If you have been following this series, you will recall that we are looking at a series of questions intended to assist in making decisions about funding OPEB plans. This week we consider the question: What other funding considerations should be kept in mind?
For private employers funding the OPEB plan through a VEBA, there are deductibility rules to follow.
For public employers, there might be state laws requiring a contribution equal to the service cost (cost of additional liability earned by active employees) and/or an amortization (payment) of the unfunded liability.
Other laws such as Public Act 202 in the State of Michigan require that at minimum, the service cost (cost of additional liability) earned by active employees hired after June 30, 2018 be contributed in addition to paying current retiree benefits from general operating funds.
The plan’s actuary can assist in navigating any funding requirements and consult on devising a benefit payment strategy that recognizes the cash flow and other budgeting considerations of the plan sponsor.
Read the rest of the OPEB series:
- Part 1: Contributions To And Benefit Payments From Retiree Healthcare Plan Assets
- Part 2: Contributions to and benefit payments from Retiree Healthcare Plan Assets – What does it mean that a plan is 100% funded?
- Part 3: Contributions to and benefit payments from Retiree Healthcare Plan Assets – If the recommended contribution is $-0-, may benefits be paid from the OPEB plan trust?
