Other Post Employment Benefit Plans

Plans that offer benefits other than pension after termination of employment are commonly referred to as “Other Post-Employment Benefit Plans (OPEBs)”. An actuary is needed to value these benefits for purposes of financial statement reporting, and can also provide vital consulting services regarding plan design, accounting strategies, pre-funding of benefits, etc.

OPEBs can be paid in whole or in part by the employer, but could also be completely paid by the retiree. OPEBs do not include pension benefits or compensated absences, which are treated differently under the applicable accounting standards.

While the most common OPEB is retiree healthcare coverage, there are many other benefits that may be considered OPEBs, including life insurance, long-term care insurance, disability benefits, and certain sick leave conversion programs.

The liabilities that OPEBs create for an employer may be classified as one of the following:

• Explicit liabilities arise from direct contributions by an employer to a retiree’s benefits.
• Implicit liabilities arise when continued medical coverage is offered to retirees at the same premium rate as active employees. Since retirees are generally older than an active population, they can be expected to generate higher medical claims, and therefore higher premiums for the active population. When the premium itself does not represent the full cost of covering the retirees, the additional cost is called the “implicit rate subsidy.” The various accounting standards that apply to OPEBs all require that the implicit rate subsidy be valued and reflected in the financial statements.

OPEBs are most commonly provided by public sector employers (who account for those benefits in accordance with GASB Statements 74 and 75), but are also provided by some private sector employers (who account for those benefits in accordance with ASC Topic 715, ASC Topic 712 and/or SOP 92-6).  See Financial Reporting for more details.

IAI works with governmental agencies in several states. Each state has different statutes regarding required healthcare coverage for retirees of governmental agencies. For example, some states (including Oregon) require that employers provide access to medical coverage to employees in retirement until at least Medicare-eligibility, whereas others do not.

OPEB services IAI provides:

• Valuation reports for reporting purposes under the applicable accounting standards
• Assistance with interim year financial reporting
• Plan redesign analysis
• Consulting regarding pre-funding of benefits through a qualified trust

See our Frequently Asked Questions for more information related to OPEBs.

Contact a consultant today to see if your OPEB needs to be valued or to get a free quote on Independent Actuaries, Inc.’s valuation and reporting services.