Big Changes Ahead for Governmental Employers

Earlier this summer the Governmental Accounting Standards Board (GASB) announced their approval of three new statements pertaining to the accounting for retirement benefits: Statements 73, 74 and 75.

Statement 73 pertains to pension benefits, and is basically an enhancement of the previously-released Statement 68. Statement 68 significantly changed the accounting requirements for pension plans funded through an irrevocable trust. For example, many employers participating in Oregon PERS are now seeing the impact of Statement 68 on their June 30, 2015 financial statements.

Prior to the effective date of the new Statement 73, pension benefits that were not funded through an irrevocable trust were not subject to these new requirements. For example, many local governments provide stipend benefits to retirees who meet certain eligibility requirements, and fund these benefits on a “pay-as-you-go” basis. Starting with fiscal years beginning on or after June 15, 2016, these requirements will apply to these types of stipend arrangements.

Similarly, Statements 74 and 75 apply to Other (than pension) Post-Employment Benefits (“OPEBs”). Most commonly these will be in the form of medical benefits provided to pre-Medicare retirees (even if the only “benefit” is allowing them to continue participating in the employer’s plan on a self-pay basis). Statement 75 is the one that will be applicable to most employers; Statement 74 only applies if these OPEBs are funded through an irrevocable trust, which is rare among Oregon employers.

Statement 75 will essentially impose these new Oregon PERS-type accounting rules to OPEBs. This will have a huge impact on most employers’ financial statements, in that the entire liability associated with these benefits will hit the Statement of Net Position (currently, only a relatively small amortized portion needs to be reported). Statement 75 is effective for fiscal years beginning on or after June 15, 2017.

It’s not too early to start planning for these changes! Please contact me at if you’d like to set up a time to discuss these changes and how they’ll impact you.

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