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NCTR Directors Meeting GASB OPEB. June 22, 2007 Ed Macdonald. The GASB Statements. GASB 43 - Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. GASB 45 - Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions.

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Nctr directors meeting gasb opeb

NCTR Directors MeetingGASB OPEB

June 22, 2007

Ed Macdonald


The gasb statements
The GASB Statements

  • GASB 43 - Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans.

  • GASB 45 - Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions.


The statements in general
The Statements in General

  • Postemployment healthcare benefits, whether provided separately or through a defined benefit pension plan.

  • Other forms of non-pension postemployment benefits (e.g., life insurance, disability, long-term care) unless provided through a defined benefit pension plan.


The implicit rate subsidy
The Implicit Rate Subsidy

By collecting contributions based on illustrative premium, the true incidence of cost is different, employers are “implicitly” subsidizing the retiree rate (true cost).



Inputs
Inputs

  • Data Collection

    • Census

    • Claims

  • Claims Analysis

  • Plan Provisions

  • Assets

  • Valuation Assumptions

    • Withdrawal

    • Mortality

    • Disability


Outputs
Outputs

  • ARC

    • Normal Cost

    • Unfunded Accrued Liability

  • Accrued Liability

  • Schedule of Funding Progress

  • Net OPEB Obligation

  • Reconciliation of Assets






Pre 65 per retiree claim cost
Pre-65 Per Retiree Claim Cost

Average Pre-65 Retiree cost is $542.

Median Pre-65 Retiree cost is $520.


Post 65 per retiree claim cost
Post-65 Per Retiree Claim Cost

Average Post-65 Retiree cost is $286.

Median Post-65 Retiree cost is $296.


Normal cost as a percentage of payroll results
Normal Cost as a Percentageof Payroll Results

Average Normal Cost = 8.7% of payroll

Median Normal Cost = 7.4% of payroll


Unfunded accrued liabilities as a percentage of payroll results
Unfunded Accrued Liabilities as a Percentage of Payroll Results

Average Unfunded Accrued Liabilities = 5.0% of payroll

Median Unfunded Accrued Liabilities = 3.6% of payroll


Arc as percentage of payroll results
ARC as Percentage Resultsof Payroll Results

Average ARC = 13.5% of payroll

Median ARC = 11.3% of payroll



Arc variance
ARC Variance Results

Sample Alternate Interest Rate Assumption Results



Asset trust for opeb plans
Asset Trust for OPEB Plans Results

  • Requires additional budget appropriation(s)

  • Could allocate the Retiree Drug Subsidy (if qualified) for partial advance funding

  • Positive impact on bond rating


Strategies for controlling the liability and expense
Strategies for Controlling the ResultsLiability and Expense

  • Capping the employer share of the obligation

  • Terminating or “sunsetting” all or a portion of the benefits (i.e. post-65 Rx coverage)

  • Tightening eligibility requirements, either for all employees or for future hires

  • Restricting retiree plan elections – direct retirees towards lower cost option


Strategies for controlling the liability and expense1
Strategies for Controlling the ResultsLiability and Expense

  • Increasing retiree premium contributions

  • Indexing fixed dollar plan features, such as deductibles and copays

  • Restrict spousal coverage and/or increase required contributions for spousal coverage


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