Application of GASB Statement 75 for Statewide Death & Disability Plan

MEMORANDUM

To: FPPA Employers
Re: Applicability of GASB 75
Date: 3/4/2019 – Updated

The Governmental Accounting Standards Board (GASB) released Statement No. 75, Accounting and Financial Reporting for Postemployment Benefit Other Than Pension that is effective for fiscal periods beginning after June 15, 2017. This statement details the reporting requirements for Employers regarding other postemployment benefit (OPEB) plans.

Applicability to FPPA Statewide Death & Disability Plan

FPPA administers the Statewide Death & Disability Plan which qualifies as a cost sharing multiple-employer defined benefit OPEB plan under this standard. This plan covers substantially all active full-time (and some part-time) employees of fire and police departments in Colorado.

As it pertains to the requirements in Statement No. 75 regarding the FPPA Statewide Death & Disability Plan only, below are some plan highlights considered:

Benefits

Benefits are provided from a plan separate from the FPPA pension plans
The plan provides benefits for members or their survivors not eligible for a “normal retirement” or for an on-duty death for active members eligible to retire
Once a member is eligible to retire, contributions to the plan and plan benefit obligations cease

Contributions

There are no mandatory employer or nonemployer contributing entities
- The State of Colorado completed its funding in 1997 for all past and future service costs for members hired prior to January 1, 1997
The plan is funded by member contributions or contributions made on behalf of members
- Local departments decide whether the member or the employer funds all or part of the contributions, which may be negotiated as part of a collective bargaining agreement
C.R.S. 31-31-811. State funding of death and disability benefits, item (4), further describes the contribution funding obligation
- The statute does not mandate a source of contributions to the plan, it only mandates that contributions are made to the plan to fund the member benefit
- FPPA is not granted authority to require employer contributions to the plan o Participating departments have locally negotiated contributions to the plan that are contributed solely by members, solely by employers or shared
- For any employer currently paying contributions to the plan on behalf of the member, the employer can negotiate the payment of contributions to the plan or shift payment to the member
Under Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and Statement No. 85, Omnibus 2017 paragraph 15, FPPA will classify all contributions to the Statewide Death & Disability Plan as member contributions. This would also result in classifying the contributions as member contributions when calculating the employer’s proportionate share of the plan Net OPEB Liability and related expenses and deferral items

Implementing Statement No. 75 for Employers

FPPA will not be providing audited schedules to employers for use in calculating a Net OPEB Liability and related expenses and deferrals as it relates to the Statewide Death & Disability Plan. The calculation of the employer’s proportion is based on a prospective analysis of current and future contributions. As the contributions to the plan are all classified as member contributions, the “employer’s projected long-term contribution effort to the OPEB plan” (numerator) is $0. Additionally, the “total projected long-term contribution effort of all employers and nonemployer contributing entities” (denominator) is also $0. Therefore, all Employer’s proportionate share calculations are 0% . (See paragraph 59 a. of GASB 75). Finally, employees are not included in the definition of a nonemployer contributing entity within the standard (see paragraph 246 of GASB 75).

We recommend that Employers work closely with their auditors to determine the correct level of disclosure for the FPPA Statewide Death & Disability Plan in their financial reports.

Additional Reference Materials

GASB Implementation Guide 2017-3, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (and Certain Issues Related to OPEB Plan Reporting) – generally applicable for Statement No. 75. There are 2 questions that appear to be most relevant to the FPPA Statewide Death & Disability Plan:

Question 4.4 regarding a cost-sharing defined benefit OPEB plan where the employer no longer provides benefits to active employees through the plan. Although this question is not directly related to the FPPA Statewide Death & Disability Plan, the answer provides criteria used in evaluating if Statement No. 75 is applicable. The answer states if the employer has no requirement to make contributions to the plan, does not have a payable to the plan, and does not receive support from a nonemployer contributing entity, the requirements of Statement No. 75 do not apply
Question 4.179 asks if a measure of employer plus employee contributions can be used as the basis for an employer’s proportion. The answer is no. Per paragraph 59a of the Statement, the employer’s proportion is based on the employer to all employers and noncontributing entities. Employees are specifically excluded from the definition of nonemployer contributing entities in paragraph 246 of the Statement

C.R.S. 31-31-811. State funding of death and disability benefits [emphasis added]

(4) For each member hired on or after January 1, 1997, who is eligible for the death and disability coverage provided by this part 8, a contribution shall be made to the death and disability account in the fund for the years 1997 and 1998 in an amount not greater than two and four tenths percent of the member's salary. Thereafter, the board, based on an annual actuarial valuation, may adjust the contribution rate every two years, but in no event may the adjustment for any two-year period exceed one-tenth of one percent of the member's salary. Any employer and any local pension board or authority shall provide such information as may be required by the board in order to complete the annual actuarial valuations. The actuary appointed by the board may utilize either the entry agenormal cost method or the aggregate cost method for purposes of the study required by this subsection (4). Any unfunded accrued liability shall be funded over a period not to exceed thirty years. The actuarial study shall not include any consideration of a cost of living adjustment to benefits awarded to members who are occupationally disabled. Payments shall be made by the employer and are due no later than ten days following the date of payment of salary to the member. The payments required by this section are subject to interest if not submitted when due. Any decision regarding whether the contribution required by this subsection (4) shall be assessed against the employer or the member, or shall in some manner be assessed jointly against the employer and the member, will be made at the local level utilizing the usual process for determining employee benefits. If it is not already part of the usual process for determining employee benefits, the employer shall confer with the employees or their representative prior to making a determination on how the contribution will be assessed.