Most employees covered by some form of employer-sponsored healthcare plan.
As you know, most employees are covered by some form of employer-sponsored healthcare plan. In most cases, the coverage ceases when the employee terminates employment (to be more precise, when the COBRA extended coverage ceases). Some employers, however, continue to cover those retirees who have satisfied certain predetermined requirements, such as age 55 with 15 years of service with the organization.
What Are Other Post-Retirement (OPEB) Benefits?
They are benefits other than pension distributions such as:
- Retiree health insurance
- Life insurance
- Deferred compensation
- Other types of “other” benefits such as vision or dental coverage
FASB ASC 715-60 and GASB 75: Accounting standards for post retirement healthcare plans
These are accounting standards that define the manner in which the expense and liability for post retirement healthcare and other non-pension benefits must be recorded for financial statement purposes. The Financial Accounting Standards Board issued FASB ASC 715-60 which applies to private sector employers. The Governmental Accounting Standards Board issued GASB 75 which applies to government agencies. They are referred to below as accounting standards.
Accounting standards generally require the cost of post retirement healthcare benefits to be accrued over the employee’s working lifetime.
The accounting standards generally require the cost of post-retirement healthcare benefits to be accrued over the working lifetime of the employee. Prior to the accounting standards, such cost was usually recorded on a pay-as-you-go basis. As an example, if an employer sponsored a self-funded plan and a retiree incurred a $1,000 covered healthcare expense, such expense was recorded on the company books in the year the hospital or doctor bill was paid by the plan.