Fitch Ratings weighs in on credit implications of GASB 45.(Governmental Accounting Standards Board's policy for post-employment retirement benefits)

A Fitch Ratings special report on GASB Statement No. 45 offers some important insights into how the rating agencies view the fiscal impacts of reporting the future costs of other post-employment retirement benefits. With required annual contributions for OPEB expected to be five to 10 times higher than current expenses, Fitch expects that governments will steadily increase annual contributions, make fundamental changes in their benefit plans, and otherwise find ways to ensure long-term fiscal stability.

"Fitch Ratings views GASB 45 as a positive step toward more fully illuminating governmental obligations to retirees, but acknowledges the inherent tension between allocating scarce resources toward critical government services today and meeting the funding requirements for retirement benefits that might not be due for decades," the report reads.

As governments near the effective dates for implementing GASB 45, they must be able to articulate a plan for funding OPEB liabilities. According to the report, Fitch's analysis will focus on understanding each issuer's liability and its plan for addressing the liability, as well as the soundness of the rationale behind the plan.