Connecticut Gov. vetoes GASB opt-out, while S&P holds Texas ratings steady
Financial Week reports on states' reactions to GASB 45, noting that while Connecticut Governor Jodi Rell recently vetoed "legislation that would have given its state comptroller, not GASB, the right to set generally accepted accounting principles," Texas Governor Rick Perry signed legislation allowing that state's governments to opt out of reporting requirements under GASB 45. "And since credit rating agency Standard & Poor's announced that not following GASB rule 45 should not affect Texas' bond ratings," the article says, "it's possible that other states may follow suit." GASB officials are quoted as saying accounting should not be driven by politics, while an official at the National Association of State Retirement Administrators says there is a "perception by some that GASB might be removed from the day-to-day realities of governmental budgeting."
QUESTION: If Standard & Poor's position is that not following GASB rule 45 should not affect bond ratings, then New Fairfield's bond rating should be O.K. ... or is it?
QUESTION: Now what impact on our taxes is GASB rule 45 going to have, if the Town follows rule 45?
Summary of Statement No. 45
Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions
(Issued 6/04)
In addition to pensions, many state and local governmental employers provide other postemployment benefits (OPEB) as part of the total compensation offered to attract and retain the services of qualified employees. OPEB includes postemployment healthcare, as well as other forms of postemployment benefits (for example, life insurance) when provided separately from a pension plan. This Statement establishes standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers.
The approach followed in this Statement generally is consistent with the approach adopted in Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, with modifications to reflect differences between pension benefits and OPEB. Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, addresses financial statement and disclosure requirements for reporting by administrators or trustees of OPEB plan assets or by employers or sponsors that include OPEB plan assets as trust or agency funds in their financial reports.
GASB 45, or GASB Statement 45, is an accounting and financial reporting provision requiring government employers to measure and report theliabilities associated with other (than pension) postemployment benefits (or OPEB). Reported OPEBs may include post-retirement medical, pharmacy, dental, vision, life, long-term disability and long-term care benefits that are not associated with a pension plan. Government employers required to comply with GASB 45 include all states, towns, education boards, water districts, mosquito districts, public schools and all other government entities that offer OPEB and report under GASB.
GASB 45 was instigated by the Governmental Accounting Standards Board (GASB) in July 2004 because of the growing concern over the potential magnitude of government employer obligations for post-employment benefits. GASB 45 will:
- Recognize the cost of OPEB benefits in the period when services are received.
- Provide information about the actuarial liabilities for the promised benefits.
- Provide information useful in assessing potential demands on future cash flows.
GASB 45 applies to the financial statements issued by government employers that offer OPEB and that are subject to GASB accounting standards. GASB 45 does not apply to private employers or trusts that are established in order to pre-fund OPEB benefits and for trusts that are used as conduits to pay OPEB benefits.
