The Governmental Accounting Standards Board (GASB) shook the foundations of many Americans' financial confidence earlier this month when it released two "statements," or guidelines, for reporting on government employers' "other post-employment benefits" (OPEB).
The term "OPEB" refers mainly to the retiree health benefits state and local employers have promised their workers over the decades in exchange for labor peace.
Statement 74 applies to plans that manage OPEB benefits for governments, and that statement applies for fiscal years beginning after June 15, 2016.
Statement 75 applies to governments that provide OPEB for their employees. That statement takes effect for fiscal years beginning after June 15, 2017.
Analysts at Milliman, an actuarial consulting firm, describe the changes this way: "For most [affected] employers, the result will be an increase in the balance sheet liability and a significant increase in the volatility of the annual OPEB expense."
In other words: Many government employers will have to be more open about the reality that the retiree health benefits they promised — or in some cases, "promised" (wink wink) — are probably not going to materialize, or, at least, not materialize in the form that the sponsors and the workers originally envisioned.
Grim discoveries about the fragile state of OPEB promises have played a major role in the bankruptcies of Detroit and of Stockton, Calif.
See also: Accounting rule to force U.S. cities to report health care bills and GASB pushes for better disclosure of public retiree benefits
Congress supposedly requires the U.S. Postal Service to set money aside to pay back its OPEB promises. The Postal Service has rarely been able to make good on that OPEB funding requirement, and occasional news coverage of its efforts to postpone having to try to achieve impossible goals further emphasizes the utopian nature of OPEB promises.
And, of course, the private employers that offer retiree health benefits and general public retirement benefits programs face similar challenges.
Certainly, Congress can have the Federal Reserve "just print money" to make good on Medicare and Medicaid promises in the 2040s and 2050s, but the results may not be great for the overall economy, and may not actually lead to the government being able to get the beneficiaries the kind of care they thought they'd be able to afford.
Maybe you sell health insurance, long-term care insurance or retirement planning products and services. Why should you care about the OPEB disillusionment crisis?
For some ideas on why and how the crisis can make you look good, read on.
1. You talk about something that matters.
Maybe you got into insurance because, really, you just weren't good enough at physics to go into engineering and develop new cellular telephones, or good enough at programming to go into software and develop hot cell phone apps, or good enough at schmoozing and sounding as if you went to Oxford to go into investment banking.
So, anyhow, what's more important: Knowing how to format a line graph in a PowerPoint presentation to persuade mutual fund and private equity managers that consumers will spend $500 billion per year on ski resort snowfall apps in 2030, guaranteed, or helping consumers prepare for a challenging future?
2. You translate the big words into English.
"Because OPEB promises represent a very significant liability for many state and local governments, it is critical that taxpayers, policy makers, bond analysts and others are equipped with enhanced information, which will enable them to better assess the related financial obligations and annual costs of providing OPEB," the Milliman analysts advise their firm's clients.
Of course, you know who else needs to be "equipped with enhanced information": the people who've been counting on the OPEB benefits.
And who, precisely, will be the real source of the "enhanced information" for the plan participants?
In many cases, that source of enhanced information may well be you.
