The Governmental Accounting Standards Board (GASB) is a division of the Financial Accounting Foundation (which also oversees the Financial Accounting Standards Board). GASB is responsible for developing standards for state and local government accounting and financial reporting.

Lynchval Systems Worldwide Inc (Lynchval) is benefits software and consulting company that has been in the pension and benefits business for nearly 30 years. Along with producing the state-of-the-art software for our industry, Lynchval has on staff 12 highly credentialed actuaries who are able to assist our clients in all aspects of the pension and Other Post Employment benefits (OPEB) valuations.

GASB Statements #25 and #27 (released in 1994) dealt with accounting for pension plans. In addition to pensions, many state and local government employers provide Other Post Employment Benefits, such as post-employment healthcare and life insurance. A recently-adopted standard will require measurement and recognition of these OPEB expenses in the financial reports of state and local government employers. These expenses potentially represent significant benefit liabilities these employers would have to officially recognize for the first time.

State and local governments, public utilities, public hospitals and state funded schools will be affected by this new regulation.

Retain an actuary to value the liabilities of any OPEB benefits, including careful selection of demographic and economic assumptions. A2.Report on OPEB liabilities in financial statements and decide how to fund these benefits in their budget.

Implementation of the recently-proposed standard will be staggered over three years, with compliance requirements based on the total revenue of the employer. According to GASB, the staggered implementation is being done to address concerns over the supply and demand for actuarial services
Note: Given the public plan sponsor aspect, it is expected that many governmental entities will want to begin costing their OPEB liabilities immediately.
Implementation Schedule (although earlier implementation is encouraged).*
Phase 1 – Periods beginning after December 15, 2006, for employers who were Phase 1 employers under Statement 34 (Generally $100MM in annual revenues).

Phase 2 – Periods beginning after December 15, 2007, for employers who were Phase 2 employers under Statement 34 (Generally $10MM to 100MM in annual revenues).

Phase 3 – Periods beginning after December 15, 2008, for employers who were Phase 3 employers under Statement 34 (Generally less than $10 Million in annual revenues). Additional GASB 45 valuations will be required biannually for entities with more than 200 members, triennially for those with less than 200 members, and a “simplified” method is available for those entities with less than 100 members.

* In some instances, immediate implementation is required.

Again, many public entities are not currently funding their OPEB obligations. With GASB 45, properly funding your future liabilities will increase your investment returns, lower your liabilities and lower your Annual Required Contribution. Funding your GASB 45 liabilities is encouraged by both the GASB organization and credit rating entities.

There are two ways to partner with Lynchval Systems on GASB 45. projects For those who need an actuary, a Lynchval actuary will perform all necessary liability calculations and even certify and file the report for your customers. For those actuary’s who will need help with the volume of GASB 45 valuations, Lynchval’s Service Bureau will calculate the liabilities and all the data needed for your certification. In this instance,
Lynchval, our actuaries and other support staff will be acting as your back office