There is a lot of discussion about OPEB liability and how municipalities can control it. OPEB (Other Post-Employment Benefits) refers to a municipality’s financial obligation to provide retiree healthcare. Most municipalities fund the cost of healthcare benefits for current retirees from the current operating budget. However, many municipalities fail to set aside funds to pay for the benefits promised retirees in the past or future obligations for healthcare benefits promised to current employees when they retire. As a result, unfunded OPEB liabilities grow over time. That funding shortfall is estimated to be in the trillions of dollars when aggregated over the entire country.
GASB 45, the standard issued by the Government Accounting Standards Board on financial reporting of OPEB liability by employers, has done a service to taxpayers by bringing this discussion to the forefront and forcing municipalities to put a number on their balance sheets for this long-term obligation. However, like many well intentioned efforts, this has had some negative, unintended consequences.
What is an OPEB Liability