That approaching wave of pension debt is a lot bigger than it looks. While the State struggles to get a handle on this, unfunded post retirement plans for school districts and municipalities around the Commonwealth present a unique challenge for local decision makers.
Comments [Add Comment]
But pensions are not the only issue. There are other post-employment benefits which have to be accounted for as well. According to Steve Kaczmarek, a Principal at the actuarial consulting firm of Milliman, Inc., "Public sector groups that offer post employment benefits like retiree health care are implementing GASB statement 45 by conducting valuations and including the results in their financial statements." These rules are set by the The Government Accounting Standards Board (GASB), which develops consistent standards for governmental accounting and developed new rules to account for post employment liabilities.
The GASB 45 Rule requires all municipal entities to measure and report the following:
• The value of benefit payments “promised” to retirees for future years
Are municipalities required to fund post retirement benefit liabilities? "Well no," responded Kaczmarek. "The statement requires that municipalities measure and report their liabilities and while some are starting to fund them through a trust others are unable to afford doing so at this time."
"What most municipal managers don't know, especially smaller ones is that for entities with 100 or less employees, there is an Alternative Measurement Method which can significantly reduce the costs of a typical valuation, which often costs $8,000-$12,000," Kaczmarek continued. "There are more than 89,000 municipal entities in the United States, including school districts and I estimate that 50,000-60,000 have 100 employees or less and will quality for the Alternative Measurement Method."