Note X – OPEB Defined Benefit Plan - Qualifying Trust

Significant Changes to Note X – OPEB Defined Benefit Plan - Qualifying Trust

Note X - OPEB (Qualifying Trust)

Updates, changes, and clarifications for disclosing other postemployment benefits made throughout (annual updates).

Note X – OPEB Defined Benefit Plan - Qualifying Trust

A template for this note is not available. See “Instructions to preparer:” for various disclosures that may be required.


Instructions to preparer:

The instructions below assume the plan is administered through a qualifying trust and there is no special funding situation. See Governmental Accounting Standard Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards (Cod.) Section (Sec.) P50 “Postemployment Benefits Other Than Pensions – Reporting for Benefits Provided through Trusts That Meet Specified Criteria – Defined Benefit.”

If applicable, the notes should separately identify amounts for the primary government (including blended component units) from amounts for discretely presented component units.

Aggregate OPEB Amounts

There should be one table that reports the aggregate amounts for all plans, regardless of the type of OPEB plan and whether or not it is administered through a qualifying trust.  OPEB assets would be relevant only for plans that are administered through a qualifying trust.

Example:

The following table represents the aggregate OPEB amounts for all plans for the year 20XX:

The remaining required disclosures should be made for each OPEB plan in which the employer participates. Disclosures related to more than one OPEB plan should be combined in a manner that avoids unnecessary duplication.

OPEB Plan Description

a. The name of the OPEB plan, identification of the entity that administers the OPEB plan, and identification of the OPEB plan as a single-employer or agent OPEB plan. The number of participating employers (if an agent or cost-sharing plan). Information regarding the OPEB plan’s board and its composition.

b. A brief description of the benefit terms, including (1) the classes of employees covered; (2) the types of benefits; (3) the key elements of the OPEB formulas; (4) the terms or policies, if any, with respect to automatic postemployment benefit changes, including automatic COLAs, ad hoc postemployment benefit changes, including ad hoc COLAs, and the sharing of benefit-related costs with inactive employees; and (5) the authority under which benefit terms are established or may be amended. If the OPEB plan is closed to new entrants, that fact should be disclosed.

c. The number of employees covered by the benefit terms, separately identifying numbers of the following: (1) Inactive employees currently receiving benefit payments (2) Inactive employees entitled to but not yet receiving benefit payments [1] (3) Active employees. Note: “inactive employee” = retiree.

Example:

Employees covered by benefit terms: At December 31, 20XX, the following employees were covered by the benefit terms:

Inactive employees or beneficiaries currently receiving benefits

1,000

Inactive employees entitled to but not yet receiving benefits

100 [1]

Active employees

10,000

Total

11,100

d. A brief description of contribution requirements, including (1) the basis for determining the employer’s contributions to the OPEB plan (for example, statute, contract, an actuarial basis, or some other manner); (2) identification of the authority under which contribution requirements of the employer, nonemployer contributing entities, if any, and employees are established or may be amended; (3) legal or contractual maximum contribution rates, if applicable; and (4) the contribution rates (in dollars or as a percentage of covered payroll) of the employer, nonemployer contributing entities, if any, and employees for the reporting period. Also, the amount of contributions recognized by the OPEB plan from the employer during the reporting period, excluding amounts resulting from contributions recognized by the OPEB plan as noncurrent receivables, if not otherwise disclosed.

e. Whether the OPEB plan issues a stand-alone financial report (or the OPEB plan is included in the report of another government) that is available to the public and, if so, how to obtain the report (for example, a link to the OPEB plan report on the employer’s website).

Assumptions and Other Inputs

Significant assumptions and other inputs used to measure the total OPEB liability, including assumptions about inflation, healthcare cost trend rates, salary changes, ad hoc postemployment benefit changes (including ad hoc COLAs), and the sharing of benefit-related costs with inactive employees, should be disclosed, as applicable. For all significant assumptions, if different rates are assumed for different periods, information should be disclosed about what rates are applied to the different periods of the measurement.

In addition, the following information related to assumptions and other inputs should be disclosed, as applicable:

a. The fact that projections of the sharing of benefit-related costs are based on an established pattern of practice.

b. The source of the mortality assumptions (for example, the published tables on which the assumptions are based or that the assumptions are based on a study of the experience of the covered group).

c. The dates of experience studies on which significant assumptions are based.

d. If the alternative measurement method is used to measure the total OPEB liability, the source of or basis for all significant assumptions selected.

e. If applicable, measures of the net OPEB liability calculated using (1) a healthcare cost trend rate that is 1-percentage-point higher than the assumed healthcare cost trend rate and (2) a healthcare cost trend rate that is 1-percentage-point lower than the assumed healthcare cost trend rate. Note: this information should come from your actuarial valuation.

Example:

The following presents the net OPEB liability of the (city/county/district) calculated using the current healthcare cost trend rate of 6.8 percent, as well as what the OPEB liability would be if it were calculated using a discount rate that is 1-percentage point lower (5.8 percent) or 1-percentage point higher (7.8 percent) that the current rate.

The following information should be disclosed about the discount rate:

a. The discount rate applied in the measurement of the total OPEB liability and the change in the discount rate since the prior measurement date, if any

b. Assumptions made about projected cash flows into and out of the OPEB plan, such as contributions from the employer, nonemployer contributing entities, and employees

c. The long-term expected rate of return on OPEB plan investments and a brief description of how it was determined, including significant methods and assumptions used for that purpose

d. If the discount rate incorporates a municipal bond rate, the municipal bond rate used and the source of that rate

e. The periods of projected benefit payments to which the long-term expected rate of return and, if used, the municipal bond rate are applied in determining the discount rate

f. The assumed asset allocation of the OPEB plan’s portfolio, the long-term expected real rate of return for each major asset class, and whether the expected rates of return are presented as arithmetic or geometric means, if not otherwise disclosed

g. Measures of the net OPEB liability calculated using (1) a discount rate that is 1-percentage-point higher than current rate and (2) a discount rate that is 1-percentage-point lower than the current rate.

Note: This information should come from your actuarial valuation.

Example:

The following presents the net OPEB liability of the (city/county/district) calculated using the discount rate of 3.5 percent, as well as what the OPEB liability would be if it were calculated using a discount rate that is 1-percentage point lower (2.5 percent) or 1-percentage point higher (4.5 percent) that the current rate.

Changes in the Net OPEB Liability

For the current reporting period, a schedule of changes in the net OPEB liability should be presented.
Note: This information should come from your actuarial valuation.

Example:

Plan Name Total OPEB Liability
(a)
Plan Fiduciary Net Position
(b)
Net OPEB Liability
(a)–(b)
Balances at 1/1/20XX $ $ $
Changes for the year:      
   Service cost      
   Interest      
   Changes of benefit terms      
   *Differences between expected and actual experience      
   *Changes of assumptions      
   Contributions – employer      
   Contributions – employees      
   Net investment income      
   Benefit payments, including refunds of contributions      
   Administrative expense      
   **Other changes      
      Net changes      
Balances at 12/31/20XX_      

If the alternative measurement method was used, you may combine the amounts for differences between expected and actual experience and changes of assumptions.

** Identify other changes separately if individually significant

In addition to the information required above, the following information should be disclosed, if applicable:

a. The measurement date of the net OPEB liability; the date of the actuarial valuation or alternative measurement method calculation on which the total OPEB liability is based; and, if applicable, the fact that update procedures were used to roll forward the total OPEB liability to the measurement date. If the alternative measurement method is used to measure the total OPEB liability, the fact that this alternative method was used in place of an actuarial valuation also should be disclosed.

b. If the employer has a special funding situation, the employer’s proportion (percentage) of the collective net OPEB liability, the basis on which its proportion was determined, and the change in its proportion since the prior measurement date.

c. A brief description of changes of assumptions or other inputs that affected measurement of the total OPEB liability since the prior measurement date.

d. A brief description of changes of benefit terms that affected measurement of the total OPEB liability since the prior measurement date.

e. The amount of benefit payments in the measurement period attributable to the purchase of allocated insurance contracts, a brief description of the benefits for which allocated insurance contracts were purchased in the measurement period, and the fact that the obligation for the payment of benefits covered by allocated insurance contracts has been transferred from the employer to one or more insurance companies.

f. A brief description of the nature of changes between the measurement date of the net OPEB liability and the employer’s reporting date that are expected to have a significant effect on the net OPEB liability, and the amount of the expected resultant change in the net OPEB liability, if known.

g. The amount of OPEB expense recognized by the employer in the reporting period.

h. The employer’s balances of deferred outflows of resources and deferred inflows of resources related to OPEB, if applicable:

Note: This information should come from your actuarial valuation. Under the alternative measurement method, deferred outflows and inflows are not calculated for anything other than payments subsequent to the measurement date.

Example:

At December 31, 20XX, the (city/county/district) reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

* Total should agree to amounts presented in the financial statements.

i. A schedule for each of the subsequent five years, and in the aggregate thereafter, the net amount of the employer’s balances of deferred outflows of resources and deferred inflows of resources in the table above that will be recognized in the employer’s OPEB expense.

Example:

Deferred outflows of resources of $__________ resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended December 31, 20XX [2]. Other amounts reported as deferred outflows and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

 

Year ended December 31: Plan Name 
20XX $
20XX $
20XX $
20XX $
20XX $
Thereafter $

j. The amount of revenue recognized for the support provided by nonemployer contributing entities, if any

For plans that do not issue a separate, stand-alone financial report for the OPEB plan, governments must also include the following:

The OPEB Plan’s Fiduciary Net Position

The components of the liability of the employers and nonemployer contributing entities to plan members for benefits provided through the OPEB plan (net OPEB liability):

Example:

Total OPEB Liability $100,000
Plan Fiduciary Net Position $90,000
Net OPEB Liability (Asset) $10,000
   
Plan Fiduciary Net Position as a % of Total OPEB Liability 90%

OPEB Plan Investments

(1) Investment policies, including:

a. Procedures and authority for establishing and amending investment policy decisions.

b. Policies pertaining to asset allocation.

c. Description of significant investment policy changes during the reporting period.

(2) Identification of investments (other than those issued or explicitly guaranteed by the U.S. government) in any one organization that represents 5 percent or more of the OPEB plan’s fiduciary net position.

(3) The annual money-weighted rate of return on OPEB plan investments, net of OPEB plan investment expense, and an explanation that a money-weighted rate of return expresses investment performance, net of OPEB plan investment expense, adjusted for the changing amounts actually invested. OPEB plan investment expense should be measured on the accrual basis of accounting. Inputs to the internal rate of return calculation should be determined at least monthly. The use of more frequently determined inputs is encouraged.

Receivables

The terms of any long-term contracts for contributions to the OPEB plan between an employer or nonemployer contributing entity and the OPEB plan, and the balances outstanding on any such long-term contracts at the end of the OPEB plan’s reporting period.

Allocated insurance contracts excluded from OPEB plan assets:

(1) The amount reported in benefit payments in the current period that is attributable to the purchase of allocated insurance contracts

(2) A brief description of the OPEB for which allocated insurance contracts were purchased in the current period


(3) The fact that the obligation for the payment of benefits covered by allocated insurance contracts has been transferred to one or more insurance companies.

Reserves

In circumstances in which there is a policy of setting aside, for purposes such as benefit increases or reduced employer contributions, a portion of the OPEB plan’s fiduciary net position that otherwise would be available for existing OPEB or for OPEB plan administration:

(1) A description of the policy related to such reserves

(2) The authority under which the policy was established and may be amended

(3) The purposes for and conditions under which the reserves are required or permitted to be used

(4) The balances of the reserves.

Required Supplementary Information

See RSI requirements at RSI Other Postemployment Benefit (OPEB) Plan Schedules.


Instructions to preparer:

[1] For plans administered by the government, if you are unable to determine the number of inactive employees entitled to but not yet receiving benefits, disclose that fact.

Example:

*It is not possible to determine the number of employees entitled to but not yet receiving benefit payments. Retiring employees apply for benefits at their discretion, may be otherwise working and not eligible for benefits or be deceased.

[2] This should always be the fiscal year immediately following the year that is reported in the financial statements.