employee benefits

Did you know that the federal government will provide a 28 percent retiree drug subsidy for qualifying employers who provide prescription drug coverage for their former employees and dependents? The New Hampshire Local Government Center (LGC) estimates that, on average, that subsidy may range from $550 to $660 per person.

By Barbara Reid

The following is a summary of the GASB 45 session presented at the LGC annual conference on November 8, 2007.

After implementing the new financial reporting model prescribed in Statement 34 by the Government Accounting Standards Board (GASB), many municipalities and school districts thought they were home-free in terms of financial statement changes. However, one area not addressed at the time of GASB Statement 34 implementation was the issue of reporting certain employment benefits other than pensions. In 2004, the GASB issued Statement 45 Accounting and Financial Reporting for Post-employment Benefits Other Than Pensions, requiring that these benefits be reported on an accrual basis.

The New Hampshire Retirement System (NHRS) program of providing post-retirement health insurance benefits is on the edge of a financial and public policy cliff that nothing short of $408,300,000 can prevent it from going over into the abyss. That is the projected cost of saving the retiree health benefit for a fixed number of currently qualified retirees and employees beyond 2012 or so, depending on the type of retiree/employee.

Section 125 of the Internal Revenue Code, initially implemented by Congress in 1978, allows employers to offer employees the choice between cash compensation and certain nontaxable (qualified) benefits. Premium contributions toward a qualified benefit are excludable from an employee’s gross income, thus allowing these expenses to be deducted prior to the calculation of Social Security or federal income tax responsibilities. Healthcare, vision care, dental care, group life and long-term disability coverage are considered qualified benefits for these purposes.

By Barbara Reid