Local governments, school districts, and authorities that provide health insurance and other non-pension post-employment benefits (OPEB) to retirees are required by governmental accounting standards to quantify and report the future costs of benefits in their financial statements. In order to avoid reporting potentially large and increasing liabilities, and to demonstrate strong financial management, well-run political subdivisions in Virginia generally choose to fund their OPEB liabilities as they accrue. For those that fund OPEB, the VACo/VML Pooled OPEB Trust is, hands down, Virginia’s most popular investment vehicle.

The requirement to report OPEB liabilities within government financial statements began with Governmental Accounting Standards Board (GASB) Statement 45. This Statement, which was phased-in during fiscal years 2008-2010, provided for the gradual recognition of existing OPEB liabilities over an extended period of up to 30 years. More recently, however, GASB 75 was issued, replacing the gradual recognition of liabilities with a requirement that the entire unfunded liability must be reported beginning in fiscal year 2018. Moreover, the net OPEB liability must be reported on the face of the financial statements. The new rule has potentially significant ramifications for the calculation of a government’s “Net Position.”

Since ignoring OPEB liabilities can be an indication of financial weakness, the vast majority of highly-rated governments in Virginia opt to fund their liabilities as they accrue. Governments also benefit because invested funds generate earnings that can help reduce the long-term cost of OPEB by as much as 40% or more.

The VACo/VML Trust offers a streamlined and cost-effective investment vehicle specifically designed for OPEB. As the only pooled OPEB trust fund in Virginia, the VACo/VML Trust offers participants professional investment management on par with the services provided by major pension funds. The VACo/VML Pooled OPEB Trust is also the simplest and lowest cost option available — and you avoid the expense and complexity of forming a separately-managed trust fund.

With invested assets of more than $1.5 billion, the VACo/VML Pooled Trust is among the largest of its kind in the nation. Investment decisions are made by a Board of Trustees composed of local officials elected at an Annual Meeting of participants. The investment consultant is Asset Consulting Group based in St. Louis, Missouri.

Under Governmental Accounting Standards Board Statement 75, all governmental bodies are required to report their OPEB liabilities on their financial statements.  Local governments accrue OPEB liabilities whether they cover the cost of non-pension benefits for retirees (typically health insurance) or merely allow retirees to participate in benefit plans for active employees.

For most local governments, the first step in quantifying your OPEB liability is to procure an actuarial study. An actuary calculates your OPEB liability using benefit plan, demographic, and other statistical data. As the program administrator for the VACo/VML Pooled OPEB Trust – the leading OPEB investment vehicle in Virginia – we can help your locality obtain high quality and affordable actuarial services. Our partner is Milliman Inc., a global firm of 1,000 consultants and actuaries serving a wide range of clients, such as local governments and school divisions.

VML/VACo Finance has established a discounted fee schedule and will provide a no-obligation fee quote to local governments upon request.

For local governments with fewer than 100 plan members, we also offer GASB help, a self-service online tool provided by Milliman specifically for small local governments.