CPFO Compensation & Benefits Practice Exam 2026 – Complete Prep Guide

Under GASB (Governmental Accounting Standards Board) regulations, it is not a requirement for Other Post-Employment Benefits (OPEB) to be prefunded. While the prefunding of OPEB can enhance the financial sustainability of a plan and ensure that sufficient funds are available for future obligations, GASB does not mandate that all entities must prefund their OPEB liabilities.

Many governmental entities may choose to pay OPEB benefits on a pay-as-you-go basis, where benefits are funded in the year they are due rather than through pre-established funding mechanisms. This flexibility allows entities to manage their cash flow and financial health according to their specific circumstances and needs.

Prefunding OPEB may result in long-term savings and is often encouraged, but the regulations ultimately leave the decision up to the entity, reflecting a broader principle in government accounting to provide operational flexibility.