Other post-employment benefits (OPEB) refer to the benefits, other than pensions, that a state or local government employee receives as part of their package of retirement benefits.  Typically, retiree health insurance is the most significant OPEB benefit offered, though benefits such as life insurance or dental insurance are also covered by this umbrella term. This benefit is also provided to spouses and surviving spouses of city retirees. 

In Massachusetts, there is state legislation that mandates cities and towns both provide these benefits to municipal retirees and contribute at least 50% of the cost of premiums. Cities and Towns are free to negotiate a higher municipal contribution, but not a lower contribution. Copays and Deductibles are paid exclusively by the employees/retirees, but this is also subject to local negotiations with municipal unions. 

This legislation also mandates that Medicare eligible retirees enroll in Medicare (Parts A & B) and migrate their city-provided health insurance to Medicare, along with an optional Medicare supplement plan provided by the City.  The city contributes to the premium cost of the Medicare Supplement Plan. If a retiree is not Medicare eligible, either because they are not aged 65 or older, or never contributed to Medicare during their working years, they are enrolled in the same plans that are offered to current City employees.   

The contribution by the city to the premium cost of retiree health insurance varies based on the dates the retirees worked for the city.  For most current retirees, the premium cost split is 80%/20% with the city contributing 80% of the premium cost and the retiree contributing 20%.  This premium split has been modified for employees and retirees that began their employment with the city at later dates with relatively newer employees and retirees contributing at varying levels of 75%/25%, 70%/30% or 65%/35%, depending on when they started employment with the city and also dependent on whether the employee/retiree was a member of a municipal union or not. 

Article XVII of the City Ordinances entrusts a board of trustees to manage the OPEB Trust, which is the investment fund that the city utilizes to offset its OPEB liability.  The five-member board of trustees consists of: (1) the Mayor or their designee; (2) the City Comptroller; (3) the City’s Chief Financial Officer; (4) a member of the City Council appointed by the City Council; and (5) a registered voter in the City of Newton appointed by the Mayor with the consent of the City Council.   

The City Treasurer serves as the Custodian of the Fund; and the fund is invested with MassPRIM, the state managed board that oversees the Pension Reserves Investment Trust Fund on behalf of the Commonwealth of Massachusetts. 

All state and local government entities are required to produce official financial statements that comply with rules adopted by the Government Accounting Standards Board (GASB), a rulemaking body of the Financial Accounting Foundation (FAF).  The FAF is the independent organization responsible for the oversight, administration, financing, and appointment of both the Financial Accounting Standards Board (FASB) and GASB.  FASB provides accounting rules for the private and non-profit sector. GASB provides accounting rules for state and local governments.   

The rules issued by GASB require that all state and local governments reflect on their official financial statements the present value of both pension liabilities and OPEB liabilities, along with the value of any investment funds that are set aside to offset these liabilities.  If the funds that are set aside to offset the liability is less than the value of the liability itself, then the liability is often referred to as an “unfunded liability.” 

These official financial statements are often used by the City when applying for grants, borrowing money, applying for credit, or conducting day to day business.  Since the values of both its Pension and OPEB liabilities exceed the annual operating budget of the city itself, these liabilities have a material effect on the financial standing of the City. Notwithstanding these unfunded liabilities, the financial strength of the City of Newton remains strong as reflected by its continued  Aaa bond rating, which is periodically reviewed by Moody’s Investor Service ®.  This Aaa rating is the highest rating possible and maintaining this bond rating is critical to the ability of the city to borrow money to support investments in critical infrastructure, such as school buildings, public parks and recreational facilities, roads and other municipal assets. Additionally, the City's comprehensive plans to continue to address these long-term liabilities only adds to the strong financial position of the City.