Dryden develops a customized solution to securitize your organization’s healthcare benefit liabilities. This generally includes the formation of an off-balance-sheet Trust whose assets are held by a highly-rated financial institution. The Trust provides a fixed monthly payment guarantee, financing and reinvestment structure.

Independent from the government entity with the employees as the beneficiaries, the Trust raises capital to fund the healthcare liabilities.   The amount raised is determined through detailed actuarial analysis. This defines a fixed time period for the client to make level remittance payments to offset the debt issued by the Trust. The program is structured to add incremental income on the over-collateralized portion of the Trust. It builds a reserve balance to offset future health care liabilities at the termination of the Trust, while lowering the Trust’s interest rate for borrowing money to pre-fund liabilities.

GASB 43/45 is forcing government employers to re-evaluate how they reserve and, more importantly, how they fund their OPEB liabilities. 

While the financial impact of GASB 43/45 is gradual, advanced funding of retiree healthcare benefits is becoming more and more critical.  Savvy issuers will stay ahead of this curve.