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The Government Accounting Standards Board GASB issued Statement 45 GASB 45 in June 2004 this statement establishes accounting and reporting standards for post-employment benefits other than pensions other post-employment benefitsOPEB offered by state and local governmentsRequiring local governments to actuarially determine their annual required contribution ARC to fund OPEB and to account for the unfunded amount as a liability on annual financial statements Government employers required to comply with GASB 45 include all states towns education boards public schools and all other government entities that offer OPEB and report under GASB In this paper we will have an overview of this pronouncement and see how it will affect governmental entities In addition to pensions many state and local governmental employers provide other postemployment benefits OPEB as part of the total compensation offered to attract and retain the services of qualified employees OPEB includes postemployment healthcare as well as other forms of postemployment benefits for example life insurance when provided separately from a pension planGASB 45 Accounting and reporting standards addressing pension obligations have been in place for many years Though because of the absence of authoritative accounting and reporting standards for OPEBs these liabilities have gone unreported GASB 45establishes standards for the measurement recognition and display of OPEB expense or expenditures and related liabilities or assets note disclosures and if applicable required supplementary information RSI in the financial reports of state and local governmental employersThis statement requires governmental entities to recognize the cost of OPEBs when they are earned while employees are working rather than when they are paid after employees retireUsually government employers have reported the cost of OPEB on a pay-as-you-go basis The annual amount paid for benefits has been reported as the annual expense with no other liabilities or funding requirements reported GASB believes that the pay-as-you-go method does not accurately reflect the accurate costs that governments are accumulating for future benefits of current employees because this method fails to recognize the
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