OPEB stands for Other Post-Employment Benefits, not retirement.  This mainly means health insurance.  Let me explain how this works:

  1. Union negotiates with the City/Town to provide certain benefits in retirement.
  2. Actuaries then try to calculate how much this will cost the City/Town.
  3. City/Town puts money aside to fund this benefit.
  4. If they do not put enough money aside then it under-funded.  Another way to look at it is to call it an “unfunded liability”.

So far so good…If not check out this video

 

As we have reported here previously GASB (Government Accounting Standards Board) is requiring state and local governments to recognize their net OPEB liabilities on the the face of their financial statements.

Now bond rating companies will have a better understanding of these OPEB costs and whether or not these are being funded adequately or not.   These accounting changes will prevent OPEB liabilities from being hidden, which are estimated to be over $4 Trillion dollars by SEC Commissioner Dan Gallagher.

I am bringing this up today because of a column I saw written by the Telegram’s Susan Spencer:

 

 

In particular this one section
Mr. Genereux told selectmen that the special town meeting should also address the establishment and funding of a trust for other post-employment benefits (OPEB). He said the town’s OPEB liability for retiree health insurance is $47 million. He recommended transferring $100,000 from the stabilization fund to a to-be-created OPEB trust to meet expectations from rating agencies that towns move toward funding their liabilities.
The Town of Uxbridge is concerned about their $47 million unfunded OPEB liability and are planning to put $100,000.   From another prior column, the City of Worcester OPEB liability is not $47,000,000, but $636,000,000.    How is the City of Worcester ever going to be able to provide the OPEB benefits that they have promised with a current gap of $636 million and no money being allocated out of the current budget to close the gap?