By Jeff Chang
Substantial confusion exists about whether the assets of an Internal Revenue Code section 115 trust created to fund pension or OPEB (retiree health) obligations may be used to offset the overall pension or OPEB liabilities that public employers are required to report under Government Accounting Standards Board Statements (Statement 68 for pension liabilities; Statement 75 for OPEB liabilities).
Statement 75 was issued in June 2015 as a replacement of GASB Statement 45 (issued in June 2004). GASB 45 became effective in phases between 2006 and 2008. GASB 45, and the guidance surrounding it, led many public agencies to believe that monies set aside in a 115 trust could be counted as an offset against OPEB liabilities on their financial statements. As a result, a number of these agencies established either a 115 trust or a section 501(c)(9) trust (a VEBA) for this purpose. Continue reading