Policy References:

GASB Statement No. 43 – Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (superseded by GASB Statement No.74)

GASB Statement No. 45 – Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (superseded by GASB Statement No. 75)

GASB Statement No. 74 - Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans

GASB Statement No. 75 - Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions

Process and Document Preparation:

BACKGROUND

GASB Statement (GASBS) 43 established uniform financial reporting standards for other postemployment benefits (OPEB) plans. GASBS 45 established standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial statements of governmental employers. GASBS 74 further refines reporting guidance established in GASBS 43 for OPEB plans that administer OPEB benefits on behalf of governments. GASBS 75 further refines reporting guidance established in GASBS 45 for governments that provide OPEB to their employees and for governments that are legally required to finance OPEB for employees of other governments. GASB concluded that OPEB, like pension benefits, are a form of employee compensation and should be recognized in the same period in which the compensated service is provided by the employees. OPEB includes postemployment healthcare benefits (including medical, dental, vision, hearing, and other health-related benefits) and other forms of postemployment benefits (including life insurance, disability insurance, and long-term care insurance).

The New York State Department of Civil Service (DCS) administers the New York State Health Insurance Program (NYSHIP) which provides health insurance to current and retired employees of New York State, participating public authorities, and local governments. As administrator of NYSHIP, DCS performs all relevant administrative tasks. Annual benefit premiums charged to and paid by participants are generally the same, regardless of each individual employer’s risk profile. The annual benefit premiums collected by DCS are either remitted to the health insurance carriers that make up NYSHIP or, for certain Empire Plan components, used to reimburse vendors for incurred claim, administrative fee and other contractually required expenses. 

DETERMINATION

An important step in implementing GASBS 74 was to determine the type of plan the State’s OPEB plan qualifies as. As defined in paragraph 11, an OPEB plan is considered to be a defined benefit OPEB plan for which the benefits that the plan member will receive at or after separation from employment are defined by the benefit terms.  The OPEB plan may be stated as (a) a specified dollar amount; (b) an amount that is calculated based on one or more factors such as age, years of service, and compensation; or (c) a type or level of coverage such as prescription drug coverage or a percentage of health insurance premiums.  

The State must apply the accounting and reporting requirements for a single-employer, defined benefit plan as required by GASBS 75.  Employers that must apply the accounting and reporting requirements for a single-employer, defined benefit plan are required to measure and disclose an amount for OPEB cost on an accrual basis of accounting and perform a valuation of the OPEB obligation. Annual OPEB cost should be equal to the annual required contributions (ARC) of the employer to the plan for that year and (for employers the size of New York State) should be based on an actuarial valuation calculated, at a minimum, biennially. The actuarial valuation date need not be the State’s balance sheet date but should be the same date each year. New valuations should be performed if, since the previous valuation, there have been significant changes in benefit provisions, the size or composition of the population covered by the plan, or other factors that impact long-term assumptions.  Due to the State’s various reporting requirements, the State has chosen to have a valuation done each year with measurement as of March 31.

The actuarial present value of total projected benefits should include all benefits provided to plan members or beneficiaries in accordance with the current substantive plan (the plan terms as understood by the employer and the plan members). Employers providing benefits to both active employees and retirees through the same plan should segregate, for actuarial measurement, the retiree benefits from the projections of future retiree benefits based on claims costs or age-adjusted premiums approximating claims costs for retirees in accordance with actuarial standards issued by the Actuarial Standards Board.

OPEB Trust (GASBS 74) 

Legislation establishing the Retiree Health Benefit Trust Fund (OPEB Trust) was enacted in 2017.  This OPEB Trust meets the criteria of paragraph 3 of GASBS 74 and is considered a single-employer, defined benefit plan in accordance with this GASBS but was not funded until March 2022.  The OPEB Trust covers employees of the State, including Lottery, NYSLRS, and SUNY (excluding SUNY hospitals, SUNY Construction Fund, and SUNY Research Foundation).

Contributions to the OPEB Trust are made at the request of the Director of the Budget.  Legislation does not require such contributions but limits the maximum contributions.  As of March 31, 2023, these contributions are limited to 1.5% of the total actuarial accrued liability included in the State’s ACFR.  Contributions were made to the OPEB Trust in FY2022 and FY2023.

The OPEB Trust is reported as a fiduciary postemployment trust fund within the State’s financial statements.  Since the OPEB Trust does not issue stand-alone financial statements, all requirements of reporting the OPEB Trust are included within the State’s financial statements.

REPORTING REQUIREMENTS FOR OPEB EMPLOYERS

Measurement of the Total OPEB Liability 

The discount rate should be based on a high-quality 20-year tax-exempt general obligation municipal bond yield or index rate. “High-quality” is defined as being rated AA/Aa or higher (or an equivalent rating). 

All governments are required to use the entry-age normal-level percentage of payroll cost method to allocate the present value over past and future periods of employee service. This method projects benefits that are discounted to their present value when employees first begin to earn benefits and are attributed to the employees’ expected periods of employment. 

Calculating OPEB Expense 

Factors that impact a government’s OPEB liability, such as actual earnings on plan investments when the OPEB plan is administered as a trust, employee compensation changes, interest on the outstanding OPEB liability, contributions from employees and employers, and actual demographic and economic changes that are not in line with assumptions made in the actuarial calculations, must be considered when determining the government’s OPEB expense. A government’s annual OPEB expense must be calculated with consideration for factors affecting the OPEB liability within the reporting period. Several elements affecting OPEB liability must immediately be factored into the calculation of OPEB expense for the period, such as benefits earned each year, interest on the total OPEB liability, changes in benefit terms, and projected earnings on plan investments, if administered through a trust.

Governments are required to recognize deferred outflows of resources or deferred inflows of resources and then introduce into the expense calculation, systematically and rationally over the average remaining years of employment (active employees and inactive employees, including retirees), the impact to the total OPEB liability for differences between assumptions and actual experience.

Note Disclosure and Required Supplementary Information (RSI) 

This standard requires disclosure of:

• Information about the OPEB plan
  • Name of the plan, identification of the entity that administers the OPEB plan, identification of the plan as a single-employer OPEB plan.
  • Brief description of the benefit terms and contribution requirements.
  • That the OPEB plan does not issue a stand-alone financial report.
• Assumptions and other inputs, including:
  • Measurement date.
  • The effects of changes during the period (such as the effects of service cost, benefit changes, and, if applicable, investment earnings) on the total OPEB liability.
  • The impact on the OPEB liability of a 1-percentage-point change (both increase and decrease) in the discount rate and a 1-percentage-point change (both increase and decrease) in the healthcare cost trend rate.
  • The long-term expected rate of return on OPEB plan investments.
  • The assumed asset allocation of the OPEB plan’s portfolio.
• A reconciliation of the changes in deferred outflows of resources and deferred inflows of resources related to OPEB. 
• The amount of OPEB expense recognized by the employer in the reporting period.
• The OPEB plan’s fiduciary net position, if applicable.
  • This became effective for the State upon initial funding of the OPEB Trust.

The RSI will have to include the following additional information for each of the past 10 years (on a prospective basis):

1. The beginning and ending balances of the OPEB liability and the effects of changes during the period on the net OPEB liability.
2. The OPEB plan’s fiduciary net position, if applicable.
3. The components of the OPEB liability and related ratios, including the covered employee payroll, the OPEB plan’s fiduciary net position as a percentage of the total OPEB liability, and a ratio of the OPEB liability as a percentage of the covered employee payroll.
4. Schedules of contributions displaying the difference between actuarially determined contributions and employer contributions, covered employee payroll and employer contributions as a percentage of covered payroll.
5. Annual average money-weighted rate of return, net of investment expense, if applicable. 
   • This became effective for the State upon initial funding of the OPEB Trust.

Governments are also required to present notes to the RSI schedules regarding factors that significantly affect the trends in the schedules.

Changes in Reporting Subsequent to Funding of the OPEB Trust

The OPEB Trust reports the total OPEB liability, the plan fiduciary net position, and the net OPEB liability.  The OPEB Trust liability under GASBS 74 is reported in the same year that it is measured; the OPEB Trust liability recognized by the State under GASBS 75 is reported on a one-year lag from the date it is measured.

Additional required reporting under GASBS 74

In addition to the reporting requirements of GASBS 75, the following is required once meeting the threshold to report under GASBS 74.  This reporting went into effect for the State when the OPEB Trust was initially funded.

• Statement of fiduciary net position and Statement of changes in fiduciary net position.  Pension and other employee benefit trusts must be combined into a single column on the statements in the ACFR, with combining statements showing detail individually for the pension trust and the OPEB trust included in the Other Supplementary Information.
• The fiduciary net position should be reported as “Net position restricted for OPEB”.
• Information related to investments: investment income and expense, investment policies, identification of investments, the annual money-weighted rate of return.
• Net increase or decrease in fiduciary net position.
• Actuarial information, including measurement date and discount rate, similar to requirements under 75.
  1. Until the plan’s fiduciary net position is projected to be sufficient to make projected benefit payments, the discount rate should be based on a yield or index rate for a 20 year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher.
• The date of the actuarial valuation.
• In the RSI:
  1. A 10-year schedule showing the breakdown of total OPEB liability, plan fiduciary net position, net OPEB liability, the plan’s fiduciary net position as a percentage of total OPEB liability, the covered-employee payroll, the net OPEB liability as a percentage of covered-employee payroll.
  2. If an actuarially determined contribution is calculated for contributing entities, a 10-year schedule presenting actuarially required contributions, actual contributions recognized, the difference between the two preceding items (3), the covered-employee payroll, and the amount of contributions recognized by the OPEB plan in relation to the actuarially determined contribution (3) as a percentage of covered-employee payroll.
  3. A 10-year schedule presenting the annual money-weighted rate of return on OPEB plan investments.

SICK LEAVE 

Sick leave is factored into the actuarial calculations done by the actuaries in determining the OPEB liability.  Since the sick leave balances are used as a credit towards health insurance premium costs, they increase the OPEB liability for the State. 

Retirees that retired prior to January 1, 1983 are required to pay, on a monthly basis, either zero percent or 25 percent of the health insurance premium for single or family coverage, respectively. 

Retirees that retired prior to January 1, 2012 but on or after January 1, 1983 are required to pay, on a monthly basis, either 12 percent or 27 percent of the health insurance premium for single or family coverage, respectively. 

Retirees retired on or after January 1, 2012

• Retirees who retired at a salary grade 10 or above are required to contribute 16 percent or 31 percent of the health insurance premium for single or family coverage, respectively. 
• Retirees who retired at a salary grade below 10 are required to contribute 12 percent or 27 percent of the health insurance premium for single or family coverage, respectively.

Retirees are entitled to have the value of their sick leave accumulated at time of retirement used to offset the cost of retiree health insurance.  The amount a retiree has available to pay the monthly premium is determined as follows:

1. Total amount available to pay the retiree’s share of health insurance is calculated by multiplying an employee’s total sick leave hours at retirement by the employee’s hourly rate at retirement.  The hourly rate at retirement for employees paid on an annual basis is calculated by dividing the annual salary (including additional constant salary factors such as location pay) by 2088 for hours which are normally 8 hours per day and 1957 for jobs which are normally 7.5 hours per day.
2. The monthly benefit available to pay the retiree’s monthly share of the health insurance premium is then calculated by dividing the total amount available (determined in step 1) by a factor that is based on the employee’s age at retirement.

The monthly benefit is then applied to the retiree’s share of the monthly health insurance premium for as long as the retiree and/or surviving spouse lives, depending on the option selected.

Guide to Financial Operations

REV. 12/26/2023