Post Employment Benefit Trust
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Governmental Employers provide substantial post-employment benefits to their Employees. These benefits frequently include a lump sum payment at retirement for unused sick and vacation leave time. Additionally, some Employers provide post-employment health care benefits. When an Employee retires, these benefits are usually paid out of the Employer’s current cash flow. Generally, governmental Employers have not set funds aside and do not carry these post-employment benefit liabilities on their balance sheet.
The Government Accounting Standards Board (GASB) has determined that the non-disclosure of this liability for post-employment benefits distorts an Employer’s financial picture. GASB has drafted rules to require disclosure of this liability and recommends that employers begin funding this liability. GASB has recommended a phase in period, but disclosure of this liability can significantly impact Employers’ financial statements. In some instances the disclosure could adversely affect an Employer’s credit rating if steps are not taken now to minimize the impact.
The solution to counteract the disclosure of a liability is to set aside assets to offset the liability. To protect the assets and ensure that they are available when the liability comes due, funds should be set aside in a Trust. Specifically, the Key Post-Employment Benefit Trust®.
Why Use A Trust?
A Trust is a legal entity, separate and apart from its creator, the Governmental Employer. Funds deposited in the Key Post-Employment Benefit Trust® are treated as expenditures by the Employer. The Employer may receive budgetary credit for the expenditure. Trust funds are safe from Employers’ creditors and secure to pay future Retiree benefits.
MidAmerica provides the Trust vehicle, turnkey administration and quality investments. Funding of the Key Post-Employment Benefit Trust® is discretionary and there is no obligation for the Employer to place any specific amount in the Trust. The Key Post-Employment Benefit Trust® is a vehicle to fund existing Employee Benefits; it does not create any new benefits. Trust assets can be invested by the Trustee, typically in a quality fixed annuity with a guaranteed minimum rate of return.