Media Advisory:
Symposium on Implications for North Carolina – Retiree Health Insurance and GASB 45
The media is invited to attend this symposium [for background or for a story] about the impact on North Carolina of Governmental Accounting Standards Board Rule 45. This rule deals with retiree health insurance benefits [see background below].
What: Symposium on Implications for North Carolina – Retiree Health Insurance and GASB 45
When: Wednesday, April 2, 11:15 AM to 1:30 PM
Where: North Carolina State University College of Management, Nelson Hall Room 2403 (Board Room)
Details:
Robert Clark, professor of economics and business management in the College of Management, has researched and written extensively on pension and other retiree benefits. At this symposium, he will provide an introduction of Retiree Health Insurance in the Public Sector.
Philip Peterson, senior vice president for Aon Consulting Public Sector and National Practice Leader, will discuss national trends in retiree health insurance programs by state and local governments, the importance of GASB 45 for assessing plan liabilities, and the impact of GASB 45 on prefunding of retiree health benefit plans
- Richard Kearney, director of the NC State’s School of Public and International Affairs, will lead a panel discussion regarding retiree health insurance plans in North Carolina. Participants include:
- Robert Powell, State Comptroller, State of North Carolina
- Dan Soper, chief operating officer and deputy executive administrator, North Carolina State Health Plan
- Mark Trogdon, principal fiscal analyst, fiscal research division, North Carolina General Assembly
This symposium is being hosted by NC State’s College of Management and the School of Public and International Affairs in the College of Humanities and Social Sciences.
Background about GASB 45
The Governmental Accounting Standards Board's (GASB) new standards for Other Post Employment Benefits (OPEB) apply to every state, city and county government, as well as specialized public organizations such as school districts, hospitals, colleges and universities.
Typically, government employers have reported the cost of heath care and other non-pension benefits on a "pay as you go" basis. It has been simple. The annual cash paid for benefits has been the annual expense with no other liabilities or funding requirements.
Under the new GASB 45 standards, state and local government employers must account for, and report, the annual cost of OPEB in the same way they report pensions. As a result, the annual OPEB costs for most employers will be based on actuarially determined amounts rather than in the "pay-as-you-go" method.
Governments must use actuarial - life expectancy - evaluations to determine the final accounting and reporting amounts expected in the future.
OPEB costs must also be reported over the working lifetime of employees, and the information provided in financial statements must include the funding, costs and provisions in an OPEB plan.
GASB states that the current "pay-as-you-go" method doesn’t accurately reflect the true costs that governments are accumulating for future benefits of current employees; the promise of future benefit is an expense that must be recorded rather than deferred as a liability to a future generation.
The relative size of the problem varies materially by state. From Maryland north to New England the extra cost is often two to six times the current cost. From Virginia south, the benefits offered tend to be less and the problem is much smaller. In the northwest part of the country these benefits are often not provided and there may be no cost issue.
At this stage preliminary valuations have been done by many of the larger jurisdictions. Based on our first two dozen valuations in Maryland, for example, we estimate liabilities of about $40 billion statewide. After the initial "shock and awe" valuation, employers are starting to meet with employee groups to discuss ways to deal with these issues and decide on benefit cuts and/or funding increases. We offer actuarial, health and welfare, and investment solutions to address our clients' GASB 45 needs.