The actuarial valuation date may be any date up to 30 months prior to the reporting date. Actuarial valuation results are projected from the valuation date to the measurement date. The projection of the valuation results from the valuation date to the measurement date must reflect any material changes that occurred between the valuation date and the measurement date. These changes include expected increase in premiums, material changes in the discount rate and any changes in plan benefits that were adopted prior to the measurement date.
The expense calculation is as follows:. Consequently, the ARC is no longer used for plan funding. The ADC is calculated by the plan actuary. It must be reasonable and based on actuarial principles. It should recognize benefits earned during the present fiscal year and employ reasonable amortization periods for recognition of plan changes, assumption changes and gain or losses associated demographic and investment experience.
They include:. Changes for Small Employers Under GASB 45, a plan with less than participants was required to have a valuation performed at least triennially. GASB 75 requires all plans complete a valuation at least biennially, regardless of size.
The Alternative Measurement Method is still permitted for plans with fewer than participants. Postemployment benefits OPEB as well as pensions are part of an exchange of salaries and benefits for employee services rendered. Nevertheless, both types of benefits constitute compensation for employee services. From an accrual accounting perspective, the cost of OPEB, like the cost of pension benefits, generally should be associated with the periods in which the exchange occurs, rather than with the periods often many years later when benefits are paid or provided.
However, in current practice, most OPEB plans are financed on a pay-as-you-go basis, and financial statements generally do not report the financial effects of OPEB until the promised benefits are paid. As a result, current financial reporting generally fails to:.
Employers that participate in single-employer or agent multiple-employer defined benefit OPEB plans sole and agent employers are required to measure and disclose an amount for annual OPEB cost on the accrual basis of accounting. The parameters include requirements for the frequency and timing of actuarial valuations as well as for the actuarial methods and assumptions that are acceptable for financial reporting.
For financial reporting purposes, an actuarial valuation is required at least biennially for OPEB plans with a total membership including employees in active service, terminated employees who have accumulated benefits but are not yet receiving them, and retired employees and beneficiaries currently receiving benefits of or more, or at least triennially for plans with a total membership of fewer than The projection of benefits should include all benefits covered by the current substantive plan the plan as understood by the employer and plan members at the time of each valuation and should take into consideration the pattern of sharing of benefit costs between the employer and plan members to that point, as well as certain legal or contractual caps on benefits to be provided.
The parameters require that the selection of actuarial assumptions, including the healthcare cost trend rate for postemployment healthcare plans, be guided by applicable actuarial standards. A sole employer in a plan with fewer than one hundred total plan members including employees in active service, terminated employees who have accumulated benefits but are not yet receiving them, and retirees and beneficiaries currently receiving benefits has the option to apply a simplified alternative measurement method instead of obtaining actuarial valuations.
Those circumstances are:. This alternative method includes the same broad measurement steps as an actuarial valuation projecting future cash outlays for benefits, discounting projected benefits to present value, and allocating the present value of benefits to periods using an actuarial cost method. However, it permits simplification of certain assumptions to make the method potentially usable by nonspecialists. Because retroactive application of the measurement requirements of this Statement is not required, for most employers the OPEB liability at the beginning of the transition year will be zero.
Sole and agent employers should recognize OPEB expense in an amount equal to annual OPEB cost in government-wide financial statements and in the financial statements of proprietary funds and fiduciary funds from which OPEB contributions are made. OPEB expenditures should be recognized on a modified accrual basis in governmental fund financial statements. Net OPEB obligations, if any, including amounts associated with under- or overcontributions from governmental funds, should be displayed as liabilities or assets in government-wide financial statements.
Similarly, net OPEB obligations associated with proprietary or fiduciary funds from which contributions are made should be displayed as liabilities or assets in the financial statements of those funds.
Employers are required to disclose descriptive information about each defined benefit OPEB plan in which they participate, including the funding policy followed. In addition, sole and agent employers are required to disclose information about contributions made in comparison to annual OPEB cost, changes in the net OPEB obligation, the funded status of each plan as of the most recent actuarial valuation date, and the nature of the actuarial valuation process and significant methods and assumptions used.
Sole and agent employers also are required to present as RSI a schedule of funding progress for the most recent valuation and the two preceding valuations, accompanied by notes regarding factors that significantly affect the identification of trends in the amounts reported. Employers participating in cost-sharing multiple-employer plans that are administered as trusts, or equivalent arrangements, in which a employer contributions to the plan are irrevocable, b plan assets are dedicated to providing benefits to retirees and their beneficiaries in accordance with the terms of the plan, and c plan assets are legally protected from creditors of the employers or plan administrator, should report as cost-sharing employers.
Employers participating in multiple-employer plans that do not meet those criteria instead are required to apply the requirements of this Statement that are applicable to agent employers.
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