Other Post-Employment Benefits, or “OPEB” for short, is defined by GASB as any post-employment benefit other than pensions or compensated absences. These types of post-employment benefits are at the complete discretion of the employer including if any OPEB benefits are provided or not, what classifications are offered benefits, and the eligibility requirements in order to receive them upon retirement. OPEBs are a good tool to use in order to attract and retain employees, and even incentivize good attendance.
OPEBs typically include an insurance benefit, whether it be for health, dental, life, vision, as well as continued insurance coverages or HRA contributions used for premium reimbursements or other eligible expenses. Benefits for insurance in retirement can vary from the employer covering all monthly premium expenses, to deductible reimbursements, to a lump-sum balance for the retiree to use at their discretion towards health expenses. Even having the right to remain on the employer’s insurance plan(s) by self-paying the full premium(s) is considered a benefit, as continued coverage on a group insurance plan results in implicit rate subsidy. A common benefit offered is paying out accumulated unused sick leave upon retirement. As an outright cash payout, this benefit is considered a “compensated absence” under GASB 16 which is not considered an OPEB benefit. However, should the funds come with the ability to self-pay for health premiums in retirement, the resulting implicit rate subsidy from the use of these funds would be considered an OPEB benefit.
Regarding the funding of OPEBs, they can be funded as employees retire, which is known as a “pay as you go” basis, or the benefits can have designated funds set aside in a Trust account, also known as a Fund 73. The way in which benefits are funded into a Fund 73, however, can alter whether the benefit is classified as an OPEB or not.
Any employers that participate in single-employer or agent multi-employer defined benefit OPEB plans are required to measure and disclose an amount for annual OPEB costs on the accrual basis of accounting. KBC’s actuarial valuations not only include all necessary disclosures, notes to the financial statements, and required supplementary information, but also include additional exhibits that provide a variety of benefits to our clients. These exhibits are modeled directly after the examples provided within GASB’s statements making them both easy to understand and easy to use without need for further modification by the government entities and/ or the auditors. Please contact us today for a no-obligation proposal.
For more information relating to other topics noted in this blog, please use the links below:
- For more information on implicit rate subsidy click here: https://keybenefits.com/implicit-rate-subsidy-what-is-it/
- For a deeper dive into understanding funding OPEB benefits click here: https://keybenefits.com/funding-your-post-employment-benefits/