Haverhill is banking up to $25 million a year to catch up on decades of deferrals in funding future employee retirement pensions, but has officially put nothing aside to pay retirees health insurance costs.
City CFO and City Auditor Angel A. Perkins told city councilors this week the city expects to meet its pension obligations in 2032, but will then have to fast track catching up on what is called other post-employment benefits—or OPEB, for short.
“When our pension liability becomes fully funded in 2032, it’s going to free up anywhere from $20 to $25 million annually in appropriations and we’d like to pivot a significant portion of that to begin funding the OPEB,” she explained.
She explained the source of what is now an estimated $276 million obligation. “Employees retire. They are still eligible to stay on our heath insurance, our dental insurance, and the city has a liability for paying a portion of that—a large portion of that,” she said.
In 2011, the Massachusetts Taxpayers Foundation titled its assessment of the problem facing most communities as “Retiree Health Care: The Brick That Broke Municipalities’ Backs.”
Mayor Melinda E. Barrett successful urged the City Council to take the first formal step in addressing the problem. “OPEB is hanging over our head and this is more than a gesture. It is establishing a trust that we’ll add money into. At some point in the near future, we will start adding significant money to,” she told councilors.
The mayor explained the city has $250,000 for this purpose, but had not previously locked in any amount. She said establishing a trust fund “looks good for the bond rating” and shows “we are aware of our obligations.”
Council President Thomas J. Sullivan said catching up promises other benefits. “At some point in the long-term future it will free up a big chunk of money that can then be used for other purposes.”
Council Vice President John A. Michitson praised Barrett’s initiative, calling it a “very prudent financial measure.”
Perkins said the next step is to assemble a schedule of payments into the trust.