GASB stands for the Governmental Accounting Standards Board. They develop the accounting rules for public sector employers.
OPEB stands for Other Post-Employment Benefits. They are benefits (other than pensions) provided after employment ends. They include:
- Retiree health coverage – which usually generates the biggest OPEB costs,
- Other retiree benefits like dental, vision and life insurance coverage, and
- Termination benefits that must be used for health coverage (such as payments to a health savings account) – but not those based on unused vacation or sick leave.
In 2004, GASB issued Statements No. 43 and 45 that required governmental entities to recognize the cost of OPEB’s when they are earned (while employees are working), rather than when they are paid (after employees retire.) GASB 43 was for plan -perspective accounting (i.e. funded plans), while GASB 45 applied to employer financial statements.
New accounting rules (GASB 74 and GASB 75) are now replacing GASB 43 and GASB 45, and there are several significant differences:
- The entire unfunded accrued liability goes on the face of financial statements. This is known as the Net OPEB Liability.
- Discount rates for unfunded plans are now based on a municipal bond index rate.
- Funded plans will use a discount rate equal to the expected asset return, to the extent that current assets and expected contributions are expected to pay all future benefits. A municipal bond index rate is used to discount future benefit payments not covered by projected trust assets.
- The required note disclosures and RSI are significantly expanded.