Speakers present strategies for OPEB funding

Categories: New England Developments,OPEB/GASB 45/75
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Massachusetts Municipal Authority,  by Katelyn O’Brien, November 7, 2013

Municipal liability for “other post-employment benefits” – largely health insurance premiums for retirees – is a daunting issue that won’t be resolved without concerted effort.

This was the message from CPA James Powers, a partner at Powers & Sullivan, and Allan Tosti, chair of the Arlington Finance Committee, who led a workshop on OPEB obligations at the Annual Meeting of the Association of Town Finance Committees on Oct. 19 in Franklin.

“This issue is not going away,” Powers said.

He pointed out that state law does not require municipalities to pre-fund OPEB liabilities, so towns will most likely fund pensions first because doing so is mandatory.

Essentially, he said, towns have two unfunded liabilities: OPEBs and pensions. Depending on the community, the OPEB liability can be significantly higher than pensions. As far as which one to fund first, Powers says it’s a balancing act that each community has to figure out.

Powers recommends that towns create an OPEB trust fund and start making appropriations to it, so people get used to seeing OPEB at town meeting. Within the last few years, some towns have started with a low number, putting in anywhere from $1 to $1,000 to start, with the intention of increasing the amount each year.

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