Complex Problems. Simplified Solutions.

What’s the difference between GASB 74 & GASB 75?

15 Aug
OPEB, GASB 74 & GASB 75

What’s the difference between GASB 74 & GASB 75?

Share:

GASB 74 is required for plan level financial reporting while GASB 75 is required for employer or plan sponsor level financial reporting  for municipal entities subject to GASB reporting that offer OPEB (medical, dental & life insurance for former employees & retirees) type benefits.

GASB 74 – key issues to consider

  1. Are you prefunding your OPEB benefits via an OPEB Trust?
    1. If so, GASB 74 will apply
  2. The discount rate (interest rate used to determine liabilities) will be based on the interaction of expected future benefit payments, expected future contributions to the OPEB Trust and the OPEB Trust investment policy
    1. Higher discount rates yield lower disclosed liabilities & vice versa
  3. GASB 74 does NOT provide for a Measurement Date unlike GASB 75
    1. The Measurement Date under GASB 74 is the Reporting Date or fiscal year end. This can cause year-end stress so planning is key.
  4. Disclosures done via Required Supplementary Information (“RSI”) – likely six to eight pages

GASB 75 – key issues to consider

  1. The discount rate (interest rate used to determine liabilities) will be based on the interaction of expected future benefit payments, expected future contributions to the OPEB Trust and the OPEB Trust investment policy
    1. Higher discount rates yield lower disclosed liabilities & vice versa
    2. Use of 20-year high-grade municipal bond index for unfunded plans
  2. GASB 75 allows for a Measurement Date of up to 12 months prior to the Reporting Date (fiscal year end)
    1. Use of an earlier Measurement Date can alleviate year-end stress by allowing the GASB 75 disclosures to be done well in advance
  3. GASB 75 requires far more disclosures than GASB 45 – review your pension plan and GASB 68
    1. Deferred Inflows, Deferred Outflows, Sensitivity Analysis, Investment Policy, etc.

This is meant to be a summary and not a detailed analysis of either Statement. For a more robust description of GASB 75, we have a recorded implementation webinar as well as various white papers available for review & download.

If you have questions on this, feel free to reach out to us at (855) 401-GAIN (4246) option 1, visit our website or email us at hello@odysseyadvisors.com and let us know how we can be of help.

 

Write a Reply or Comment