Pensions and Other Post-Employment Benefits (OPEB) are two different issues and must be viewed separately.
State law establishes Belmont’s retiree pension obligations. Belmont’s Retirement Board is authorized to determine how to fund our retirement obligations and to manage investments designed to fund them. In 2015, the Warrant Committee issued a Pension report analyzing different options for funding our pension liability; the Selectmen have and should continue to discuss this with the Retirement Board.
- Extending the amortization period from 2027 to some later date could reduce the pension contribution impact on annual budgets.
- Pension Obligation Bonds (POBs) are a bet that pension investments will exceed the cost of borrowing. Moody’s has indicated that POB’s typically create additional risks, including budgetary and default risk. GFOA recommends that local governments not issue POB”s. I would not subject taxpayers’ money to risks of this type.
OPEB consists primarily of retiree health care, a benefit provided to Belmont’s retirees. To date, payments for retiree health care have been manageable because Belmont adopted healthcare reforms allowing it to effectively control health insurance costs — under 1% growth annually for the last three years.
Working with the Treasurer, the Selectmen adopted an OPEB Funding policy that Moody’s reviewed favorably. It created an OPEB Irrevocable Trust Fund and ensures that a fixed percentage of free cash is deposited in that Fund every year.
In 2015, the Selectmen established the OPEB Funding Advisory Group. On February 7, it reported that the actuarial estimate of Belmont’s unfunded liability is likely overstated. The group was asked to: (1) to continue its work and provide us with a more accurate estimate of our unfunded liability based on key cost data; and (2) analyze options to control this liability. This additional information will help the Selectmen to determine the most prudent course of action.