Commonly used OPEB accounting terms
Accounting terms mentioned throughout our website may not be familiar to everyone and so we’ve complied a list of common terms related to FASB and GASB OPEB accounting standards.
There are currently 24 terms in this directory
To record on an organization's books according to when a transaction occurred rather than when the related cash payment was made; e.g. John earned $1,000 in salary during December, 2020 but was not paid such amount until 1/10/21. John's employer would consider the $1,000 as accrued in 2020 even though it was not paid until 2021.
Agent multiple-employer plan (agent plan)
An aggregation of single-employer plans, with pooled administrative and investment functions. Separate accounts are maintained for each employer so that the employer's contributions provide benefits only for the employees of that employer. A separate actuarial valuation is performed for each individual employer's plan to determine the employer's periodic contribution rate and other information for the individual plan, based on the benefit formula selected by the employer and the individual plan's proportionate share of the pooled assets. The results of the individual valuations are aggregated at the administrative level.
Annual OPEB cost
An accrual-basis measure of the periodic cost of an employer's participation in a defined benefit OPEB plan.
Cost-sharing multiple-employer plan
A single plan with pooling (cost-sharing) arrangements for the participating employers. All risks, rewards, and costs, including benefit costs, are shared and are not attributed individually to the employers. A single actuarial valuation covers all plan members, and the same contribution rate(s) applies for each employer.
Defined benefit OPEB plan
An OPEB plan having terms that specify the benefits to be provided at or after separation from employment. The benefits may be specified in dollars (for example, a flat dollar payment or an amount based on one or more factors, such as age, years of service, and compensation), or as a type or level of coverage (for example, prescription drugs or a percentage of healthcare insurance premiums).
Defined benefit pension plan
A pension plan having terms that specify the amount of pension benefits to be provided at a future date or after a certain period of time. The amount specified usually is a function of one or more factors such as age, years of service, and compensation.
Defined contribution plan
A pension or OPEB plan having terms that (a) provide an individual account for each plan member and (b) specify how contributions to an active plan member’s account are to be determined, rather than the income or other benefits the member or his beneficiaries are to receive at or after separation from employment. Those benefits will depend only on the amounts contributed to the member’s’ account, earnings on investments of those contributions, and forfeitures of contributions made for other members that may be allocated to the member’s account. For example, an employer may contribute a specified amount to each active member’s postemployment healthcare account each month. At or after separation from employment, the balance of the account may be used by the member or on the member’s behalf for the purchase of health insurance or other healthcare benefits. Healthcare cost trend rate - The rate of change in per capita health claims costs over time as a result of factors such as medical inflation, utilization of healthcare services, plan design, and technological developments.
Financial Accounting Standards Board
The organization that determines the accounting standards under which private sector organizations must operate. There is another organization referred to as the Government Accounting Standards Board that sets the accounting standards for state and local governments.
Healthcare cost trend rate
The rate of change in per capita health claims costs over time as a result of factors such as medical inflation, utilization of healthcare services, plan design, and technological developments.
Investment return assumption (discount rate)
The rate used to adjust a series of future payments to reflect the time value of money.
Market-related value of plan assets
A term used with reference to the actuarial value of assets. A market-related value may be fair value, market value (or estimated market value), or a calculated value that recognizes changes in fair value or market value over a period of, for example, three to five years.
Other postemployment benefits
Postemployment benefits other than pension benefits. Other postemployment benefits (OPEB) include postemployment healthcare benefits, regardless of the type of plan that provides them, and all postemployment benefits provided separately from a pension plan, excluding benefits defined as termination offers and benefits.
To record on an organization's books according to when the cash payment was made rather than when the transaction giving rise to such payment occurred; e.g. In the example shown in the definition of "accrued", the $1,000 would be considered as earned in 2021 since that is the year in which it was paid.
Retirement income and all other benefits, including disability benefits, death benefits, life insurance, and other ancillary benefits, except healthcare benefits, that are provided through a defined benefit pension plan to plan members and beneficiaries after termination of employment or after retirement. Postemployment healthcare benefits are considered other postemployment benefits, whether they are provided through a defined benefit pension plan or another type of plan.
Resources, usually in the form of stocks, bonds, and other classes of investments, that have been segregated and restricted in a trust, or in an equivalent arrangement, in which (a) employer contributions to the plan are irrevocable, (b) assets are dedicated to providing benefits to retirees and their beneficiaries, and (c) assets are legally protected from creditors of the employer(s) or plan administrator, for the payment of benefits in accordance with the terms of the plan.
Obligations payable by the plan at the reporting date, including, primarily, benefits and refunds due and payable to plan members and beneficiaries, and accrued investment and administrative expenses.
The individuals covered by the terms of an OPEB plan. The plan membership generally includes employees in active service, terminated employees who have accumulated benefits but are not yet receiving them, and retired employees and beneficiaries currently receiving benefits.
The period between termination of employment and retirement as well as the period after retirement.
Postemployment healthcare benefits
Medical, dental, vision, and other health-related benefits provided to terminated or retired employees and their dependents and beneficiaries.
Postretirement benefit increase
An increase in the benefits of retirees or beneficiaries granted to compensate for the effects of inflation (cost-of-living adjustment) or for other reasons. Ad hoc increases may be granted periodically by a decision of the board of trustees, legislature, or other authoritative body; both the decision to grant an increase and the amount of the increase are discretionary. Automatic increases are periodic increases specified in the terms of the plan; they are nondiscretionary except to the extent that the plan terms can be changed.
Projected salary increase assumption
An actuarial assumption with respect to future increases in the individual salaries and wages of active plan members; used in determining the actuarial present value of total projected benefits when the benefit amounts are related to salaries and wages. The expected increases commonly include amounts for inflation, enhanced productivity, and employee merit and seniority. Single-employer plan - A plan that covers the current and former employees, including beneficiaries, of only one employer.
A plan that covers the current and former employees, including beneficiaries, of only one employer.