U.S. accounting rules should recognize that employers usually have the ability to reduce or eliminate post-retirement health benefits, according to two committee leaders at the American Academy of Actuaries.
Jeffrey Petertil and Adam Reese, co-chairpeople of the Joint Committee on Retiree Health at the American Academy of Actuaries, Washington, have emphasized the tentative nature of retiree health benefits in a comment letter sent to the Financial Accounting Standards Board, Norwalk, Conn.
FASB has proposed a package of pension accounting reforms that could require employers to report their accumulated post-retirement health benefit obligations on their corporate balance sheets. Up till now, employers have reported that information in footnotes to their financial statements.
Actuaries and accountants use the acronym “OPEB,” for “other post-employment benefits,” to refer to obligations for retiree health benefits and related benefits.
Few companies set aside much cash to fund retiree health benefits, and “OPEB calculations” are extremely sensitive to actuarial assumptions and actuarial projection methods, Petertil and Reese write.
Companies already have narrowed or eliminated many retiree health plans, Petertil and Reese note.