Fund 73 OPEB Update October 2013 - Wisconsin Department …



Date: October 14, 2013

To: Districts using Fund 73 for OPEB

From:  Michele Tessner

Subject: Fund 73 OPEB trust updates

This document will provide guidance for districts using a Fund 73 OPEB trust.

Updated documents on the Benefit Trust Fund site include:

• Updated Sample of Activity Workbook with a new calculation for the implicit rate subsidy

• Updated Excel worksheet (data as of 10/8/13) to determine special education categorical aid eligibility

Updated Guidance:

Implicit Rate Subsidy Calculation - Sample of Activity Updated

There has been a change to the way the implicit rate subsidy is calculated. Districts should use the updated Sample of Activity to calculate the implicit rate subsidy for FY14. The update is that the implicit rate subsidy factor or percentage is applied to both retiree paid benefits and district funded trust expenditures, and also to both health insurance premiums and long term care premiums. The new Sample of Activity should be used to calculate the implicit rate subsidy, and can also be used as a guide to determine the amount of the contribution for benefits valued in the actuarial study and the related accounting entries.

If a retiree pays the insurance company directly for their portion of the premium and does not remit that amount to the trust or district, the district should still include the amount the retiree paid directly to the insurance company in the box for retiree paid insurance on Exhibit A of the Sample of Activity. The retiree paid amount needs to be included in the calculation of the implicit rate subsidy.

Implicit Rate Subsidy Expenditure in Fund 73

Districts should account for the implicit rate subsidy payment from the trust to the district using object 994. Object 994 was recommended for this expenditure in fiscal year 2012-13, but is required to be used for fiscal year 2013-14. In most cases, if a district maintains the retirees on their health insurance plan, the trust is required to pay the district back for the implicit rate subsidy, which lowers active employee health care costs. The implicit rate subsidy payback may not apply to self-funded districts or those on the Wisconsin Public Employer Group Health Insurance plan through the WI Employee Trust Fund (ETF), which is community rated.

Special Education Categorical Aid Eligibility Worksheet

The Special Education Categorical Aid Eligibility Worksheet has been updated for FY14 and includes preliminary FY13 data as of 10/8/13. If your district makes changes to the FY13 PI-1505 Annual Report relating to OPEB, the district should make those same changes to the spreadsheet to make sure eligibility is accurate.

Fund 73 Fair Market Value at the End of the Year

Unrealized gains and losses are typically not recorded for DPI purposes. The current WUFAR guidance does not allow unrealized gains and losses in any fund. Starting with the fiscal year ending June 30, 2014, both realized and unrealized activity should be accounted for in Fund 73. The investment balance in the PI-1505 should reflect the market value of the investment. In our fall WUFAR update dated October 15, 2013, Source 957 was added for Unrealized Gains on Investments and Object 998 for Unrealized Losses on Investments. The new source and object are only allowed in Fund 73. Again, as is the current practice, no other funds will record unrealized gains or losses for DPI purposes.

Accounting for Contribution and Implicit Rate Subsidy when there are no active employee plan members

For districts that use the Fund 73 OPEB trust to pay retiree health or long-term care premiums for retirees that remain on the districts health or long-term care insurance, but no longer have any active employee plan members, the following treatment should be followed:

Contribution to the Trust when no active employee plan members – The entire contribution will always be coded to function 292000 and object 218. The district may choose to charge Fund 10 for the entire amount or they may choose to allocate it to the funds where the retirees worked while active employees. The method chosen should remain consistent from year to year.

Implicit Rate Subsidy Payback when no active employee plan members – The implicit rate subsidy should be allocated as a credit to ALL active employees who receive healthcare. This means all district employees who receive health insurance will be credited a portion of the implicit rate subsidy and it will directly lower the exact account charged for all employee’s health insurance.

Please contact Michele Tessner at (608) 267-9218 or michele.tessner@dpi. with any questions regarding this information.

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