Focus Area: Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions
GASB 75 Effective for FY 2018
January 26, 2018
Update: August 16, 2018 – Added implementation guidance and appendices; links to OSA’s audit reports on the OPEB schedules for RHBF and DIPNC and links to OSC’s GASB 75 Templates (component units).
Update: April 30, 2019 – Clarified how to classify the DIPNC asset as a component of restricted net position and added GASB Codification references.
In June 2015, the Governmental Accounting Standards Board (GASB) issued GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (GASB 75). This statement replaces the requirements of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions as well as the requirements of Statement No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, as they relate to other postemployment benefits (OPEB) that are provided through OPEB plans administered as trusts or equivalent arrangements that meet certain criteria.
GASB 75 is effective for the fiscal year ending June 30, 2018. The objective of this statement is to improve accounting and financial reporting by state and local governments for OPEB. It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities.
A major change is the reporting of the net OPEB liability on the statement of net position (i.e., total OPEB liability for the OPEB plan, which is actuarially based, less the plan’s fiduciary net position). Under previous OPEB standards, this liability was reflected only in the note disclosures. Employers that participate in a cost-sharing multiple-employer defined benefit OPEB plan (e.g., Retiree Health Benefit Fund) are required to recognize liabilities for their proportionate share of the collective net OPEB liability. Also, the auditors of participating employers will require assurances that the OPEB amounts reported on the statement of net position are accurate and supported by verifiable audit evidence.
This statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses/expenditures. For defined benefit OPEB plans, the statement identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. This statement also establishes requirements related to special funding situations for defined contribution OPEB plans. Note disclosures and RSI requirements about OPEB are also addressed.
The provisions of this statement apply to the financial statements of all state and local governmental employers whose employees are provided with OPEB through OPEB plans that are administered through trusts. The requirements apply whether the government’s financial statements are presented in stand-alone financial reports or are included in the financial reports of another government.
To gain additional understanding of GASB 75, please refer to the following resources:
- The GASB webpage from which you can access a PDF file of GASB 75 as well as other GASB pronouncements – GASB Pronouncements
- GASB Plain-Language Article – GASB Proposals Would Significantly Improve Reporting of Retiree Health Insurance and Other Benefits
GASB 75 Implementation
The State of North Carolina currently administers three postemployment benefit plans as pension and other employee benefit trust funds: the Retiree Health Benefit Fund (RHBF), the Disability Income Plan of North Carolina (DIPNC), and the Retirees’ Contributory Death Benefit Plan (CDBP).
- The RHBF is a cost-sharing, multiple-employer, defined benefit healthcare plan established to provide benefits to retired and disabled employees and their applicable beneficiaries.
- The DIPNC is a cost-sharing, multiple-employer defined benefit plan established to provide short-term and long-term disability benefits to the eligible members of the Teachers’ and State Employees’ Retirement System and the University Employees’ Optional Retirement Program.
- The CDBP is a single-employer defined benefit plan that provides a group life insurance option to all retired members of the Teachers’ and State Employees’ Retirement System, the Local Governmental Employees’ Retirement System, the Consolidated Judicial Retirement System, and the Legislative Retirement System.
As part of the GASB 75 implementation, component units and proprietary funds of the State primary government will be required to make year-end entries to record their proportionate share of the net OPEB liability, OPEB expense, and associated deferred inflows of resources and deferred outflows of resources for the cost-sharing, multiple-employer OPEB plans in which they participate. (The RHBF and the DIPNC are the State’s two cost-sharing, multiple-employer OPEB plans.) The net OPEB liability will be measured as of June 30, 2017. (Note: GASB 75 requires the net OPEB liability to be measured as of a date no earlier than the end of the employer’s prior fiscal year.) Additionally, net position will need to be restated to record the beginning balance of the net OPEB liability and the deferred outflow of resources for employer contributions made subsequent to the measurement date of the beginning net OPEB liability but before the start of the government’s fiscal year. OPEB entries for governmental funds of the State primary government will be made at a statewide level by OSC and will be recorded at the government-wide functional level.
The RHBF entries referenced in the preceding paragraph will impact unrestricted net position because the RHBF is in a liability position. (This treatment is consistent with that of TSERS.) However, because DIPNC is in an asset position, the DIPNC entries will impact restricted net position.
UPDATE: GASB Codification Section 1800 .734-6 defines the restricted component of net position as the restricted assets reduced by liabilities, as well as deferred inflows, related to those assets. Thus, the impact on DIPNC’s restricted net position will be the DIPNC asset reduced by the DIPNC deferred inflows. If the deferred inflows of resources related to the DIPNC asset exceeds the DIPNC asset, no restricted component of net position should be reported. In that case, the net negative amount should reduce unrestricted net position (GASB Codification 1800 .734-9).
GASB Codification Section 2300.131 requires that a government should provide an explanation of the impact on its net position in the notes to the financial statements when a component of net position (net investment in capital assets, restricted, unrestricted) is significantly impacted by a transaction resulting in recognition of a deferred outflow or inflow of resources.
The impact of GASB 75 is deemed to have a significant impact on the financial statements of the State of North Carolina as well as certain other entities within the State of North Carolina’s reporting entity, including but not limited to, universities and community colleges. If an entity determines that the transactions to record the RHBF liability and associated deferrals have a significant effect on unrestricted net position, the entity should disclose the impact in its standalone note disclosures. Similarly, if an entity determines that the transactions to record the DIPNC asset and associated deferrals have a significant effect on restricted net position, the entity should disclose the impact in its standalone note disclosures. The North Carolina Office of the State Auditor (OSA) has included a note disclosure in its university and community college proformas for the component units to follow for the impact of the RHBF liability on the unrestricted net position. If deemed significant, the entity should also disclose the impact of the DIPNC transactions on the restricted net position.
OSA has completed a financial audit of the Schedule of Employer Allocations for the year ended June 30, 2017 and June 30, 2016 and the Schedule of OPEB Amounts by Employer for the year ended June 30, 2017 for the State’s two cost-sharing, multiple-employer plans. Below are the links to OSA’s audit reports for RHBF and DIPNC.
- Retirees Health Benefit Fund – Financial Audit of Schedules
- Disability Income Plan of North Carolina – Financial Audit of Schedules
OSC has created a separate GASB 75 template for RHBF and DIPNC for component units that incorporates data from the audited schedules. The templates generate for each component unit, the GASB 75 year-end entries and information to assist component units with required GASB 75 note disclosures. Each component unit will verify that the OPEB amounts provided by the template agree with the audited OPEB schedules. Below are the links to the GASB 75 Templates for component units that participate in RHBF and DIPNC:
- GASB 75 Template for Component Units (RHBF)
- GASB 75 Template for Component Units (DIPNC)
At year-end, OSC will provide State agencies that have proprietary funds with a PDF file of the summarized year-end entries (13th period) they will need to make for their enterprise funds and/or internal service funds and information they will need to complete CAFR worksheet 310.
For additional information regarding the GASB 75 implementation, please refer to the following resources:
- Appendix A: Chart of account changes for GASB 75 – See Attachment below.
- Appendix B: Component unit entry instructions – See Attachment below.
- Appendix C: Proprietary fund entry instructions – See Attachment below.
- Appendix D: CAFR package worksheet examples – See Attachment below.
Thank you for your time and attention to this important change. OSC will continue to provide updates as the standard is implemented. Questions regarding this specific update and/or the GASB 75 templates should be directed to Virginia Sisson at 919-707-0530 or virginia.sisson@ncosc.gov.