GASB’s accounting and financial reporting requirements for Other Post-Employment Benefits (OPEB) are set primarily by Statement No. 75 for employers and Statement No. 74 for the plan itself. Together they require state and local governments to measure retiree healthcare and similar non-pension promises on an accrual basis, report the Net OPEB Liability directly on the government-wide Statement of Net Position, and back that number with prescribed note disclosures and a schedule of trend data in Required Supplementary Information. The standard took effect for fiscal years beginning after June 15, 2017, and replaced the older approach that kept most of the obligation off the balance sheet.
What OPEB Covers
OPEB is the category of non-pension benefits a government promises to provide after an employee retires. Retiree healthcare is by far the largest component. The category also includes life insurance, dental and vision coverage, and long-term care subsidies. The common thread is that the promise is future services or premium support rather than a fixed monthly annuity.
The obligation builds up during each employee’s working years. A promise of retiree healthcare is being earned with every year of service, even though most of the actual spending is decades away. Measuring it requires actuaries to project medical costs, estimate retiree longevity, and account for workforce turnover.
One boundary catches governments that assume they have no OPEB at all: the implicit rate subsidy. If retirees remain in the same health insurance pool as active employees, retirees pay a blended premium that is lower than their true expected cost. The difference is subsidized by active employees’ premiums, and it counts as OPEB even when retirees pay 100 percent of that blended premium themselves. Governments that had never written a check for retiree healthcare discovered a reportable liability solely because of this arrangement.
How the Net OPEB Liability Is Measured
The Net OPEB Liability (NOL) equals the Total OPEB Liability (TOL) minus the OPEB plan’s fiduciary net position. It is the gap between what the government owes for future retiree benefits and whatever assets sit in a qualifying trust to pay them.
The TOL is the present value of all projected future benefit payments attributable to employees’ past service. GASB 75 requires the entry age actuarial cost method, which spreads each employee’s projected benefits as a level percentage of pay from the first day of service through exit from active employment. The fiduciary net position is the fair value of assets held in a qualifying trust dedicated to paying OPEB. Without such a trust, fiduciary net position is zero and the NOL equals the full TOL.
An actuarial valuation must be performed at least every two years, though more frequent valuations are encouraged. Governments with fewer than 100 plan members, active and inactive combined, may use a simplified alternative measurement method instead of a full actuarial valuation.
The Discount Rate
No single assumption moves the NOL more than the discount rate. GASB 75 uses a blended approach. Projected benefit payments are discounted using the long-term expected rate of return on plan investments to the extent that plan assets are projected to cover those payments, and a tax-exempt, high-quality municipal bond rate for any portion the assets are not projected to cover. A well-funded trust with a diversified portfolio can use a higher rate, which shrinks the reported liability. An unfunded plan must discount the entire obligation at the lower municipal bond rate and reports a much larger number for the same benefit promises.
Other Key Assumptions
The healthcare cost trend rate projects how fast medical costs will rise. Actuaries typically assume a higher near-term rate that declines to a long-term ultimate rate over several decades. Small changes here can swing the TOL by millions of dollars for a mid-sized government. Mortality tables and turnover assumptions also feed the calculation. Because the NOL is sensitive to all of these inputs, GASB 75 requires governments to disclose how the number would change if key assumptions moved.
Plan Types and Reporting Differences
GASB 75 recognizes three categories of defined benefit OPEB plans, and reporting differs for each.
- Single-employer plans. One government provides OPEB to its own employees, and the employer recognizes the full NOL, related deferred inflows and outflows, and OPEB expense on its own statements.
- Agent multiple-employer plans. Several governments pool assets for investment but keep separate accounts, with each employer’s assets legally available only for its own employees’ benefits. Each agent employer reports its individual NOL the same way a single-employer plan would.
- Cost-sharing multiple-employer plans. Multiple governments pool both obligations and assets, and any employer’s assets can pay any employer’s benefits. Each participating employer recognizes its proportionate share of the collective NOL, determined on a basis consistent with how contributions are calculated.
The distinction matters most for cost-sharing plans, where a government’s reported liability depends on its share of the pool rather than a standalone actuarial calculation. Year-to-year changes in that proportion generate deferred inflows or outflows that amortize into expense over time.
What Appears on the Financial Statements
The NOL is reported as a non-current liability on the government-wide Statement of Net Position. For governments with significant OPEB promises, this one line substantially reduces reported net position and can push it into negative territory.
Deferred Inflows and Deferred Outflows
GASB 75 does not run every fluctuation through the current year’s expense. Differences between projected and actual investment earnings on plan assets are amortized into OPEB expense over a closed five-year period. Changes in actuarial assumptions and differences between expected and actual demographic experience are amortized over a closed period equal to the average expected remaining service lives of all plan members, active and inactive. These deferrals dampen the effect of a single bad investment year or an assumption update, but the costs do flow through eventually.
Annual OPEB Expense
OPEB expense under GASB 75 is not the amount contributed. It is an accrual figure whose components include service cost, interest on the TOL, and immediate recognition of any benefit changes, plus the amortization charges from the deferred items above. Reported expense can be substantially higher or lower than the government’s actual cash contributions in any given year.
Note Disclosures and Required Supplementary Information
Governments must include detailed narrative disclosures in the notes to the financial statements. These describe the plan, the employees covered, the benefits provided, and the significant actuarial assumptions and methods used to measure the TOL. GASB 75 specifically requires sensitivity disclosures showing the NOL calculated with the discount rate and the healthcare cost trend rate each one percentage point higher and one percentage point lower than assumed.
Beyond the notes, GASB 75 requires schedules in Required Supplementary Information. Single and agent employers must present, for each of the 10 most recent fiscal years as data becomes available:
- A Schedule of Changes in Net OPEB Liability detailing the components that caused the NOL to move, including service cost, interest, benefit payments, assumption changes, and investment performance.
- The plan’s fiduciary net position as a percentage of the TOL, and the NOL as a percentage of covered-employee payroll.
- A Schedule of Contributions, where an actuarially determined contribution (ADC) is calculated, comparing actual contributions to the ADC along with related ratios.
The 10-year presentation builds prospectively. Governments that adopted GASB 75 when it first took effect are now approaching a full decade of trend data available to bond analysts, taxpayers, and oversight bodies.
GASB 74 on the Plan Side
GASB 75 governs the employer. GASB Statement No. 74 governs the financial reporting of the OPEB plan itself when it is administered through a qualifying trust. Under GASB 74, the plan produces a statement of fiduciary net position and a statement of changes in fiduciary net position, along with notes disclosing investment policies, concentrations of investments exceeding 5 percent of fiduciary net position, and the annual money-weighted rate of return. The plan’s own RSI must include a 10-year schedule of investment returns and, for single-employer and cost-sharing plans, schedules of changes in the NOL and contribution information. A full picture of a government’s OPEB situation requires reading both the employer’s GASB 75 disclosures and the plan’s GASB 74 report.
Trusts and How Funding Interacts With Reporting
A qualifying OPEB trust is the primary tool for managing the liability proactively rather than paying claims from the general fund each year. To qualify under GASB 75, the trust must meet three criteria: contributions are irrevocable, assets are dedicated exclusively to providing OPEB to plan members, and assets are legally protected from creditors of the employer, the plan administrator, and the plan members.
The reporting incentive is built into the discount rate structure. A funded plan invested in a diversified portfolio may discount using the higher expected long-term rate of return, reducing the reported liability. An unfunded plan uses the lower municipal bond rate on the entire obligation and reports a larger NOL for the same set of promises. Governments that fund typically aim to contribute at least the ADC each year. Falling short is not a legal violation in most cases, but the unfunded liability grows, future costs compound, and the shortfall is visible in the Schedule of Contributions.
Why the Reporting Matters
With the NOL now on the face of the balance sheet, credit rating agencies weigh it directly. S&P increased the weight of its debt and liabilities factor to 20 percent of the overall municipal rating model in late 2024, giving pension and OPEB obligations more influence on rating outcomes than before. Aggregate unfunded OPEB liabilities across state governments alone exceeded $550 billion as of recent reporting periods, and many individual plans remain funded at well under 20 percent of their total obligation. The accounting standards don’t dictate a funding strategy. They make the consequences of not having one visible to anyone reading the statements.