New Financial Accounting Standard Takes Effect for NHRS Employers in 2018

Dec 29, 2017
  • Employer Notices

For Immediate Release: December 29, 2017
Contact: Marty Karlon, Public Information Officer, (603) 410-3594; [email protected]

CONCORD, NH – The Governmental Accounting Standards Board (GASB) is implementing updated financial reporting changes for post-employment benefits other than pensions (OPEB) that affect the New Hampshire Retirement System (NHRS, the retirement system) and its participating employers.

OPEB refers to the benefits, other than pensions, that a state or local government employee receives as part of his or her package of retirement benefits. Typically retiree medical insurance is the most significant OPEB offering, though other benefits such as life insurance are also covered by this umbrella term. For GASB purposes, the NHRS Medical Subsidy is an OPEB benefit.

GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, took effect for the retirement system in fiscal year 2017 and plan-level GASB 74 data is included in the recently released 2017 NHRS Comprehensive Annual Financial Report (CAFR).

GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, will take effect in 2018 for governmental employers with fiscal years ending June 30, 2018, or later.

These statements – which were issued in 2015 to replace Statements No. 43 and 45 – make changes to the financial reporting framework for OPEB plans and require more disclosures and required supplementary information.

In recent years, GASB updated accounting standards for pensions in Statements No. 67 and 68.  NHRS began providing employer-level GASB 68 data for participating employers beginning in 2015. (Note: FY 2017 GASB 68 data will be available in early 2018.)

GASB 75 is similar to GASB 68, in that it requires participating governmental employers to report their proportionate share of the net OPEB liability and expense on their financial statements. However, there is one significant difference that employers need to be cognizant of: While NHRS will provide employer-level GASB 75 liability and expense information regarding the Medical Subsidy, an employer may have additional OPEB liabilities that the retirement system is unaware of, such as employer-funded health care or life insurance for retirees.  NHRS advises employers to discuss the impact of these new GASB Statements with their auditors.

NHRS expects to provide audited GASB 75 employer-level data in the summer of 2018 for employers with fiscal years ending June 30, 2018, and updated data in early 2019 for employers with fiscal years ending Dec. 31, 2018. Additionally, NHRS has posted GASB background material online at:

Questions and Answers

What is the Medical Subsidy? The Medical Subsidy is a payment made by NHRS directly to an eligible retiree’s former employer or the employer’s health insurance administrator that goes toward the cost of health insurance for a qualified retired member, spouse, or dependent child(ren). The Medical Subsidy is not a health insurance plan. For more information on the Medical Subsidy, see:

How is the Medical Subsidy funded? Medical Subsidy benefits are funded from a 401(h) trust for Political Subdivision Employees, State Employees, Teachers, and Police and Fire members. Because these benefits are not fully funded, employers are required by statute to pay the minimum rate necessary to maintain the benefits provided for each of the above groups under RSA 100-A:53, RSA 100-A:53-b, RSA 100-A:53-c, and RSA 100-A:53-d.

Because this benefit is closed to all active Group I (Employee and Teacher) members and only certain active Group II (Police and Fire) members still qualify, the Medical Subsidy rates are expected to decrease in future years.

Does the GASB 75 OPEB reporting requirement impact NHRS employer contribution rates? No. Employer contribution rates are actuarially determined pursuant to RSA 100-A, the NH Constitution, and the NHRS Actuarial Funding Policy.

Will reporting OPEB liability increase local property taxes? No. These reports are for accounting and financial reporting purposes only and do not impact local property tax rates or future NHRS employer contribution rates. This is because the OPEB liability will be presented in the “government-wide financial statement,” not the “fund financial statement” that is used by the state Department of Revenue Administration for tax rate-setting purposes.

How will the proportionate share for individual employers be determined? The proportionate share for each employer will be determined by comparing the Medical Subsidy contributions collected from each employer to the total Medical Subsidy contributions NHRS received in the fiscal year.

The first part of the calculation is to take the amount of employer Medical Subsidy contributions made by individual employers in the fiscal year and divide each individual amount by the total amount of all employer Medical Subsidy contributions.

The percentages derived in the above calculation are then multiplied by the GASB 74 Net OPEB Liability to determine each employer’s proportionate share.

It sounds like the proportionate share is an accounting approximation, not the employer’s true liability for the Medical Subsidy benefit. Is that correct? Yes. The GASB calculation of an employer’s Net OPEB Liability is not done on an actuarial basis and does not represent an employer’s true unfunded OPEB liability. Because NHRS is a cost-sharing, multiple-employer plan, pension and Medical Subsidy costs are assessed equally among all participating employers.

Do employers need to report this data? NHRS employers that report on a GAAP (generally accepted accounting principles) basis must comply with the requirements of GASB 75 in their audited financial statements for the fiscal years ending June 30, 2018, and later. GASB 75 requirements are not applicable to employers that report on a cash basis.

Although GASB has no enforcement authority, public employers generally follow GASB rules in order to obtain unmodified opinions from their auditors. Adhering to GASB standards is also an important consideration for bond rating agencies.

Is the GASB 75 data that NHRS will provide the only OPEB information an employer will need? NOT NECESSARILY! An employer may have additional retiree OPEB liabilities funded directly by the employer that the retirement system is unaware of, such as employer-funded health care or life insurance for retirees and dependents. NHRS advises employers to discuss the impact of GASB 75 with their auditors.

About NHRS

NHRS provides retirement, disability, and death benefits to its eligible members and their beneficiaries.  The State of New Hampshire and nearly 470 local government employers participate in NHRS for their employees, teachers, firefighters, and police officers.  NHRS has approximately 48,000 active members and 33,000 pension recipients. NHRS administers a defined benefit plan qualified as a tax-exempt entity under sections 401(a) and 501(a) of the Internal Revenue Code.

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