Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
Cities and towns across the Commonwealth continue to grapple with the size and scope of their unfunded liability for “other post-employment benefits,” but the Legislature has yet to take action on statewide reform. In fact, no comprehensive reform package has been filed for the 2015-2016 legislative session.
Municipalities face a liability of more than $30 billion for retiree health insurance benefits. This includes benefits owed to current retirees as well as active retirees who are vested in the system and will receive a benefit at a later date.
In most communities, an employee who works at least 20 hours per week for 10 years and is at least 55 years old is eligible for the municipality’s retiree health insurance plan. Municipalities pay, on average, 70 percent of the premium. State law requires municipalities to pay at least half the cost.
In the absence of significant reform, cities and towns are using a variety of methods to manage and fund their liability. Communities are taking advantage of the 2011 municipal health insurance reform law, which allows municipal managers to adjust health insurance features outside of collective bargaining in order to manage premium costs. Municipal managers also have the option to make premium contribution changes for retiree benefits and to negotiate premium contribution changes with active employees.
In addition to making changes to help mitigate future costs, many communities are beginning to fund their liability. Communities have the option of setting up an OPEB trust fund locally or investing their money in the state’s fund. Municipalities are using a variety of sources to contribute to the fund, including savings from making plan design changes, a dedicated contribution from property tax revenue, and revenue generated from the local meals tax. Contributions are generally considered nominal, however, compared with the size of the liability.
Former Gov. Deval Patrick filed a bill in 2013 that would have made sweeping changes to eligibility and access to retiree benefits. His legislation followed the work of a special commission on OPEB that met throughout 2012. After much debate, however, the bill died at the end of the 2013-2014 legislative session.
The MMA continues to advocate for strong and meaningful reform that would deliver significant savings in the near term. The MMA supported many aspects of Gov. Patrick’s legislation in order to ensure the long-term economic health of cities and towns, equity for taxpayers, and sustainability of benefits for the long term. But the association raised objections to provisions that would weaken the reform by undermining local authority or imposing unfunded mandates.
Written by Katie McCue