For government employers, managing compensated absences has long been a balancing act between operational needs and financial accountability. These benefits may seem routine, but they carry significant financial implications when it comes to accurately recognizing and reporting liabilities.
Governmental Accounting Standards Board (GASB) Statement No. 16 has provided the foundation for how state and local governments account for compensated absences for more than three decades. However, as workforce policies evolved and new forms of paid leave emerged, that guidance began to show its age. That’s where GASB Statement No. 101 comes in.
What is GASB 101?
GASB 101 establishes updated guidance for accounting and financial reporting of compensated absences, such as vacation, sick leave, and paid time off. GASB 101 supersedes GASB 16 and aims to clarify recognition and measurement standards, enhancing consistency and comparability in financial reporting.
Key Changes Established by GASB 101
| Topic | GASB 16 (Superseded) | GASB 101 |
|---|---|---|
| Scope | Focused on leave paid out upon termination (e.g., vacation, sick leave) | Includes all types of compensated leave, whether used as paid time off or paid at termination, and non-cash settlements like post-employment benefits |
| Probability Threshold | “Probable” – typically interpreted as 70-80% likelihood | “More likely than not”, i.e., >50% likelihood |
| Recognition Timing | Liability recognized as benefits are earned and vested or accumulated | Liability recognized as benefits are earned (regardless of vesting), including non-vesting benefits if payment is more likely than not |
| Non-accumulating Leave | Generally excluded unless payable upon termination | Included if payment is probable |
| Disclosure Requirements | General requirements; required gross increases and decreases in liability | More specific disclosures, including assumptions used in estimates; allows for disclosure of gross changes or net change |
| Consistency | Had different guidance for different types of leave (e.g., vacation vs. sick) | Creates a unified model for all types of compensated absences |
| Implementation | Accounting standard since 1992 | Replaces GASB 16, effective for fiscal years beginning after December 15, 2023 |
How Can an Actuary Help?
One of the most significant changes in GASB 101 is the shift to a “more likely than not” probability threshold. This term can cause some confusion among employers in determining liability for each of their eligible employees.
An actuary can provide critical support in this process. Using established assumptions about retirement, termination, and other workforce behaviors — along with historical absence data — actuaries calculate, for each employee, the probability of receiving termination or retirement benefits and the expected future working lifetime. This approach allows for consistency in liability measurements across your benefit plans.
Take the Guesswork Out of Liability Calculations With CBIZ
At CBIZ, our experienced actuaries help state and local governments navigate the complexities of GASB 101. Ensure your liabilities are measured accurately and consistently — connect with our team today.
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