We have talked about this many times in the past, link to last column.     This is not an exact number but only an estimate but we think it is fair to say that it is approximately $700,000,000!!  What is OPEP?

  • Other
  • Post
  • Employment
  • Benefits

Typically we seem to only talk about retirement benefits when we refer to benefits that are due to retired City of Worcester employees, but there are “other’ benefits like health insurance.   We have to give alot of credit to former City Manager Mike O”Brien, who was able to make Medicare the primary coverage for retirees (Section 18 of Chapter 32B of Massachusetts State Law) back in 2007.  If we had done that, who know how high this number would be now.

What are we doing now, however, to address this debt?   In last week’s City Council agenda we notified that the City of Worcester had $1,006,504 of “free cash” left over from FY2015 at it was determined:

  • Bond rating stabilization   503,252
  • OPEB trust   301,951
  • City Manage Capital Contingency    201,301

How did we come up with those numbers?    “Consistent with the adopted Five Point Plan (5PP) we would respectfully recommend that 50% and 30% of the certified Free Cash be appropriated to the Bond Rating Stabilization Fund and the OPEB Trust, respectively.”      Going forward how much certified “free cash” do you think there will be in FY2016??

Bottom line  a plan that results in a $300,000 contribution to a $700,000,000 dollar problem is not the answer.   Don’t forget the Governmental Accounting Standards Board (GASB) recommendation regarding OPEB (note below).   You can no longer bury this debt in some foot note on page 299.   An OPEB debt not being addressed will result in a lower bond rating and higher interest costs to the City of Worcester.

 

 

 

Why Do We Need a New Standard On OPEB?

In June 2015, the GASB approved the issuance of two new Statements that are designed to improve the usefulness of information about OPEB in the general purpose external financial reports of state and local governmental plans for making decisions and assessing accountability:

  • Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, addresses financial reporting by plans that administer OPEB benefits on behalf of governments.
  • Statement No 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, addresses accounting and financial reporting by government employers.

The new OPEB Statements includes requirements for defined benefit OPEB plans that replace the requirements of Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans.

They also include requirements for defined contribution OPEB plans that replace the requirements of Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, Statement 43, and Statement No. 50, Pension Disclosures.

 

 

 

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