MINIMIZING THE IMPACT OF GASB STATEMENTS 43 AND 45

WHEREAS, the provision of retiree healthcare benefits has helped attract and retain a high-quality workforce in the public sector; and

WHEREAS, the steady rise of healthcare costs, increased longevity of retirees and impending retirement of the baby boom generation have created added pressure on retiree health coverage; and

WHEREAS, in the past it was common for employers to include retiree healthcare benefits in their early retirement incentive plans as a way of encouraging early retirement, thus creating opportunities for younger workers and cutting costs; and

WHEREAS, Statement 45 by the Government Accounting Standards Board (GASB) now requires public employers to report the projected costs of retiree healthcare and other nonpension retirement benefits for all current employees over a 30-year period instead of the previous annual reporting of such actual costs; and

WHEREAS, Statement 43 by the Government Accounting Standards Board (GASB) applies to trusts that are established in order to pre-fund benefits, which will reduce reported OPEB liability.

WHEREAS, such reporting, which is technically less accurate than the actuarial assumptions underlying pension benefits, is likely to exaggerate the financial implications of retiree health benefits, already leading to highly negative reporting of the issue; and

WHEREAS, only a handful of employers have set any funds aside to offset some or all of the actuarial 30-year accrued liability of such costs; and

WHEREAS, a similar statement implemented in 1993 by the Financial Accounting Standards Board, GASB’s private sector counterpart, accounted in large part for the drop in retiree health coverage by large private employers from 66 percent in 1998 to 35 percent in 2006, according to the Kaiser Family Foundation; and

WHEREAS, as a result, concern about the cost of health benefits for public sector retirees has increased dramatically, causing some public officials to seek to cap or reduce retiree benefits:

RESOLVED, that the American Federation of Teachers continue to inform affiliates of the technical problems inherent in GASB reporting and the impact of GASB Statements 43 and 45 on union members and work with affiliates to educate members about the impact of these regulations; and

RESOLVED, that the American Federation of Teachers support and seek appropriate legislation to allow the states and all municipalities or public school districts within the states, to set aside funding in irrevocable trusts for the exclusive purpose of pre-funding retiree benefits other than pensions; and

RESOLVED, that the American Federation of Teachers offer technical assistance to those affiliates affected by GASB Statements 43 and 45 in an effort to mitigate its effects.