May 25, 2006
“Member” For Purposes Of The Alternative Measurement Method Under GASB 45 May Be Broader Then You Think
Calculations of GASB 45 liability are required to be made based upon actuarial assumptions applicable to the particular plan. GASB 45 provides limited relief to employers with fewer than one hundred (100) plan members. Namely, the employer may use the alternative measurement method (AMM) for purposes of calculating GASB 45 liability. At least in theory, the AMM does not require the use of an actuary. Under the AMM, broad assumptions regarding various factors may be used instead of having an actuarial evaluation performed.
A plan’s membership is the sum of persons covered under the plan as follows:
- Employees in active service; and
- Terminated employees who have accumulated benefits but are not yet receiving them; and
- Retired employees and beneficiaries currently receiving benefits.
See Paragraph 11 of Statement No. 45 of the Governmental Accounting Standards Board (June 2004).
Please note, the critical number is not the number of retirees. An employer with fifty (50), twenty-three (23), or even no retirees may nevertheless have one hundred (100) or more members for purposes of the AMM simplified reporting threshold.
See Paragraphs 37 – 39 and 159 – 169 of the Guide to Implementation of GASB Statements on 43 and 45 on Other Postemployment Benefits: Questions and Answers (GOA43/45) (Implementation Guide) for more information regarding counting plan members and the AMM implementation.
If you have any questions, please feel free to contact us.