Recognizing and Responding to Retirement Obligations

Abstract

With the implementation of recent accounting standards (GASB 43 and 45), local governments began reporting their liabilities and funding levels for postemployment benefits other than pensions—so-called OPEBs. In this article we pose three questions: (a) What factors affect the size of a government’s OPEB liability? (b) How did the OPEB standards affect the way governments manage their OPEB plans? and (c) What factors explain government responds to the OPEB standards? We draw data directly from audited financial reports in Florida counties and cities to examine those questions. Our results suggest that benefit policies, personnel characteristics, and actuarial cost methods are the most influential factors in determining a size of a government’s OPEB liability. Our results also provide evidence that many governments responded to the OPEB standards by reducing their benefits and changing their funding approaches. We show preliminary evidence of differences in governments that changed their policies or funding approaches with those that continued the status quo.