OPRBs (other postretirement benefits) are benefits that an employer
may offer to former employees after retirement, and it is something
other than pensions such as healthcare. I chose healthcare because it
is something that most people would be interested in having provided
for them after their employment. Healthcare can be one of the most
costly expenses for an individual when paying for it out of your own
pocket. It has been an argument on how OPRBs should be measured
because future costs are hard to determine. When a company sets a
healthcare plan into place, there are many unknowns. Such as when a
person may need the benefits, marital status, dependency, medical
rates, new illnesses, and the cost of new treatments. Retired
employees are typically older than current employees, and the need
to seek medical attention rises as we get older, and the costs can
significantly increase, which is more of a liability to the employee and
leads to many unknown factors in providing a healthcare OPRB. A
company would only have an estimated cost of providing a healthcare
plan to their employees. But a pension plan can be a set contribution
and a fixed monthly cost to the company. Accounting for both a
pension and a healthcare plan are liabilities for the company since a
liability is the probability of future expense or obligation. GAAP
follows the viewpoint that “..a company offering OPRBs is essentially
providing deferred compensation to employees because the benefits
received during retirement were earned during the period of
employment. Therefore, the company incurs an obligation as its
employees provide services.” (Whalen et al., 2017). a
a A company that provides both to their employees is an
excellent company to work for, but it doesn’t make sense to me to
offer a healthcare plan due to the unknowns involved with such a
plan. A pension plan makes the most sense since it is a fixed amount
provided to employees during retirement.
Reference:
Whalen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate
Accounting: Reporting and analysis. Boston, MA: Cengage Learning.
