COGs Can Solve Members' OPEB
COGs Can Solve Members' OPEB
Posted: 02/25/08
If you haven't heard of GASB 45 yet, you will soon. The new accounting statement requires that governmental employers declare Other Post Employment Benefits (OPEB) on their balance sheets, much like they do pensions. Governments must either fund these liabilities or face credit degradation.
OPEB is causing havoc with budgets as local governments struggle to figure out how to fund their overwhelming annual contributions. The Governmental Accountability Office estimates that public agencies should contribute an additional 3 percent of payroll over what they presently contribute to properly fund their OPEB promises.
COGs can help reduce their members' liabilities and add dollars back into their budgets thanks to a new program offered by NARC in conjunction with Invest by Design. Each COG can design its own private-label program using Invest by Design's scoring, weighting, and ranking expertise.
And, if your organization has vetted actuaries to help your members calculate their OPEB liabilities, Invest by Design can help their selected actuary support the use of a higher discount rate. This will reduce annual contributions. As a rule of thumb, for each additional percent of investment return, members can reduce annual OPEB contributions by between 13 – 20%. In addition, by pooling resources in these plans, governments can avail themselves of economies of scale that will save them tens of thousands of dollars in set-up costs, provide access to institutional investments, and reduce maintenance costs. That, in turn, will lead to a lower impact on budgets. Invest by Design also does not sell investments and has no conflict of interest in finding the best priced options for your plan.