Watertown school district to receive study on post-employment benefits

By Teresa Stowell of the Daily Times staff
Friday, January 9, 2009 12:30 PM CST

The Watertown Unified School District will soon get information back from a study that will help the district plan and pay for its future post employment benefits.

The Wisconsin Governmental Accounting Standards Board created a recommendation that would make government agencies, including school districts, account for its retirement benefits. The policy was created in 2004 and since that time school districts throughout the state have been hiring companies to calculate their future post employment benefits liability.

At the beginning of the summer, the Watertown school district hired Blackburn Actuarial of Florida to assess the district's financial liability for future post employment benefits. The district is paying Blackburn $7,700 to complete the study.

Doug Linse, district director of business services, said the firm has been analyzing the district's employment statistics as of July 1, 2008, by looking at all the groups that will receive benefits after retirement including teachers, administrators and others.

To receive post employment benefits in the Watertown school district a teacher must teach in the district for at least 15 years and be at least 55 years old when retiring. The district will pay post employment health insurance for the shorter of 10 years or until the retiree reaches Medicare eligibility age.

ADVERTISEMENT

Currently the district does a pay-as-you-go system for the health insurance of the district's retirees. The federal accounting board recommendation calls for a new method and recommends accounting for those future liabilities on the district's financial statements.

“For example a new teacher enters the district at age 40. Blackburn is actuarially determining the likelihood that the teacher will remain with the district for another 20 years and retire here,” Linse said. “Blackburn is determining what is going to be the approximate cost based on historical and projectable costs of post employment benefits for all of our employees and presenting that value to us to tell us how much we should put aside or fund to meet those obligations in the future.”

Linse said the government accounting recommendation has been discussed for a number of years. The standard has been implemented in three stages with schools with the largest amount of revenue having to implement the standard the earliest.

“This is something we've known about for a long, long time,” Linse said. “In the past, post employment benefits were recognized as a long-term obligation but it was never a necessity to reflect it on the balance sheet. Bigger school districts have already implemented the accounting standard. Watertown is in the third tier and by next school year the post employment benefit liability will be reflected on the budget balance sheet.”

Linse said Blackburn's study of the district's employees is expected to be complete and sent to the district within the next few months. Once the district has the study, the board of education will decide how the liability will be funded. Because the number of new teachers reaching retirement in the district will change continuously, Linse said a study is required to be conducted every two years.

“The bottom line is this accounting recommendation is something that will make public entities look more like private entities,” Linse said. “All private businesses already do this, so now all public organizations will have to as well.”

According to the federal accounting statement, accounting for the future post employment benefits liability will give school districts a better credit rating and a more favorable interest rate for borrowing.

“Although the liability has always been there, by accounting for it we will be showing that we've recognized it and we're reflecting it on our credit sheet,” Linse said. “It may have a negative impact on our balance sheet but when a credit rating company looks at it, we would likely get a discount for it because the district recognized its liability.”