What are GASB 43 and 45?

In 2004, the Government Accounting Standards Board (GASB) finalized two new accounting standards, GASB 43 and 45, for public sector entities. Because of this, governments must report costs that pertain to post-employment benefits other than pensions, known as OPEB (Other Post-Employment Benefits). These GASB standards require that governmental employers report liabilities that are accrued in OPEB plans over the service time of employees, rather than as the current year’s cash outlay, as most governments previously reported. 

In the past, government employers would simply account for OPEB benefits on a “pay-as-you-go” basis when claims were actually paid.  The new accrual accounting approach may create significantly higher annual accounting expenses than the previous cash basis. GASB 43 and 45 serves the same purpose as FAS statements 106 and 112 for private and corporate employers, which have been in effect since the early 1990s.  The accrual method is similar to GASB 25 and 27 for pension-related benefits.

Guide to GASB 43 and 45 PDF

Who is affected by GASB 43 and 45?

Any public entity that follows the GASB accounting standards will be affected, including:

• States
• Counties
• Cities
• Towns and villages
• School boards
• Public colleges and universities

What is the difference between GASB 43 and GASB 45?

GASB 43 covers financial reporting of OPEB plans.  GASB 45 covers both financial reporting and accounting for government employers who sponsor OPEB plans. Often times, GASB 45 rules will apply.

Are FAS 106 and GASB 45 the same?

Financial Accounting Standards (FAS) 106 and GASB 45 are similar in that they both require accrual accounting for OPEB benefits; however, there are important differences:

• GASB 45 covers all post-employment (retirement, disability, survivor, withdrawal) OPEB benefits, while FAS 106 only covers post-retirement benefits.  In a way, GASB 43 and GASB 45 combine FAS 106 (retirement) and FAS 112 (disability, survivor, withdrawal).
• GASB 45 allows six actuarial cost methods, while FAS allows only one.
• GASB 45 focuses on funding obligations while FAS tends to focus on financial comparison between employers.
• GASB 45 ties discount rate assumption to the long-term expected rate of return on the assets being used to pay out the benefits (could be rate on general revenues if no separate trust exists).  FAS ties discount rate assumption to rate on long-term, high quality, fixed income investments, such as Moody’s AA bonds.