City sets up trust fund to pay for future retiree benefits

HAVERHILL — The City Council recently gave its unanimous approval for the city's finance department to create a trust fund intended to pay the city's portion of health insurance for future city retirees.

Called the Other Post-Employment Benefits (OPEB) Liability Trust Fund, Mayor Melinda Barrett said the creation of the fund is more than a gesture, it establishes a fund the city will add money to and, at some point in the near future, will start adding even more money to cover retirees' health insurance costs.

"It looks good for our bond rating if we have this trust and it's a vehicle that shows we are aware of our obligations and we will work to meet them," she told the council at its March 19 meeting.

Angel Perkins, the city's director of finance and auditor, said that when city employees retire, they are eligible to stay on city health and dental coverage and the city is liable to pay a large portion of the premiums.

Perkins said that what started creeping up in the past decade were concerns about future liability and how it can be addressed by the creation of the OPEB trust fund.

"This is a significant amount of money and I believe our last actuarial valuation was about $276 million, which will take some time to fund it," she said, explaining the valuation of the city's future OPEB liability was completed by a certified actuary.

"Bond agencies really want to see that you're acknowledging this," she said.

Perkins said almost every city and town in the state has at least established a trust fund and made some efforts to begin funding them.

She said the city has about $250,000 set aside, not in an official trust, but it is earmarked for OBEB.

"Setting up the official trust would designate those funds only to be used for this purpose, and it would also add a layer of protection for any legal liability the city may encounter at some point or hopefully never," she said.

Perkins said the city's pension system is funded with $20 to $25 million a year from the city budget and that it will become fully funded by 2032. Then in 2033, a significant portion of that annual funding would begin funding the OPEB liability annually while earning interest.

Councilor John Michitson called it a "very prudent financial measure."

Responding to questions from Councilor Ralph Basiliere, Perkins said the creation of the fund is considered a best practice by the Government Finance Officers Administration (GFOA) and the state's Department of Revenue.

"When I talk to my constituents and get questions about this, would I be able to tell them that this will make city employees more secure in their retirement?" Basiliere asked.

"Absolutely," Perkins responded. "Anything that improves our financial position, and this will in fact do that ... make the funds more available and make the city more stable and financially sound."

Perkins said the first step is to create the official OPEB trust fund and discussions about a funding schedule will come at a later time.

Council President Tom Sullivan reiterating the importance of creating the OBEB trust fund saying "it's time to do this, it's a prudent measure long overdue."