5.	RECEIVE GOVERNMENT ACCOUNTING STANDARDS BOARD STATEMENT NO. 75 - ACCOUNTING AND FINANCIAL REPORTING FOR POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
Meeting Date:		November 18, 2024	Budgeted:	N/A
From:		David J. Stoldt,	Program/	N/A
		General Manager	Line Item No.:
Prepared By:		Nishil Bali	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: The Finance and Administration Committee reviewed this item on November 12, 2024 and recommended approval.
CEQA Compliance: This action does not constitute a project as defined by the California Environmental Quality Act Guidelines Section 15378.

SUMMARY: In June 2015, the Governmental Accounting Standards Board (GASB) issued Statement No. 75 to improve accounting and financial reporting by state and local governments for post-employment benefits other than pensions (OPEB). This Statement replaced the requirements of Statement No. 45 - Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, Statement No. 57 - OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB, and Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishing new accounting and financial reporting requirements for OPEB plans. GASB 75 establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit OPEB, this Statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Since this statement requires a full actuarial report, District used GovInvest to prepare this report for the fiscal year ending June 30, 2023, attached as Exhibit 5-A. It is noteworthy to mention that the GASB 75 standard only applies to reporting the liability and does not stipulate any requirement for funding the liability.

As reported in the Executive Summary, page 3, the District’s Net OPEB Liability as of June 30, 2024, is estimated at $5,222,313. In comparison, District’s Net OPEB Liability as of June 30, 2023, was estimated at $4,991,860. The increase in liability is attributed to increases in service costs, interest costs, census changes, and medical long-term actuarial trends.

The District’s annual OPEB expense of $361,140 would fully fund the current and future costs amortized over time. In FY 2023-2024, the District paid premium contributions towards medical coverage for eighteen retirees in the amount of $144,551. This actual cost would be deducted from any contribution made for the year. For example, if the District had fully funded its contribution in FY2023-2024, the $144,551 would have been deducted from the $361,140 resulting in an additional net contribution of $216,589. It should be noted that both current and future costs must be recalculated on an annual basis based on then current employee data and District benefit levels, so the contribution amounts may vary somewhat each subsequent year. The District can elect to either partially fund, fully fund or continue to fund the costs on a pay-as-you-go basis. The District’s budget in the past included funds for pay-as-you-go basis. The District budget starting with fiscal year 2018-2019 has included an additional $100,000 set aside towards OPEB reserve funds. The OPEB reserve balance as of 06/30/2024 was $600,000. Details of existing employees in the OPEB tired plan are as follows:

Tier 1 Plan (hired prior to 01/01/2013) 8 employees

Tier 2 Plan (hired after 01/01/2013) 17 employees

RECOMMENDATION: The Finance and Administration Committee recommends that the Board receive the GASB 75 OPEB Valuation Report prepared by GovInvest.

BACKGROUND: In July 2004, GASB issued Statement Nos. 43 & 45, establishing financial reporting requirements for post-employment benefits other than pensions. The District provides health insurance as a post-employment benefit and was required to comply with GASB 43 and 45 and include the required information in its audited financial statements beginning in FY 2009-10. In June 2015, GASB issued Statement No. 75 replacing GASB 45, financial reporting requirement for post-employment benefits other than pensions, which includes information with respect to the total obligation to provide future retiree health and welfare benefits with fiscal year beginning June 15, 2017.

The main thrust of GASB OPEB standard is to require that public-sector employees recognize the cost of other post-employment benefits over the service life of their employees rather than on a pay-as-you-go basis. While the liability amount must be included in each entities annual audited financial statements, the GASB statements do not require that the amount actually be funded. Government entities can either partially fund, fully fund or continue to fund the costs on a pay-as-you-go basis.

Beginning with the fiscal year 2018-2019 budget, District has started setting aside funds towards the unfunded pension and other postemployment benefits (OPEB). With each budget cycle, staff will continue to recommend adding additional funds to these reserve accounts. Eventually, the District may also consider setting up a Section 115 trust fund – a tax-exempt trust that prefunds post-retirement employee benefits including pensions.

EXHIBIT

5-A GASB 75 OPEB Valuation Report

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