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Many public-entity employers are unsure of the extent of their retiree life and health benefit obligations and undecided about how they will calculate them for financial statements, a survey by Aon Consulting has found.
Only 47.7% of the public entities responding to a January survey by the benefit consulting subsidiary of Chicago-based Aon Corp. reported having completed their baseline actuarial valuations of their nonpension post-employment retiree benefit liabilities, while 36.7% were still calculating them and 15.6% had not yet begun the process, the survey found.
In addition, only 21.3% of public entities reported having created a formal plan to address their OPEB obligations while 45.7% were in the process of making a plan. One-third said they had taken no steps so far, half of which said they had no intention to do so.
Government Accounting Standards Board Accounting Standard 45, which is being phased in over a two-year period ending Dec. 15, 2008, requires public-sector employers to recognize their nonpension post-employment benefits such as retiree health and life insurance benefits on financial statements.
"Gathering the data and understanding the financial impact of the new GASB accounting standard will require significant time and resources," Phil Peterson, director of the survey and Aon Consulting's public-sector national practice leader, said in a statement announcing the findings. "In many cases, the weight of the financial expense required under the new GASB standard will affect the public entity's budget and/or require retiree benefit changes. Both often require legislative and regulatory changes, renegotiating rates with insurance carriers and possibly renegotiating union contracts."
The online study included responses from 118 public-entity employers that offer nonpension post-employment benefits. The complete report, "Navigating the GASB OPEB Standards," is available by request through Aon's Web site at www.aon.com by clicking the GASB Survey 07 link.