OPEB

OPEB stands for Other Post-Employment Benefits. These are benefits provided to retirees that are not pensions, most commonly health care coverage, but also life insurance and other post-employment benefits.

The term is widely used in public sector accounting in the United States, where governments at the state and local levels, school districts, and public universities typically provide OPEB to former employees.

Under Governmental Accounting Standards Board (GASB) guidance, governments recognize a net OPEB liability on the balance sheet and disclose information about funding status and required contributions. GASB 74/75, which updated earlier rules (GASB 43/45), requires actuarial valuations to determine the present value of future benefits (the actuarial accrued liability) and the funded status of the OPEB obligation.

Funding for OPEB can be pay-as-you-go or prefunded through irrevocable trusts or other dedicated accounts. Key assumptions in valuations include the discount rate, medical cost trends, retirement ages, and other demographic factors.

Because OPEB liabilities can be large and long term, they affect budgets, debt capacity, and credit ratings. Reform efforts often aim to reduce costs through changes to benefit formulas, increased employee or retiree contributions, and strengthened funding mechanisms.