As of 2012, MA state unfunded liability for OPEB was $16.7 billion
funding available (already set aside) would cover about 1% of liability
state has about $400M set aside; communities between $50-75M
GASB: "therefore the cost of these future benefits is a part of the cost of providing public services today"
warn plan sponsors in the public sector that this is the liabilities that are being faced
some question if the benefit is "vested" (cannot be taken away; GASB says liability must be calculated for it)
OPEB trust: "not required by law to have an OPEB trust"
(also not required to offer retiree health benefits by law)
ARISA (?) rules for following if you offer health care to retirees
an OPEB trust: MGL c32B, Sec. 20 (amended 2011) for establishing our such a fund (done by vote of City Council, for cities)
vote: authority to establish the trust fund, determine who is custodian of trust fund, appropriation of an amount to be put in the trust fund
if Mass Health Care Secuirty Trust (MHCST), give up some control of trust, but also some of the requirements
they invest in State Retiree Benefits Trust Fund (SRBTF), which currently invests throught he Pension Reserves Investment Trust (PRIT)
not willing to negotiate on measures of investment: they don't accept responsibility as a fiduciary*
*I don't know what this means
collaboratives are not mentioned: open question
Trust Agreement: written document that establishes purposes for which trust assets may be used, and how the trust is governed
establishes Trustees for fund who will govern and manage the fund; should meet regularly
ARE subject to Open Meeting Law
separate posting, separate meeting
trustees are fiduciaries, held to fiduciary standard of care, who can be held personally liable for violation of fidiuciary duties
"for exclusive purpose of providing benefits to retirees and their beneficiaries withthe care, skill, prudence, and diligence" as would a "prudent expert"
OPEB trust must have irrevocable employer contributions, assets to be used only for provision of OPEB benefit and to defray reasonable costs of maintaining the trust
protection of assest from creditors of employer or site administrator
fiduciaries must ALWAYS act in the best interests of the fiduciaries of the trust...not in the interest of the school district
SCs that act in both capacities are thus wearing two hats
can be a complicated concept to get your head around, but it's very important; avoid conflict of interest
can hire investment consultants to assist
Q: is there a reason to have a separate OPEB trust for the municipality than for the school district?
if the funding is coming out of your budget (as a district)...
comment that an SC believes it's the responsibility of the town,not the district, to fund the liability
can band together to establish a trust fund
due diligence in selecting investments and other vendors (looked at different options based on interest of beneficiaries)
"it's the process that you use, not just how it turns out"
use assests for allowed purposes only
goal is "to build it up to fully fund it" though presenter concedes "that seems like a pipe dream"
can draw down after five years to fund retirees
(notes that if it's underfunded, it affects your bond rating)
summary of costs and obligations must be reported annually by Dec. 31, including assumptions that were sued to calcuate the liability
these provisions are required under GASB 43; otherwise it won't accept your liabilities as being reduced
report from January outlined proposals to reduced OPEB liabilities, H Bill 59 would implement some of these proposals
number of drivers of liabilities: health care costs, level of benefit (split of premium), and eligible population
new law: age would be raised across the board, would raise years of service, plus would pro-rate benefits from 20 to 30 years of service
exempts certain employees
public hearing last week, currently before Committee on Public Service
bill faces opposition by retirees
likely something will be passed this or next year, 'though probably not quite this
Q: what about people who are never eligible for Medicare?
"I can't see where a school committee would want establish a trust when they have lots of different retirees" Recommendation to work with state. Note that need for trust fund and board of trustees, even if investment is made with state
separate auditor for trust than for district. "wall between both interests is very important"
Q: wouldn't it be better to have different people on the trust board?"
It depends. Might be best in some circumstances
Q: OPEB responsibilities needs to be apportioned among the former employers, if applicable. Would that be done by actuary in report?
Yes, but must be sure that you are enforcing that statute, because many places are igoring that statute.