No. 38433 (New Rule): Rule R277-118. LEA Post-employment Benefits Plans

(New Rule)

DAR File No.: 38433
Filed: 04/15/2014 03:27:44 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this new rule is to provide directives to local education agencies (LEAs) regarding post-employment benefit plans.

Summary of the rule or change:

This new rule provides definitions and directives on post-employment benefit plans including exceptions, funding of liability, compliance, and termination benefits.

State statutory or constitutional authorization for this rule:

• Subsection 53A-1-401(3)

Anticipated cost or savings to:

the state budget:

This new rule provides directives to LEAs regarding post-employment benefit plans which likely will not result in a cost or savings to the state.

local governments:

LEAs may have costs and/or savings associated with implementation of this rule. Because of many variables and choices LEAs can make with implementation or discontinuation of LEA plans, costs and/or savings are too speculative to determine at this time.

small businesses:

This new rule provides directives to LEAs regarding post-employment benefit plans which likely will not result in a cost or savings to small businesses.

persons other than small businesses, businesses, or local governmental entities:

This new rule provides directives to LEAs regarding post-employment benefit plans which likely will not result in a cost or savings to persons other than small businesses, businesses, or local government entities.

Compliance costs for affected persons:

There may be compliance costs to LEAs resulting from implementation of this rule. Because of many variables associated with implementation or discontinuation of LEA plans and decisions that LEAs can make, compliance costs are too speculative to determine at this time.

Comments by the department head on the fiscal impact the rule may have on businesses:

I have reviewed this rule and I believe that there is likely no fiscal impact on businesses.

Martell Menlove, State Superintendent

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Education
Administration
250 E 500 S
SALT LAKE CITY, UT 84111-3272

Direct questions regarding this rule to:

• Carol Lear at the above address, by phone at 801-538-7835, by FAX at 801-538-7768, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

06/02/2014

This rule may become effective on:

06/09/2014

Authorized by:

Carol Lear, Director, School Law and Legislation

RULE TEXT

R277. Education, Administration.

R277-118. LEA Post-employment Benefits Plans.

R277-118-1. Definitions.

A. "Board" means the Utah State Board of Education.

B. "GASB Statement 43" (or successor rule) means a Statement of the Governmental Accounting and Standards Boards that establishes uniform standards of financial reporting by state and local governmental entities for OPEB plans. This Statement provides standards for measurement, recognition, and display of the assets, liabilities, and, where applicable, net assets and changes in net assets of such funds and for related disclosures. GASB Statement 43 applies to financial reports of all state and local governmental entities, including public employee retirement systems.

C. "LEA" means a local education agency, including local school boards/public school districts, charter schools, and for purposes of this rule, the Utah Schools for the Deaf and the Blind.

D. "Other post-employment benefits (OPEB)" means benefits after retirement, other than pension benefits, provided over an extended period of time and may include:

(1) healthcare;

(2) dental care; and

(3) life insurance.

E. "Other post-employment benefits plan (OPEB plan)" means a plan approved by an LEA that provides post-employment benefits as identified in R277-118D to employees.

F. "Qualified actuary" means a statistician who determines the present effects of future contingent events; especially one who calculates insurance and pension rates on the basis of empirically based tables. An actuary shall have appropriate credentials or experience or both.

G. "Termination benefit plan" means benefit(s) (such as cash payments, health insurance supplements or bridge payments or sick leave payouts) offered to an employee as incentive(s) to retire or sever employment from an LEA voluntarily.

H. "Trust or a set aside fund balance," for purposes of this rule, means a legal trust established consistent with requirements of state law or a designation of a portion of the LEA's maintenance and operations (M and O) fund balances. Either a trust or an LEA designation of fund balance liability would be dedicated to supporting an LEA's outstanding post-employment benefits.

 

R277-118-2. Authority and Purpose.

A. This rule is authorized under Utah Constitution Article X, Section 3 which vests general control and supervision over public education in the Board, Section 53A-1-401(3) which allows the Board to adopt rules in accordance with its responsibilities, and Section 53A-17a-125 which appropriates funds to the Board to distribute to LEAs for employee retirement and social security payments.

B. The purpose of this rule is to direct LEAs not to add new employee benefits, not to lengthen existing employee benefits and not to offer employee benefit plans to new employees unless LEAs maintain adequate ongoing assets to fund the plans. The rule provides required timelines for meeting the provisions of this rule.

 

R277-118-3. Other Post-Employment Benefit Plans; Exceptions; Funding of Liability; Compliance.

A. LEAs shall not add enhanced benefits nor extend time periods for benefits to employees currently enrolled in and not enroll new members in post-retirement benefit plans.

B. Exceptions to R277-118-3A

(1) If an LEA has and desires to continue an outstanding OPEB liability for post-employment benefit plans, the LEA shall comply with GASB Statement 43, Paragraph 24 in the LEA's computation of its liability by a qualified actuary.

(2) If an LEA has an existing OPEB plan and the plan is fully funded consistent with the provisions of GASB Statement 43, an LEA may make the plan open to new employees so long as it remains fully funded.

(3) If an LEA's OPEB plan becomes less than fully funded at any time and the LEA has not provided the documentation for an exception under R277-118-B(2), the OPEB plan shall be closed to eligibility to new employees and shall lose its USOE approved status.

C. Funding of liability - If an LEA has an OPEB plan:

(1) the LEA must compute an annual required contribution (ARC) as provided in GASB Statement 43;

(2) the LEA shall contribute annually the amount of the ARC in a trust account or annually set aside as a designated fund balance the equivalent amount of the ARC; and

(3) have a plan consistent with the timeline of GASB Statement 43, Paragraph 24, to ensure compliance with this rule.

D. Compliance

(1) LEAs with OPEB plans shall comply with all outlined GASB Statement 43 financial reporting requirements.

(2) If, due to adverse economic conditions, an LEA fails to meet the ARC requirement, the LEA shall provide to the Board a reasonable funding plan to bring the LEA into compliance with the actuarial timeline required in GASB Statement 43 by the end of the second year following the year of inadequate funding.

 

R277-118-4. Termination Benefits.

An LEA may offer retirement or severance benefits in addition to retirement/severance benefits currently in place for one year only if the LEA has adequate funds to fully pay out the benefits in the fiscal year in which the benefits are budgeted.

 

KEY: post-retirement benefits

Date of Enactment or Last Substantive Amendment: 2014

Authorizing, and Implemented or Interpreted Law: Art X Sec 3; 53A-1-401(3); 53A-17a-125

 

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