Employers who subsidize retiree health benefits incur an obligation during their employees' active employment for the benefits that will be paid in retirement. The liability and expense created by retiree health benefits are often a source of confusion and invariably present a financial burden for employers. Harbridge Consulting Group has performed retiree health valuations since 1991 and performs over 100 recurring FAS 106 valuations. We help employers manage their retiree health plans through our expertise in performing actuarial valuations, our ability to help employers understand the factors that drive these liabilities, and our consulting skills in clarifying the retiree benefit objectives and identifying opportunities to mitigate an employer's exposure.
Private sector and government sector employers need to comply with similar, but separate accounting standards that apply to these benefits:
FASB Statement of Financial Accounting No. 106
("SFAS No. 106", or "FAS 106")
Employers' Accounting for Postretirement Benefits Other Than Pensions
- Requires accounting of postretirement benefits such as medical or life insurance for public and private employers
- Harbridge Consulting Group has a team of credentialed health care actuaries and the combination of expertise in both health care and pension plans required to value postretirement health benefits
- We have developed numerous strategies to mitigate FAS 106 exposures, such as modifying plan design, Medicare integration, plan underwriting, experience blending, credited service periods, and marginal cost for healthcare providers
GASB Statement of Financial Accounting No. 45
Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions
- Final statement issued in August 2004
- All governmental entities that offer postretirement medical benefits will be required to record a liability for the benefit, some as early as 2007
- Harbridge has already begun to help municipalities, school districts, and other governmental entities understand and begin managing these exposures.
Medicare Part D Prescription Drug Subsidy for Employer
Sponsored Retiree Health Plans
In an effort to encourage employers to continue providing
retiree prescription drug coverage, Federal subsidy payments of
approximately $650 per Medicare eligible participant per year will be
available beginning in 2006 for qualified retiree health plan sponsors.
For More Information
More information regarding Retiree Health Valuations for Governmental Employers