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52 Pa. Code § 69.351. Implementation of Statement of Financial Accounting Standards for Rule No. 106 (SFAS 106)—statement of policy.


§ 69.351. Implementation of Statement of Financial Accounting Standards for Rule No. 106 (SFAS 106)—statement of policy.

 (a)  Effective with financial statements for fiscal years beginning after December 15, 1992, SFAS 106 provides the generally accepted accounting principles to be used by large companies in accounting for post-retirement benefits other than pensions (OPEBs). Up to now, companies which provided OPEBs for their employers used the pay-as-you-go (cash) basis. Each year a company would record on its books the actual cash paid for OPEBs.

 (b)  SFAS 106 operates on the premise that post-retirement benefits are a form of deferred compensation whereby an employer promises to exchange future benefits for current service. SFAS 106 requires companies to switch to the accrual method of accounting for OPEBs. As guidance to utilities wishing to implement SFAS 106, the Commission provides the following guidelines regarding the rulemaking treatment of OPEBs:

   (1)  Each jurisdictional utility which has satisfied the appropriate customer notice requirements, presented sufficient documentation to support its SFAS 106 cost estimates and presented sufficient cost containment measures, may seek formal Commission approval to record on its books a regulatory asset pursuant to SFAS 71 equal to the difference between its current rate recognition of OPEB costs and its accrued liability for the expenses under SFAS 106 subject to recovery in future rate proceedings to the extent that the costs are prudently incurred and demonstrated to be reasonable.

   (2)  The funding of a dedicated trust for the deferred amounts is not required at this time. A utility should maintain separate balance sheet accounts for both the accrued liability and the regulatory asset along with sufficient records to allow a detailed analysis of the accounts.

   (3)  The Commission intends to move jurisdictional utilities to SFAS 106 accrual accounting for ratemaking purposes within approximately 5 years and to allow the recovery in base rates of deferred amounts in approximately 20 years, to the extent that OPEB costs are prudently incurred and examined for reasonableness in a base rate proceeding prior to rate recognition.

   (4)  If the Commission, after examination, grants current rate recognition of OPEB costs exceeding the pay-as-you-go amount, the excess amount should be placed in a dedicated trust fund.

   (5)  The Commission will monitor the development of changes in OPEB costs as a result of both government policy changes and company cost containment efforts.


   The provisions of this §  69.351 adopted June 18, 1993, effective June 19, 1993, 23 Pa.B. 2839.

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