Pittsfield Establishes Trust Fund For Retiree BenefitsBy Andy McKeever
08:24PM / Tuesday, May 27, 2014
Councilor At Large Barry Clairmont hopes to transfer about $1.6 million currently sitting in a stabilization account into the OPEB trust fund.
PITTSFIELD, Mass. — The city is setting aside $50,000 for future retirees, the start of what some city councilors feel will ultimately save millions of dollars.
On Tuesday, the City Council voted to establish an Other Post Employment Benefits (OPEB) trust fund and in the budget; $50,000 is already set aside to fund it. The funds are to pay for health care benefits to future retirees.
"Our auditor has been saying for years that we should establish it," said Councilor at Large Barry Clairmont, who filed the petition to form the fund.
In recent years, the state has changed general accounting practices to include future liabilities and has encouraged cities and towns to have enough stashed away.
In 2008, the auditors estimated that as the city currently pays the yearly cost for retirees, over time it will ultimately pay some $250 million. That $250 million would pay for all of the city's current employees retirement benefits.
However, some of those employees are far from retirement, so if the city starts putting money aside now, interest alone will reduce the overall payout.
Ward 5 Councilor Jonathan Lothrop said once the trust fund is established, the council will then have to look at ways to invest the money. He suggest the city look toward the state Pension Reserves Investment Management Board, which manages billions of dollars in investments for communities.
"You have to invest it in a way that will grow the money," Lothrop said.
According to Clairmont, as the law is currently written, the city treasurer will oversee the funds.
Clairmont said he had asked Mayor Daniel Bianchi to establish it with $100,000, but Bianchi only funded half. The city has been aware of the practice and advice for years but had not put any funds aside until this fiscal year.
Clairmont and Lothrop are hoping the next step would be to take about $1.6 million currently sitting in a stabilization account and put it into the trust fund. That $1.6 million dates back to when the city was in receivership and the state Legislature has to approve the use of those funds — even moving it to the trust fund.
"I would like to see something happen with that," Clairmont said.
The City Council already accepted the trust fund law some years ago, giving it the legal authority to establish a fund. But, to be sure, councilors voted again on Tuesday.
Locally, many towns have not begun accounts while others are already funding. This year, Lenox aggressively set aside $500,000 to dig into the $30 million in liabilities it currently has. Lenox is hoping to put as much aside for nearly a decade before reducing the annual payment.