Report Warns of Mounting Pension, OPEB Liabilities in MACategories: New England Developments,OPEB/GASB 45/75
Public worker pension and retiree health liabilities in Massachusetts are continuing to mount at an alarming rate, warns a report from the Massachusetts Taxpayers Foundation released on Oct. 10.
The total for covering all pension and retiree health benefits promised to current state and local employees and retirees is about $146 billion, but state and local governments have set aside only $63 billion of that amount, or 43 percent, leaving $83 billion in unfunded pension and retiree health care obligations, according to the report.
Of the $83 billion, nearly $37 billion is for unfunded pension benefits and $46 billion is for unfunded retiree health care benefits, referred to as “other post-employment benefits” or OPEBs.
Pension liabilities are only 63 percent funded statewide, and there is virtually no funding set aside for retiree health care liabilities, the report finds.
“A variety of factors account for this reality,” the report states, “including legislation to enhance benefits and provide early retirement incentives, as well as the failure of most systems to achieve the typical 8 percent or 8.25 percent target for annual earnings on pension assets.”
Compounding these problems, according to the report, is that nearly all systems have extended their pension funding schedules to restrict short-term growth in contributions, but this move adds dramatically to long-term costs.