Implicit OPEB (Retiree Healthcare) Liabilities: It’s Real

Categories: National Developments,OPEB/GASB 45/75
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Implicit retiree healthcare or OPEB liabilities are the inherent subsidies that are calculated when a retiree continues to receive coverage under the employer’s group health insurance plan by paying the group premium charged to active employees.

Prior to GASB 75, public agencies with implicit OPEB liabilities were not concerned with prefunding these benefits because unlike explicit retiree healthcare liabilities, there are no direct costs.

With GASB 75 taking effect in 2018 however, implicit retiree healthcare benefits are now going to be on the balance sheet… not a footnote anymore and will impact financial reports.

Address this real balance sheet liability by pre-funding implicit OPEB liabilities with the PARS OPEB Trust Program, one of the largest full-service, low-cost, multiple-employer OPEB trusts in the country with partners, U.S. Bank and Vanguard.

Key considerations:

  • Your actuarial report should show explicit (direct) and implicit (indirect) liabilities. Both impact the balance sheet, and balance sheet liabilities impact finances.
  • Implicit liabilities can be reduced and even eliminated, just like explicit liabilities, by
    pre-funding in a compliant trust.
  • Once in the trust, money can be pulled out using the actuarially calculated subsidy, just as one would withdraw reimbursements for explicit (direct) costs.
  • Funds invested in the OPEB trust can grow with a managed blend of equity and fixed income investments thus providing a competitive return. You and your entity can select your risk tolerance from the PARS OPEB Trust Program’s multiple avenues of investment.

PARS has experience successfully implementing implicit-only OPEB trust programs in other states and would be happy to discuss this critical issue and personalize a program for your entity’s needs.