Don't be fooled by these common misperceptions—know the facts!

• "Our benefits are self-insured, so this doesn't apply to us."
• "We allow retirees to continue coverage through our medical plan, but they pay their own way, so we don't have any OPEB."
• "We still have plenty of time."

What is GASB?

GASB is the Government Accounting Standards Board. Its statements, including GASB 43 and GASB 45, define what is considered to be generally accepted accounting principles for governmental entities. Employers subject to GASB accounting standards include state governments, local governments, school districts, public employee retirement systems, state universities, state hospitals, utility districts, public transit companies, and other governmental or quasi-governmental employers.

What do GASB 43 and GASB 45 require plan sponsors to disclose on their financial statements?

The disclosures fall into three basic categories:

• Information about the benefits: what they are, who receives them, how many employees and retirees are covered, and a discussion of the future uncertainties associated with the benefits
• The actuarially determined liability for benefits and the plan assets (if any) that are available to offset the liability, including the basis for determining the liabilities (actuarial methods and assumptions)
• The annual required contributions (ARC) determined in accordance with the parameters set forth by GASB, and the basis for determining these contributions

When must a plan sponsor comply with GASB 43 and GASB 45?

• Phase I implementation—for employers with annual revenues greater than $100 million—is for fiscal years beginning after December 15, 2006.
• Phase II implementation—for employers with annual revenues between $10 million and $100 million—is for fiscal years beginning after December 15, 2007.
• Phase III implementation—for employers with annual revenues less than $10 million—implementation is for fiscal years beginning after December 15, 2008.

Although implementation is not required, most entities need to understand these liabilities well before the dates shown above. These liabilities can affect upcoming labor relations and bonding issues in particular.

How will GASB 43 and GASB 45 affect the benefits that plan sponsors provide to retirees?

GASB 43 and GASB 45 may have several ramifications:

• Apply additional fiscal pressures on already tight budgets
• Bring the scrutiny of tax-payers and public officials
• Force a separation of active and retiree benefits plans
• Bring the aging of our population to the forefront
• Force consideration of plan re-design

The implications of GASB 43 and GASB 45 are important now. Here are the steps you need to take:

• Get an idea of the magnitude of the numbers.
• Plan for the cash flow you'll need in the coming years.
• Address the question of whether or not to prefund, and what steps are needed to establish a trust.
• Examine ways in which the overall cost of providing medical benefits can be reduced, for example through use of the Medicare Part D drug subsidy.
• Evaluate the cost impact of proposed benefit changes in the context of union negotiations.