Funding your Post-Employment Benefits

Key Benefit ConceptsActuarial, OPEB, Services

The statements issued by the Governmental Accounting Standards Board (GASB) related to post-employment benefits do not require entities who provide Pension or Other Post-Employment Benefits (OPEB) to fund such benefits via an irrevocable trust.  However, if you currently do or are considering setting up a Trust to begin funding your post-employment benefits, there are a few important things one should be mindful of.

First and foremost is determining exactly what benefits are or will be funded through the Trust.  If you currently provide both an OPEB and a Supplemental Pension benefit, will you be funding both of these through the established Trust?  Or will you continue to pay for certain benefits on a pay-as-you-go basis while funding the rest?  You might ask, “Why would it matter which benefits are funded through the Trust?”  Per the current GASB guidelines, assets should be designated to providing each type of benefit whether that be a Supplemental Pension or an OPEB.  In essence, amounts contributed for purposes of providing a specific benefit can only be used for that purpose and subsequently must be reported in that fashion.

In situations when multiple post-employment benefits are funded through a Trust, it can be helpful to think of the whole Trust as a compilation of smaller trust “buckets”, each of which pertain to a specific benefit provided.  While your Plan administrator may be able to set up separate sub-accounts to help track the transactions for each benefit provided, this might not always be the case. If so, work together with your actuary to breakout and begin tracking separate balances as they will need these separate accumulated funds when preparing your actuarial valuation and exhibits. 

For more information on the importance of separately tracking your accumulated assets for purposes of providing post-employment benefits or guidance on where to start, contact us today!