OPEB Governance and Administration

Entities that sponsor OPEB plans often administer the benefits. Alternatively, if a trust has been established to fund a plan, the trust’s governing body might be responsible for administering the plan. Administration entails interpreting plan provisions, maintaining accurate and up-to-date data (e.g., demographic), and ensuring that benefits are provided to retirees and their dependents. Depending on the administrative structure, additional responsibilities can include periodic actuarial valuations, plan changes, actuarial valuations of proposed plan changes, and securing insurance providers. The scope of these responsibilities might be greater if the plan sponsor has also established a trust to fund its OPEB liabilities.

• Clearly delineate the governance responsibilities of fiduciaries and plan administrators in a comprehensive manual and the appropriate plan and trust documents.
• Keep plan documents current and ensure that they reflect the substantive plan (see Governmental Accounting Standards Board Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions). Administrative decisions and interpretations that accumulate over time should be formally documented and incorporated in any plan summaries and, when appropriate, in the plan document; doing so will help avoid legal issues regarding variations between the substantive plan and the official plan documents.
• Provide participants with a summary plan description, a document that describes plan benefits, including what benefits will be received and the vesting period, and the plan’s significant features. Conduct periodic educational sessions to review the summary plan description and answer participants’ questions. Plan summaries and other documents can be construed as legally binding, so the plan sponsor, governing body, legal counsel, and administrative staff should review them carefully to avoid conferring rights and benefits that the plan sponsor did not intend and that are not included in the official plan documents.
• Maintain all participant and beneficiary records necessary for administration of the plan. These include:
  • Participant and beneficiary names.
    • Demographic information on each participant and beneficiary.
    • Dates such as hire dates (for computing vesting), and birth dates (for determining Medicare eligibility).
• Maintain any information necessary for legal and tax compliance (e.g., labor contracts, Internal Revenue Service (IRS) determination letters).
• Develop and maintain a comprehensive policy and procedures manual, and distribute updates in a timely manner. The manual should include:
  • Current plan documents, IRS determinations, and administrative interpretations and decisions.
  • Policies, guidelines, and procedures regarding governance; administration; accounting, budgeting and financial reporting; and legal compliance and reporting.
  • Policies and procedures for the professional and technical training of fiduciaries and administrative management and staff, particularly in the areas of governance and fiduciary duties and responsibilities; plan compliance and legal issues; and best practices in OPEB plan administration and all relevant areas of responsibility.
• Hire an actuary to perform periodic valuations and to determine the financial impact of any proposed changes in the plan or trust funding. The responsibility for appointing an actuary can rest with the plan sponsor, trust governing body, or the plan administrator. For those employers that issue periodic studies, experience studies, and actuarial audits, GFOA recommends an interim assessment of the validity of the assumptions.
• Commit to the obligation to fund the Actuarially Determined Contribution in full every year, based on the plan funding policy.
• Implement procedures to keep administrative costs as low as possible. For example:
  • Periodically review contractual services and purchases to make sure the product and services being purchased are priced appropriately.
  • Periodically conduct an eligibility audit and death audit of plan participants.
  • Consider combining administrative activities with other departments or entities to lower administrative costs and review this possibility periodically.
• Implement training and procedures to protect the privacy of participant data.
• Develop, implement, and regularly test procedures to continue providing administrative services in the event of service disruption events.
• In some cases, the absence of statutory requirements may allow for some flexibility in how the plan’s governing body is set up or organized.  In such circumstances, careful consideration should be given to:
  • The structure of the plan’s governing body, such as whether the plan’s governing body is separate from the government’s governing body, the experience needed or desired from members of the plan’s governing body, and the size of the plan’s governing body.
  • Rules expected of members of the governing body, such as ethics requirements, fiduciary duties, and lobbying rules.