Why is GASB 45 important to public agencies?

Many public agencies that have completed actuarial valuations have learned that retiree healthcare costs represent a huge financial burden and may not be sustainable in the future. In the early 1990s, private companies were required to comply with similar financial accounting standards that are applicable to the private sector. Due to inaction, some of these companies and the labor unions are now faced with tremendous legacy costs that may lead to financial insolvency.

 

How do I know if our public agency is impacted by GASB 45?

All public agencies that offer retiree healthcare benefits by paying the entire or partial amount of benefits must comply with GASB 45. Even those employers that allow retirees to participate at their own expense in the public agency’s group healthcare may have a liability under GASB 45.

Examples of government agencies that must comply with GASB 45 are: state governments, local governments, school districts, certain universities and colleges, state and county hospitals, utility districts, special districts, and other governmental and quasi-governmental agencies.

 

Why should a governing board member care about GASB 45?

A GASB 45 actuarial valuation will provide the information needed for inclusion in the annual financial statement. The valuation will also provide a good planning tool for the board to evaluate whether the existing benefits are sustainable or if any benefit changes may be necessary. Boards are responsible for the financial solvency of the public entity and preserving their ability to provide services in the future.

 

What should my public agency do to comply with GASB 45?

The first thing that a public agency should do is obtain an actuarial valuation. The actuarial report will provide the following information: 1) the current and long term costs of providing retiree healthcare benefits, 2) the information required by the management team to determine whether benefits will be sustainable in the future, and 3) the information required by vested stakeholders to accurately assess the financial effects of retiree health benefits on the fiscal health of the agency.

 

When must qualifying public agencies implement GASB 45?

GASB 45 has three implementation stages. The final implementation stage requires all public agencies with annual revenues of less than $10 million to comply in the fiscal year after December 15, 2008. The test is based on the agency's revenue for the first fiscal year ended after December 15, 1998.
All public agencies that offer retiree health care benefits must be in compliance with GASB 45 by the 2009-10 fiscal year.

 

Must an AMM calculation be performed by an actuary?

No. Anyone can perform an AMM calculation. However, even though the AMM uses simplified techniques, it is still extremely complex. The use of the term “simplified” in this case does not translate to “simple.” Any agency making the decision as to whether to perform an AMM calculation in-house should not underestimate the considerable amount of internal time and resources that may be drawn upon if the calculation is not outsourced. Furthermore, the AMM will be used for 3 fiscal years, during which time questions may be raised that will also draw upon internal resources to answer.

 

If my public agency plans to pre-fund money into a multiple employer trust, can it use the GASB 45 AMM?

There is some disagreement on this point within the actuarial and auditing community, and the GASB itself has the question under review and has promised further guidance in late 2009. However, what is clear is that a public agency that plans to pre-fund assets into a non-government sponsored multiple employer trust may use the AMM, since such a trust is not governed by the rules of GASB.

 

If my public agency plans to pre-fund money into a multiple employer trust, can you help?

Yes. We have a non-government sponsored multiple employer trust eligible to accept the AMM. Our Internal Revenue Code Section 115 Trust has received an IRS private letter ruling. There is no obligation or pressure to utilize our trust options, however, if interested we have GASB 45 consultants ready to help you get started.

 

I noticed your office is based in California. Is your service available to any public agency located in other states?

Yes. Any public agency in any state can utilize our service.

 

I have 105 plan members of which 10 do not/will not meet the eligibility requirements to receive retiree benefits in the future. Do I qualify because that puts me under the 100 member threshold?

No. For the purposes of GASB 45, a plan’s total membership is the sum of its employees in active service, terminated employees who have accumulated benefits but are not yet receiving them, and retired employees and beneficiaries currently covered under the agency's healthcare plan(s). Therefore, you may not exclude the 10 people from your plan member total simply because they will not be eligible in the future. Any person, active or retired, currently receiving healthcare coverage, counts towards the 100 threshold.

 

I have 105 actives plus retirees of which 10 actives have elected not to receive our health care plan benefits. Do I qualify because that puts me under the 100 member threshold?

Yes, and for the same reasoning as in the previous question: It goes by the number of actives plus retirees currently covered under the agency's healthcare plan(s). If an active employee elects to not receive healthcare benefits from an employer, they do not count as a plan member because they are not currently enrolled in the plan.

 

If I’m not sure how to answer a question online, is there someone available to help me?

Our staff is available by phone or email Monday through Friday, 8am-5pm Pacific Time. Please do not hesitate to contact us .

 

How can I be sure that the report gives reliable results?

Any result is only as good as the data upon which it is based. Therefore, the report is reviewed by a staff member for completeness and in most cases we contact you to verify key information. It’s critical that we ensure the completeness and accuracy of the information submitted in order to confidently rely on the results of the tool. The actuary always makes the final review before the report is sent to the client.

 

How long will it take to obtain results and the final GASB 45 AMM report?

Upon submission of the required information, you will receive your report within a maximum of 10-15 business days. However, it is often received sooner.

 

I received my final report and have questions. Should I contact the actuary?

We are able to provide this service at a low cost because it provides for limited actuarial support. If you have questions, you should contact the staff person that sent you the report. Telephone support with the actuary is not included in the $1,500 AMM service, and will be charged at the rate of $250 per hour or fraction thereof - there are no exceptions.

 

I received my final report. If I want to experiment with different scenarios, can I?

No. Our service does not allow for the tweaking of results. This is another reason we are able to keep the cost of our service down. However, if a reasonable error is found to have been made in data collection process, either by the agency or by CSBA staff, we will make every effort to accommodate you in correcting the report without additional charges.

 

How frequently should the AMM calculation be made?

Public agencies that qualify to use the alternative measurement method must perform the calculation at least triennially.

 

Will you send me a reminder when I’m due for the next AMM calculation?

Yes. We will send you a reminder at least 6 months prior to the due date of your next AMM calculation.

 

Why use GASB45 AMM.com?

It is simple and easy-to-use, reasonably priced, and the final report is reviewed for reasonableness by a professional actuarial firm. The total cost for the valuation is $1,500. Most actuarial firms charge $5,000 or more to prepare an actuarial valuation and report. In addition, we have staff available to assist you by phone and Demsey, Filliger & Associates will review the input and final report for reasonableness.