Town Manager Floats Plan on Budget-Busting Retiree Benefits

When it comes to providing retired town employees with benefits, the problem is clear: costs are rising while budgets are tightening, and it's a crisis that won't go away.

The solutions are not as clear. But Town Manager Buzz Stapczynski is making a few recommendations to address mounting retirement costs, which he shared at Monday night's Tri-Board Meeting of the Board of Selectmen, School Committee and Finance Committee.

Other Post-Employment Benefits -- referred to as OPEB -- refers to retiree benefits other than pensions. This includes health insurance, dental, vision and life insurance. In Andover, the biggest cost is health insurance.

Stapczynski made a series of recommendations on how to address OPEB in the future. From 2009 to 2011, Andover's accrued 30-year unfunded liability decreased $30 million -- from $245 million to $215 million -- after changes were made to the town's insurance plan and some retirees were moved to Medicare. And Stapczynski said a further liability reduction is expected this year.

And, Stapczynski said, forming a solid long-term OPEB funding policy would bring that number down even more.

But what are some factors that add to the mountain of expenses with retiree benefits?

For one, there's the required tome of employment. Currently, someone can work for the town for 10 years and they will receive retirement benefits. And "full-time" means 20 hours or more a week.

Stapczynski's recommendations include:

• Work with the state legislature to pass the governor's retirement reform bill that seeks to increase the required years of service to 20 years and increasing the eligibility age.

• Having the town look into more cost saving options in the next round of bargaining with local unions.

• Examine the savings potential of contracting out some special education services.

• Have all town departments look for ways to function with fewer employees.

• Look into adjusting existing insurance premium employee/town contribution splits.

• Create a 27-year OPEB funding plan. Some of his suggestions include increasing OPEB funding by $100,000 a year from the General and Water/Sewer Enterprise funds; putting 25 percent of the Free Cash every year into the OPEB Trust Fund; and appropriating an additional $900,000 for OPEB in the FY2015 budget.

"We recognize that we’re in this hole," Selectman Brian Major said. “The purpose here is getting a plan in place that the town can be proud of because we’re using funding toward this liability."