Thursday, April 2, 2015

MERSD On A Path To Full-Funding of OPEB

MERSD is pleased to report that through a collaborative effort with the Manchester Essex Teachers Association (META), the MERSD School Committee successfully renegotiated its health care agreement in a manner that generated annual revenue to support the establishment of an OPEB Trust Fund, putting MERSD on a path to full funding.   As a result of restructuring our health care policy, MERSD reduced a $1.8 million unfunded annual obligation to an estimated annual gap of $235,000, which will be eliminated overtime.

Other Post-Employment Benefits (OPEB) includes the cost of retiree health insurance, which is guaranteed by Massachusetts General Law to all municipal employees that retire with pension eligibility. Management of unfunded future OPEB liabilities has been a critical priority for MERSD.  In its District Improvement Plan established several years ago, MERSD identified the need to develop, by 2015, a sustainable, long-term financial plan to address these challenges, with actual pre-funding to begin by 2016.  MERSD is pleased to have met these self-imposed objectives ahead of schedule. 

The 2016 budget places $300K into an OPEB trust, which is funded entirely by negotiated changes to health insurance district-wide, with no added cost to taxpayers. The negotiated agreement with the META has been forecast by an independent actuary to reduce the unfunded annual OPEB  cost by approximately 87% or $1.6 million per year.  Changes include reducing the district contribution for health care premiums from 80% to 75% for active employees and 70% for new hires.  Additionally, the agreement migrates all employees to an insurance program with lower monthly premiums (the cost of which is split between MERSD and employees, based on contribution percentages referenced above) in exchange for higher co-pays (which are paid by employees for each doctor’s visit or procedure).  The negotiated agreement stipulates that in return, all savings from these changes will be placed into an OPEB trust fund for the sole purpose of paying future OPEB costs.  These trust funds can be invested in accordance with restrictions in Massachusetts General Law to earn higher rates of return, thereby reducing future required contributions from MERSD, staff, and taxpayers.   The remaining annual gap of just $235,000 can be addressed over time by gradually increasing annual funding each year.    
Addressing long-term liabilities is just one example of MERSD’s commitment to fiscal responsibility and was critical to our long-range fiscal planning, as these costs threatened to absorb more and more dollars slated for education. This goal could not have been achieved, though, without the cooperation of our faculty and staff and from the support member towns.

Additional information about the MERSD Budget, OPEB and pension liabilities and the plan to achieve full funding over time can be found at, by following the Quick Link for Budget .

MERSD School Committee,Pamela Beaudoin, Superintendent & Avi Urbas, Director of Finance