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City outlines plan to fund OPEB account

Date: 3/29/2013

By Carley Dangona

WESTFIELD — In the wake of Gov. Deval Patrick's plan to reform Other Post-Employment Benefits (OPEB) liability, Mayor Daniel Knapik released an assessment at the end of last week to address the issue of OPEB.

In the outline, OPEB is defined as "the health insurance liability for retired employees and future retirees." The mayor cites $276 million dollars as the OPEB liability for the city.

"The City of Westfield is acutely aware of the challenges we face relative to our OPEB liability. In order to appropriately address these matters, it is imperative that we study the ramifications of any actions we might take and weigh them relative to their impact on both our short-term and long-term financial and service viability," Knapik stated.

"While this certainly is a gargantuan task and must remain a high priority as we undertake any capital expenditure, we cannot allow it to paralyze our ability to move forward and provide basic services to the citizens of our community," he added.

Some of the steps the city has already enacted to lessen the OPEB liability include requiring 65-year-old retirees to enroll in Medicare, which allows the city to fund a supplement plan rather than a full policy; the availability of a tiered health insurance package where employees pay higher premiums for select plans of their choosing; and the acceptance by the City Council of municipal health reform in 2011 that reduced the OPEB liability to 9 percent.

At the Massachusetts Municipal Association (MMA) Spring Legislative Breakfast March 15, the issue of OPEB was discussed.

"This is an issue that's really grown in importance, in part, because when a city or town goes to borrow, bond-rating agencies want to know what its OPEB liability is and what is being done about it," John Robertson, MMA legislative director, said.

Robertson told attendees that a special commission studied the issue last summer and determined that OPEB liability for the Commonwealth was $50 billion, with $37 billion of that balance belonging to cities and towns. He explained that this liability "accrued to date for retirees and expected future retirees."

He said, "Most cities and towns don't have a schedule for funding that yet. Many communities have set up special funds — trusts or otherwise — and are putting money into those. However, the contributions tend to be opportunistic — municipalities set aside OPEB funds where they can."

Robertson explained that the large sum and the lack of funding prompted Patrick to create the committee to see if any savings could be had.

Some of the changes listed in the proposed legislation include increasing the minimum age of eligibility by five years, increasing the minimum years of service for eligibility from 10 to 20 years and decreasing the premium liability of surviving spouses from 100 percent to 50 percent.

Knapik cited the next step in the process as having the already created OPEB task force prepare a plan for future city savings. He anticipated that process will take "18 to 24 months."