NEW YORK–(BUSINESS WIRE)–As the deadline for implementation of Governmental Accounting Standards
Board Statement No. 45 (GASB 45) by larger governmental entities nears,
Fitch Ratings has further developed its thinking on the credit
implications for state and local governments of providing long-term
funding for other post-employment benefits (OPEB). In Fitch’s special
report titled ‘Old Promises, Emerging Bills: Considering OPEB in Public
Finance Ratings’ Fitch focuses on how the various approaches to managing
and funding the liability will affect its credit analysis, rather than
on meeting the reporting deadlines set forth by GASB 45, as Fitch
expects such compliance from the issuers it rates. It is Fitch’s opinion
that failure to comply with this regulation will be considered a weak
management practice.
In conjunction with the report, Fitch will host a teleconference to
discuss the key highlights regarding the impact of OPEB on rating
analysis and OPEB liability challenges and approaches on Monday, March
26 at 1 p.m. EDT. The call will be hosted by Amy Laskey, Managing
Director and Richard Raphael, Executive Managing Director in Fitch’s
Public Finance Group. The full report is currently available on Fitch’s
web site at www.fitchratings.com.
‘As GASB 45 approaches, we felt it important to follow up on our June
2005 report: The Not So Golden Years (Credit Implications of GASB 45)
and to more specifically discuss how we will consider governments’ plans
to address OPEB liabilities in our bond rating process over time,’ said
Amy Laskey. ‘While OPEB liabilities aren’t new, GASB 45’s reporting
requirements provide governments with a framework for quantifying them
and we expect that compliance with this standard will be a first step in
a multi-year process of confronting the liabilities for most entities.’
According to the report, Fitch will begin to incorporate a government’s
approach to addressing its OPEB liability, as well as the magnitude of
the liability itself, into its analysis of the main credit factors
including finances, debt and other long-term liabilities, management,
and the economy. As more governments receive actuarial reports that
estimate the liability, Fitch will evaluate those reports and discuss
the governments’ plans for addressing the liability. Fitch will assess
the assumptions used in the actuarial report, recognizing that they have
a significant impact on the resulting liability. Fitch expects that
after the actuarial report is released, municipalities will begin to
develop plans that may include funding of the existing liability,
benefit plan adjustments, increased employee and retiree contributions,
and other programs to reduce the liability or curb its growth.
To participate in the teleconference, interested parties should call
877-241-2557 five minutes prior to the 1 p.m. EDT start time and give
the title of the call ‘Fitch’s OPEB Teleconference’ or the call leader
name ‘Amy Laskey’. To ensure there are sufficient telephone lines
available, use internal conferencing capabilities, if possible, for
multiple listeners at a single location.
A replay of the teleconference will be available starting two hours
after the teleconference is completed and will be available until April
2 close of business. To listen to the teleconference replay,
participants should call 800-642-1687. The conference ID number for the
replay is ‘3644331’.
In addition, the teleconference will be archived on the Fitch web site;
interested parties can find the appropriate links at www.fitchratings.com.
Click on the ‘Fitch Events’ button, and then click ‘Teleconferences’.
Fitch’s rating definitions and the terms of use of such ratings are
available on the agency’s public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch’s code of conduct, confidentiality, conflicts
of interest, affiliate firewall, compliance and other relevant policies
and procedures are also available from the ‘Code of Conduct’ section of
this site.
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