MMA continues focus on OPEB concerns

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At its Dec. 7 meeting, the MMA Policy Committee on Personnel and Labor Relations received an update from experts about municipal “other post-employment benefits” (OPEB).
 
Daniel Rhodes, a vice president and consulting actuary from Segal Consulting, provided committee members with an overview of new OPEB accounting standards issued by the Governmental Accounting Standards Board.
 
GASB statements 74 and 75 recommend changes to how municipalities report their OPEB liability (as a balance sheet line item as opposed to a footnote, including a 10-year history of the OPEB liability), and how they calculate their liability (a calculation to set the discount rate as opposed to a judgment-based decision).
 
James Lamenzo, an actuary from the Public Employee Retirement Administration Commission, discussed a PERAC Emerging Issues Forum held earlier this year. The presentation focused on how PERAC collects and reports OPEB liability information from municipal and state entities.
 
PERAC recently released its “OPEB Summary Report,” which details the liability for hundreds of entities across the Commonwealth. (The report is available at www.mass.gov/perac/about-perac/units/opeb-summary-report.html.)
 
While a precise total is difficult to pin down due to the number of employees joining and leaving the workforce, the generally accepted number for total OPEB liability in Massachusetts is $46 billion, with $16 billion being attributable to the state and $30 billion to municipalities.
 
A special OPEB commission filed its report in January 2013, but little attention has been directed to the enormous unfunded OPEB liability since the report’s release. (To view the report, visit www.wrrb.org/wp-content/uploads/2013/11/opeb-commission-final-report-2013.pdf.)
 
Unlike pension liabilities, there is not a legal requirement for municipalities to have an OPEB funding plan in place by a certain date. Local officials argue that such a requirement, if put in place today, would cripple municipal finances across the Commonwealth.
 
There is general agreement among municipal officials, however, that the massive unfunded OPEB obligation is a serious problem that will continue to worsen if no action is taken.
 
The MMA continues to bring the OPEB issue to the attention of the governor and his administration, as well as legislators. The association is hopeful that the legislative session that begins this month will provide an opportunity to substantively address this priority.