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Requesting acceptance of Section 20 of M.G.L. Chapter 32B allowing the City to establish a Trust Fund for Other Post Employment Benefit Liabilities (OPEB).
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Official Text
To the Honorable Board:
I respectfully request that your Honorable Board accept the provisions of Chapter 32B, Section 20 of the M.G.L. allowing the City to establish a Trust Fund for Other Post Employment Benefit Liabilities. (OPEB)
Government Accounting Standards Board (GASB) Statements 43 and 45 require disclosure of costs that, along with salaries, pension benefits, and pre-retirement health insurance, make up government employees' total compensation package. The largest source of OPEB Benefits is health insurance. Like pensions, OPEB is a form of deferred pay, part of an exchange of salaries and benefits for employees' service. The largest source of OPEB is health insurance. Their costs to employers accrue over the period of employment, even though the benefits are not provided until later. GASB's new standards require governments to measure and report OPEB costs as they are incurred, during the employment period. This mandate will force significant changes in government practice. Most governments, by measuring as expense only the outlays associated with current retirees' OPEB, have failed to capture the accrued cost and liabilities of promising retirement benefits to active workers. The actuarial methods used to estimate the cost of OPEB will be similar to those already applied to pensions. Biennial actuarial valuations of OPEB assets and liabilities will be required under the new accounting rules.
Because failure to pre-fund benefits will result in new balance-sheet liabilities, governments have begun to set aside assets for future OPEB obligations. The Trust Fund established by the acceptance of Chapter 32B, Section 20, is the accounting entity that will receive funds in reserve to plan for the payment of these liabilities.
Respectfully Submitted,
Joseph A. Curtatone
Mayor