Provide benefits other than
a pension to your retirees?
New accounting standards will require changes
in your financial statements
League offers actuarial services to help cities and towns comply with new GASB standards and to determine costs of LEO separation allowance
If your city or town offers any benefits other than pension to your retirees, you must comply with two new accounting standards from the Government Accounting Standards Board (GASB) - GASB rules 43 and 45. These standards will require you to determine the costs of retiree benefits (other than pensions) and show them as expenses on your financial statements.
Essentially, the new standards mean that you will handle benefits for retirees in the same manner as you now handle pensions for retirees. Other than pension, the most common benefit for retirees is health insurance. Additional benefits include dental, vision, life, disability, or long-term care.
The new standards do not require you to advance fund these retirement benefits -- rather than pay-as-you-go -- but not doing so may have a negative effect on your audit or credit/bond rating. Advance funding means that you fund the retirement benefits during the working years of the employee rather than just paying out the benefit after he or she retires.
The new standards are being phased in, with the largest cities having to comply first. A schedule for compliance is shown below.
If you offer benefits to retirees, we recommend that you begin work on compliance with these new GASB rules. Although there are no specific penalties for failing to meet the standards, not complying will have a serious negative effect on your municipality's annual audit and your credit and bond ratings.
To help you comply with these rules, the League has negotiated for the services of Cavanaugh Macdonald, an actuarial consulting firm based in the Atlanta suburbs. This firm has agreed to conduct the necessary actuarial and valuation work necessary to comply with the new GASB rules at costs that are significantly lower than if a city or town contracted with a firm individually. In addition, we have negotiated a group rate with Cavanaugh Macdonald for actuarial services necessary to determine the special separation allowance for law enforcement officers.
To give you some idea of how much these services will cost, some estimates are shown at the bottom of this page. Pricing is based on the size of your budget, number of employees, whether your municipality is a member of the local government retirement system, and whether you are a member of the League's MIT of NC health benefits plan.
We are offering these discounted services in cooperation with the N.C. Association of County Commissioners. We selected Cavanaugh Macdonald after completing a careful selection process and receiving proposals from a number of firms. We have chosen a well-qualified firm whose staff has significant experience working with North Carolina local governments.
Use of Cavanaugh Macdonald's services is, of course, entirely voluntary. You may choose to work with another firm or develop the information on your own.
Attached you will find a general description of the work Cavanaugh Macdonald Consulting will do on the special separation allowance and the GASB rules on retirement benefits other than pension.
Cavanaugh Macdonald will be sending out an application form by a separate notice. If you are interested in using the services of Cavanaugh Macdonald, please complete this form.
To contact Cavanaugh Macdonald Consulting, please call Todd Green at 678-388-1705 or ToddG@CavMacConsulting.com
Effective dates for GASB 43
• Phase I - Governments with total annual revenues of $100 million or more:
June 30, 2007
• Phase II - Governments with total annual revenues of more than $10 million but less than $100 million: June 30 , 2008
• Phase III - Governments with total annual revenues of less than $10 million:
June 30, 2009.Effective dates for gasb 45
• Phase I - Governments with total annual revenues of $100 million or more:
June 30, 2008
• Phase II - Governments with total annual revenues of more than $10 million but less than $100 million: June 30, 2009
• Phase III - Governments with total annual revenues of less than $10 million:
June 30, 2010.
The League encourages it members to conduct their actuarial studies at least one to two fiscal years in advance of the effective dates in order to meet the compliance deadlines and to consider any budgetary actions to respond to respond to the results of the study.
(Please note that your actual costs will be determined by your annual revenues, number of employees, membership in the retirement system, membership in MIT of NC and other factors. The estimates given below are for illustration purposes only.
• Town with 10 employees $1,290
• Town with 25 employees $2,100
• Town with 200 employees $3,600
• Town with 800 employees $5,050 (not in MIT )
* participating in MIT of NC( NCLM Risk Management Services insurance pool)
- GASB Statements on retirement benefits other than pensions (pdf)
- GASB Statements 43 & 45 (pdf)
Special Separation allowance for Law Enforcement Officers (pdf)
To contact Cavanaugh Macdonald Consulting, please call Todd Green at 678-388-1705 or ToddG@CavMacConsulting.com
