Q. What are FASB and GASB?
In 1989 the Financial Accounting Standards Board (FASB) issued FAS 106 to underscore the significant liabilities companies may have for Other Post Employment Benefits (OPEB) like retiree medical coverage. FAS 106 requires companies to accrue the cost of these benefits and to record a liability for unfunded retiree medical costs explicitly on their financial statements.
Public-sector entities are subject to similar guidelines set forth by the Governmental Accounting Standards Board (GASB):
- Standard 45 – Applies to government employers paying for retiree medical benefits
- Standard 43 – Applies to Funds (Trusts) created by government employers to pay for and administer their retiree medical and other retirement plans
If your organization needs to respond to these standards, but you don't want to eliminate retiree benefits altogether, you can consider financial approaches – for example, taking a one-time charge against earnings on your financial statements or amortizing the cost of the transition over time. But benefits changes can also be an effective strategy. For example, you may be able to mitigate the impact of FASB or GASB by switching to a less-expensive Group Medicare Advantage plan, adding age and service requirements, or migrating to a defined contribution health benefit.