OPEB ACCOUNTING TRANSACTIONS

WASBO Accounting SeminarMarch, 2007

Presented by:

Kathy Guralski, School Finance AuditorWisconsin Department of Public Instruction

Need to know:Need to know:

1) Timing of contribution2) Amount of contribution3) Annual Required Contribution

(ARC) amount4) Current retiree benefits to be paid5) Implicit rate subsidy6) Salary OR FTE of employees

eligible to receive the benefit

Timing of Contribution

A contribution to the trust may be made at anytime during the fiscal year but

MUST be physically made by June 30th to be accounted for in that same fiscal

year ending June 30th.

Amount of Contribution

• How a contribution is accounted for and aided will vary depending on the following:

• A contribution to the trust may be:• An amount for the entire unfunded actuarial

accrued liability plus normal cost• ARC amount• Amount less than ARC• Amount more than ARC but less than unfunded

actuarial accrued liability plus normal cost

Annual Required Contribution (ARC) Amount

Amount determined by valuation Amortization of Actuarial Accrued

Liability Normal Cost

Current Retiree Benefits

If applicable, what amount your current retirees contribute towards their insurance cost.

If applicable, what cost the district incurs for current retirees

Implicit Rate Subsidy

Insurance rates are blended (one rate for all married, single, etc.)Premium rate paid by retirees may be lower than if retiree were rated separately (actives are subsidizing)GASB requires value of the insurance provided retirees (age related) versus blended rateDifference is implicit subsidy rate

Employees eligible toreceive the benefit and

their salary OR FTE

Determine who your employees are within the class that are eligible to receive the postemployment benefit being funded

Determine the amount of either their salary or FTE

Steps for entries:Steps for entries:

1) Allocation of contribution1) Exhibit B

2) Record contribution in applicable funds1) Exhibit C, Entries 1 & 2

3) Record contribution in fund 731) Exhibit C, #3

4) Record retiree paid portion of insurance premiums

1) Exhibit C, #4

5) Record payment to insurance providers1) Exhibit C, # 5, #6, #7, #8 & #9

6) Record payment for implicit rate subsidy1) Exhibit C, #10, #11 & #12

Allocation of contribution

Only amount up to ARC is eligible for federal/state grants and state categorical aid and may be allocated to appropriate functions

Any amount in excess of ARC is to be accounted for in fund 10, function 291000, object 218.

Allocation of contribution

Exhibit B Determine who your employees are that

are eligible for the benefit Determine either the salary OR FTE of the

eligible employees Allocate total contribution to appropriate

functions of eligible employees in the plan

Record Contribution Made from Applicable Funds

Contribution may be accounted for as a prepaid made at the beginning of the year, accounted for through the payroll system or as a lump sum payment Exhibit C, Entries 1 & 2 Exhibit A, #3

Record Contribution in Fund 73 Exhibit C, Entry 3

Record Retiree Portion of Insurance Premiums Exhibit C, Entry 4

Record Payment to Insurance Providers

District pays premiums on retirees in combination with active employees

Exhibit C, #5 Exhibit C, #7 Exhibit C, #8 Exhibit C, #9

Direct retiree payment from trust to insurance provider

Exhibit C, #6

Record Payment for Implicit Rate Subsidy

Exhibit C, #10

Exhibit C, #11

Exhibit C, #12

Exhibit D

BORROWING BY DISTRICT TO FUND OPEB

Borrowing by the district to fund OPEB liability is considered refinancingExhibit F

The contribution to the trust made with borrowed funds is not an expenditure for shared cost or categorical aid

Principal and interest payments in future years are costs in determining shared costs

Exhibit F

BORROWING BY TRUST TO FUND OPEB

Exhibit F Debt is reported within the trust Investment earnings remain in the trust

to be used for future payment of employee benefits

DPI CONTACTS

Kathy GuralskiSchool Finance Auditor

608-266-3862kathryn.guralski@dpi.state.wi.us

Lori AmesSchool Administration Consultant

608-266-3464lori.ames@dpi.state.wi.us