Weymouth liability for retirees’ health costs pegged at $358 million

March 22-- Mar. 22--The town has $368 million in unfunded health care benefits for retired employees, but remains in a strong financial position despite that, an auditor said.

Frank Byron, president of the auditing firm Melanson and Heath, and Erica Lussier, a governmental audit manager, went before town council Monday to report on the town's finances for fiscal year 2018 that ended last June 30.

While post-employment liability was previously documented, it was measured in increments rather than as a total liability, which the state Governmental Accounting Standards Board began requiring for fiscal 2018, Melanson said.

As a result, the financial reports for fiscal 2018 reflect the total $368 million liability for retiree health costs, up from the $118 million reported the previous year.

Byron said every community is in the same situation, struggling to put aside money to cover those costs.

"You're generous with your health insurance benefits, so your liability may be higher than average," he told the council.

The town council in 2017 voted to join the Plymouth County OPEB Trust Program, which was created in 2015 to help communities and public entities in Plymouth and neighboring counties pre-fund retiree health care liabilities, also known as Other Post-Employment Benefits.

Byron said the town has $3.8 million set aside in the trust to fund retiree health care, which is equal to about 1 percent of the overall liability.

At-Large Councilor Jane Hackett said the town has taken steps to contain health insurance costs, such as joining the Group Insurance Commission to offer employees a range of health insurance options.

Byron said the town's pension liability is about 68 percent funded, leaving a liability of about $90 million. He said the liability went down $15 million because the pension system had "a very good year" in terms of investment return.

"The pension is in pretty good shape. The only ding in there is OPEB, but you're not alone," he said.

Byron said bond rating agencies will want to see the town make steady progress in putting money into the trust fund.

He said the town ended the year with a surplus of $13.17 million -- or 8 percent of the budget -- which the state certifies as free cash for communities to use for things like capital purchases or savings accounts. Byron said bond-rating companies like to see communities end their fiscal year with a surplus of about 5 to 10 percent. Weymouth used about $7.7 million in free cash, and put $5.5 million into a savings account in fiscal 2018.

Byron said the town has gradually increased its free cash during the last four years, from 4 percent to 8 percent.

"Most towns strive to get there," he said.

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