Thursday, November 8, 2012

Other Post-Employment Benefits

Brian Fox; Frank Colvario; Roberta McCollum
what are your requirements?
setting up plans, maintenance of plans, employment of an actuary
Kodak: judge determined that retirees from Kodak (which went bankrupt) now have to pay $400/mo for health insurance from having paid $100/mo

  • Other Post Employee Benefits; anything other than pension
  • health care, other things
Mass had state $16.2B liability
$29-30B liability at municipal level
auditor discloses amount of liability

GASB: part of compensation that employees earn every year; cost is constantly accruing
Statements 43 and 45: plan sponsors were not accurately calculating, disclosure now required
municipalities are not required to establish OPEB benefits
don't have to set up an OPEB trust fund, either

OPEB trust: MGL c.32B Sec.20: vote of proper authority (vote of city council in Plan E)
must establish trust fund, establish custodian of assets, establish funding
custodian can be Treasurer of municipality or Mass Health Care Security Trust

Trust requires a written document on how it may be used and how it will be governed; requires a board of trustees
trustees of the fund are fiduciaries;can be held liable
Irrevocable employer contributions
assets used exclusively for OPEB benefits

appropriations must be approved (as any appropriations must be)

Trust must follow Prudent Investor Rule (MGL c.203C)
Fiduciary must act in best interest of the beneficiaries of the trust; use due diligence in selecting investments and other vendors; use assets for allowed purposes only; avoid conflicts of interest

annually by December 31, OPEB trusts must submit a summary of OPEB benefits costs and obligations to the Public Employee Retirement Administration Commission; PERAC must let the trust know of any concerns they have by June 30 

new actuarial valuation every 2 years for those with membership of 200 or more and every 3 years for plans with fewer members

Question: why not go "pay as you go" for now? We can't pay for what we have to do now. 

OPEB commission established by the state
wish for disclosure for long-term liabilities of municipalities and the state

engage an actuary to run projections of the benefit plan specifics you're contemplating
Note that there are costs associated with doing this: annual audit, actuarial estimates

AHA! Some towns are not doing it because it's going to even out. 
Need to look at actual costs projected, weigh benefits
example given of Central Falls RI and retirees benefits being taken away from them when the city went bankrupt

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