The Governmental Accounting Standards Board has published a proposed staff Technical Bulletin aimed at clarifying financial reporting of subsidy payments received by a governmental employer or plan from the federal government under Medicare Part D. [Proposed GASB Technical Bulletin No. 2006-a, ©2006 GASB; News Release] As previously touched on here at BeneBlog, GASB does not view Medicare Part D subsidy payments for prescription drug coverage as connoting transfer to the federal government of any portion of a governmental employer’s obligation for postretirement health care coverage. Proposed guidance under the technical bulletin -
- Employer Accounting for Subsidy Payment – A payment from the federal government is a voluntary nonexchange transaction that should be recognized as an asset and revenue under the requirements of GASB 33.
- Accounting for Subsidy Payment to Plan – A Medicare Part D subsidy payment to a governmental OPEB plan is treated as an on-behalf payment for fringe benefits under GASB 24. The employer should disclose and recognize revenue and expense or expenditures for the payment. No reduction should be made for the subsidies in determination of OPEB expense or expenditures.
- Effect on OPEB Accounting – A governmental employer should determine actuarial accrued liabilities, the annual required contribution, and OPEB cost without reduction for the subsidy payments.
The technical bulletin would be effective for financial statements issued after June 30, 2006, except that guidance pertaining to GASB 43 and 45 would apply concurrent with implementation of those standards. Comments on the proposed technical bulletin should be submitted to GASB by April 17, 2006.