OPEB update

Mike Sullivan explained the recent OEPB actuarial study at the selectmen meeting last night, that shed new light on my prior understanding.

The town has been paying what the consultant calls the “pay as you go” OPEB cost each year, as part of the town’s insurance budget. Previously I had not realized that we were paying for those expenses each year, so I saw the OPEB deficit increasing each year.  What we pay are the actual costs incurred each year for retiree health costs.  Mike cited those last night as being $1.2m. this year, but the consultant report uses the figure of $1.5m. for its 1/1/2013 valuation.

Additionally, the town paid $400,000 last year in to a fund to use to pay future OPEB costs.  So instead of getting further behind each year, as I had thought we were doing, we are instead slowly paying off the future OPEB debt.  Last night Mike quoted the OPEB future debt as $48m., but the actuarial study uses $43m. as of 1/1/2013.

Lastly, the actuarial study says that to fully fund the OPEB debt, we would have to pay $3.5m/ year for 26 years.  By contrast, we apparently paid $1.9m. last year, between paying for the actual costs ($1.5m.) and adding some extra ($400,000).