Haverhill officials want to see what can be done about paying down or slowing the growth of retiring employee pension and healthcare costs.
Haverhill City Council President John A. Michitson said this week the city has accrued $186 million in expected pension payouts as well as $307 million in, what is called, other post-employment benefits, or OPEB. Councilors approved his request to seek a “strategy session” with Mayor James J. Fiorentini and the city’s financial advisor.
The city’s Retirement Board has set aside 52 percent of the $186 million in future pensions, as estimated in 2018. It is expected to catch up by the early 2030s. Michitson seeks to find out whether there is any benefit to paying off the amount early. He noted the city is earning an average of 7.25% each year on its investments, but taxpayers have to make up the difference if returns fall short. Other means of reining in costs, he said, might be to change the eligibility for new hires or curbing abuses.
“Some people know how to game the system for their pension. You know, they’ll end their career with a high paid position and then have 20 years of low-paying positions,” he said.
He explained those low-paying positions might be, for example, a board appointment with a stipend.
In the area of healthcare costs for retirees, Michitson said, new ratios shifting more of the cost to the employee may be in order. He credited the mayor with having negotiated such changes with various unions.
Another approach is to put more money aside each year into a stabilization account. Michitson noted an existing account has only $200,000 in it.