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Executive Director's
Report - Volume 52, Number 1 - 2008
New law passed to help fund OPEB liabilities.
I used this space in the previous issue of County Commissioner magazine to express my displeasure with the Governmental Accounting Standards Board (GASB).
My specific problem was with GASB’s adoption in 2004 of Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans and Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions.
I explained that the statements address the reporting of and possible funding of what is referred to as Other Post-Employment Benefits (OPEB) liabilities. Considerable space was devoted to reasons I think the statements are ill-advised and specifically should never have been made applicable to governmental entities.
My opinions have not changed during the past two months and have, in fact, been further confirmed as I contemplated another reason to dislike the statements.
In order to comply with requirements of Statements 43 and 45, it will be necessary for counties and other affected governmental entities to employ the services of actuarial firms. The services of such firms will be necessary in order to determine and give validity to the value of OPEB liabilities in the future.
The services of actuarial firms will be needed on an ongoing basis (probably annually) and will represent a considerable cost. Such cost will result in a diversion of funds needed for basic governmental services.
My displeasure notwithstanding, the Alabama Legislature, during the 2008 Regular Session, passed Act 2008-_____ (the bill was not signed by the Government at the time of this writing).
This new law authorizes practically any governmental entity or agency and subdivision thereof to create, individually or jointly, an irrevocable trust or trusts exclusively for the purpose of funding OPEB liabilities. The legislation was supported by the Association of County Commissions of Alabama as part of its legislative agenda for the 2008 legislative year.
Prior to the passage of this act there was no general or local laws in Alabama that authorized the establishment of such trusts.
I stated in the previous article that it was my understanding that the State of Alabama Examiners of Public Accounts would not take exception to the establishment of such trusts in recognition of their necessity in order to comply with the requirements of the statements.
It was the thinking of the Association’s leadership that if such trusts are needed, they should be established and maintained according to statutory provisions.
It was also recognized that there was no authority in Alabama for governmental entities to establish multiple-employer or joint trusts.
The new law is appropriately called the Post-Employment Benefits Act of 2008. It is anticipated that some of the larger counties (in terms of revenue and expenditures) will use this new authority to establish individual trusts for the benefit of their current and future retired employees.
It is also anticipated that smaller counties may want to participate with other counties in multi-employer trusts. By participating in such joint trusts, counties would be able to benefit from the obvious investment advantages of pooling their fiscal resources.
The ACCA Board of Directors will discuss this subject at an upcoming meeting. The Board will consider whether or not the Association should create a joint OPEB trust for the benefit of the counties.
Yes, I do not like GASB Statements 43 and 45. This new law does not require county commissions to comply with their requirements. But, we do now have a state law that provides a means of compliance.
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