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BACKGROUND <br />Actuarial consulting services will be needed to implement two new accounting <br />standards. The new accounting rules have been issued by the Governmental <br />Accounting Standards Board (GASB) and are Statement No. 43, Financial Reporting for <br />Postemployment Benefit Plans Other Than Pension Plans, and Statement No. 45, <br />Accounting and Financial Reporting by Employers for Postemployment Benefits Other <br />Than Pensions. The implementation date for GASB #43 is June 2008, and June 2009 <br />for GASB #45. GASB #43 covers the financial reporting for assets accumulated in a <br />trust for the purpose of paying the retiree health benefits. GASB #45 covers the <br />financial reporting for the employer liability and annual required contribution to the trust. <br />GASB #43 &GASB #45 apply to all public employers that offer post employment <br />benefits including states, cities, counties, state universities and public hospitals. The <br />basic premise of the new accounting rules is to measure and report the long-term costs <br />of non-pension retiree benefits, with the idea that these benefits are a form of employee <br />compensation that should be recognized as an expense as the employee earns the <br />benefit, which is the way pension benefits are handled. GASB #45 does not require that <br />the actuarial liability be funded. However, it does require that the total liability be <br />disclosed and reported in the annual financial statements. It also requires that an <br />annual amount be funded that will retire the liability over time, or that a liability be <br />reported for any unpaid portion of the annual required contribution. <br />DISCUSSION <br />Due to demographic and economic forces at work such as the increasing cost of health <br />care, earlier retirements and people living longer, the cost of providing retiree health <br />care benefits will become an increased item in the annual budget, and is the reason that <br />developing a long term funding strategy is important. <br />Submitted by: <br />,y r <br />~. <br />av~Culver <br />Director of Finance <br />Attachments: <br />1. Amendment 3 <br />2. Original Agreement <br />Approv by: <br />Ne so Fialho <br />City Manager <br />Page 2 of 2 <br />