05
Feb
2019

How to Address OPEB (Retiree Healthcare) Liabilities in Texas

Categories: OPEB/GASB 45/75,PARS News,Texas Developments
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With GASB Statement 75 going into effect in 2018, it made significant changes to retiree healthcare (OPEB) reporting standards by requiring public agencies to recognize their OPEB liability as a line-item on the balance sheet (rather than only a footnote in the financial statement). The standards have had a significant fiscal impact on many cities, but it is important to note some of this can be addressed by establishing and setting aside funds in a legally compliant OPEB trust.

The PARS OPEB Trust Program provides an easy way to “prefund” or set aside funds in an IRS-approved/GASB compliant trust.

Key benefits include:

  • Increased Discount Rate = Lower Liabilities: With the ability to diversify plan investments, program members have seen their discount rates rise and liabilities decrease by joining the PARS OPEB Trust. For example, one member lowered its OPEB liability by about 30%, which was a reduction of over $10 million.
  • Assets Address Liabilities: OPEB trust assets help address OPEB liabilities which is increasingly important since the implementation of GASB 75.
  • Increased Bond Rating: Some agencies have advised that participation in an OPEB trust was significant factor in elevating their credit ratings.
  • One-Stop, Ready-to-go Trust Program: IRS-approved, Section 115 Trust with no start-up costs, minimum funding requirements and or contribution requirements. Signature-ready implementation documents.

For more information, please contact:

Dion Papafote, Senior Manager
(512) 415-6874 |  dpapafote@pars.org