 68, Accounting and Financial Reporting for Pensions.

The Board tentatively decided that an employer’s obligation for pensions and OPEB provided outside of a trust or equivalent arrangement in defined contribution arrangements and defined benefit single-employer and agent employer arrangements meets the definition of a liability in Concepts Statement No. 4, Elements of Financial Statements.

Minutes of Meeting, July 10-11, 2012

The Board revisited the results of staff research using Comprehensive Annual Financial Reports and reconsidered some conceptual issues related to accounting and financial reporting for other postemployment benefits. The Board reaffirmed its tentative decision to propose that an employer’s net obligation for other postemployment benefits, when determined by projecting future benefit payments, including probabilities of future events, discounting to present value using an appropriate rate, attributing the costs to periods using an appropriate actuarial cost allocation method, and subtracting net position accumulated in a qualifying trust (as defined in paragraph 4 of Statement No. 68, Accounting and Financial Reporting for Pensions), meets the definition of a liability in Concepts Statement No. 4, Elements of Financial Statements. The details related to projecting benefit payments and determining the discount rate and attribution method will be determined at a future meeting.

In contrast to its prior tentative decision, the Board determined that it was not appropriate to conclude at this time whether the employer’s net liability for other postemployment benefits is measurable with sufficient reliability for recognition in the financial statements. This issue will be reconsidered when the details of a proposal related to measurement of the net other postemployment benefits liability are determined.

Minutes of Meeting, November 8-10, 2011

The Board reviewed the results of the research using Comprehensive Annual Financial Reports and considered some conceptual issues related to accounting and financial reporting for other postemployment benefits. The Board tentatively agreed to propose that an employer’s obligation for other postemployment benefits meets the definition of a liability in Concepts Statement No. 4, Elements of Financial Statements. Furthermore, the Board tentatively agreed to propose that the liability for other postemployment benefits is measureable with sufficient reliability and, therefore, meets the criteria for recognition in financial statements. The Board also tentatively agreed to consider at future meetings issues related to measurement of the liability and recognition in expense, acknowledging that different decisions may be reached for other postemployment benefits than were reached for pensions.

Minutes of Meeting, August 17-19, 2011

The Board reviewed and approved the research plan for the other postemployment benefits portion of the postemployment benefits project.