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Our members are the local governments of Massachusetts and their elected and appointed leadership.
In 1994, Mayor Dean Mazzarella developed a fiscal plan with his financial team to fully fund the city of Leominster’s pension liability. For 25 years, the city has stuck to its plan, and now it has a 100 percent funding status for its pension plan, which means it has enough assets to make all current and future retirement benefit payments.
City Comptroller John Richard said Leominster prioritized the funding of its pension liability for both fiscal and moral reasons. The issue of intergenerational equity remains at the heart of the city’s efforts, he said, as it remains committed to paying approximately $2.5 million annually in order to remain fully funded. The city will also conduct an annual actuarial study to monitor the status of the funding ratio, which fluctuates with market conditions.
Sticking to the plan through all economic cycles was crucial, Richard said. The city shortened or lengthened its frequency of pension fund payments in accordance with economic upturns and downturns, but it never stopped paying down the liability.
The city is funding its liability for other post-employment benefits (OPEB) in a similar manner.
“It doesn’t seem right,” Richard said, “to promise employees health insurance and not be able to pay for it.”
Cost of living increases for retirees were suspended for seven years, allowing the city to contribute to its outstanding liabilities and shaving $100 million off its OPEB liability on its financial statement.
The Governmental Accounting Standards Board issued new government reporting requirements for OPEB liabilities that took effect for fiscal 2018. Municipal OPEB liabilities must now appear on financial reports.
Leominster’s financial statement will reflect no pension plan liability and a $100 million OPEB reduction due to careful fiscal planning for more than two decades.
The city views full pension and OPEB funding as “one point in time,” Richard said. Educating taxpayers and maintaining the appropriation in the budget remain key to staying fully funded.
Richard added that the effort to fully fund liabilities is really about taxpayer dollars and services. Because of careful planning and fiscal austerity, Leominster has an additional $6 million annually at its disposal.