Personnel Information
District Other Post Employment Benefits (OPEB) Committee
Committee Recommendations
- Final OPEB Task Force Recommendations to District Negotiating Teams
- PowerPoint Presentation to Negotiating Teams
Introduction
The following information is provided to help employees better understand the Other Post Employment Benefits (OPEB) issue and where the District is in the process of addressing the situation.
New accounting rules from the Governmental Accounting Standards Board (GASB) will change the way the District accounts for retiree health care and other benefits. These changes will impact District budgets and future retiree benefits.
- What is GASB? GASB is a national organization that establishes accounting standards for governments and public organizations such as school districts. Federal and state laws require governments to follow GASB standards.
- What is GASB 45? In August 2004, GASB issued Statement No. 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions. Under the GASB 45 standard, retiree health care and other non-pension benefits for retirees must be paid for as the benefit is earned (similar to pension benefits) rather than on a “pay-as-you-go” basis, as is currently the case. GASB 45 requires the District to actuarially estimate the future cost of non-pension benefits for retirees and then calculate a yearly expense to be shown on the budget. Provo City School District must implement these rules by July 1, 2008.
- What benefits does GASB 45 affect? The GASB 45 standard applies to non-pension retiree benefits. Provo City School District’s non-pension benefits include items such as health insurance, life insurance, early retirement incentives, and Medigap insurance. The rule does not deal directly with current benefits for active employees.
- How will GASB 45 impact the District? Because the District will be required to simultaneously fund future benefit payments and current benefit payments for retirees, the cost to provide these benefits will increase substantially. Some organizations are estimating the expense is likely three- to four-times the current pay-as-you-go cost. An actuarial study estimates Provo City District liability for Medigap insurance and early retirement medical premiums in excess of $45 million. The district estimates its additional liability for early retirement stipends to be in excess of $38 million. The actuarial study estimates it would take over $3 million per year for Medigap insurance and early retirement medical premiums for the next 30 years to meet current obligations under new GASB rules. The district estimates it would take over $4 million per year for early retirement stipends for the next 30 years to meet current obligations under new GASB rules. In addition, health care costs are increasing about 10 percent annually, creating a difficult funding situation.
Provo City School District did away with Medigap benefits during the 2004-2005 school year for all new and many current employees. The district also abolished early retirement benefits for all new employees during the 2005-2006 school year. The remaining retiree benefits under GASB 45 represents a big enough issue that it must be addressed now. Because of the concern about the District’s ability to pay for current as well as future retiree costs, the District has organized an OPEB (Other Post Employment Benefits) committee consisting of District employees. The committee has been identifying strategies for addressing the issues surrounding the GASB 45 standard. It is anticipated the Task Force will make recommendations to the negotiating bodies around February 2006.
The Purpose of OPEB
The OPEB Committee was formed as a result of an agreement made by the 2005 negotiating teams. The purpose of the committee as defined by the negotiating teams is as follows:
- Educate employees and committee regarding OPEB
- Explore Medigap/Medicare D savings
- Explore options to lesson impact of benefits changes
- Explore Bridge vs Incentive options
- Options for 8 yr health benefit (sliding scale)
- Move benefit dollars saved to the salary schedule
- Explore Trust fund options
- Explore grandfather options and legal consequences
OPEB Committee Members
- Kerry Smith....Business Administrator
- Ron Firmage....PEA Representative
- Sue Tandy....USEA Representative
- Raimee Hunt....Classified Employee-Secretary
- Margo Walker....Classified Employee-Payroll
- Lorna Teeter....Teacher
- Carol Gaylord....Teacher
- Linde Safesten....Principal
- Mitch Swenson....Principal
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