Friday, July 8, 2016

The Reality Of Southbridge's Pension Commitments

Ken O'Brien

Recent discussions on this site have related to issues confronting Southbridge's finances in the context of real estate taxes.

One area of concern is the town's commitment to financing the long-term costs associated with its retirement obligations to town employees.

This area is frequently overlooked when addressing the town budget. In large part this is a function of the fact that the complexity of the issue is beyond the grasp of many.

As I pointed out in a comment on an earlier post:

 According to the town’s most recent bond offering “The total actuarial liability applicable to the entire system [Southbridge’s retirement plan] at January 1, 2014, was $67,505,108; the unfunded liability of the system was $33,179,035."
In addition other post-employment benefits amounted to $47,599,891 based on the latest actuarial analysis completed July 1, 2013. “As of June 30, 2015, the balance in the OPEB Trust was $513,606.”

In order to assist in understanding this issue, I have reproduced below the comments related to retirement and other post-employment benefits from the aforementioned bond offering document. This provides a concise summary of the matter that will allow the reader to gain a better understanding of the issue.

Additional information is available on the Public Employee Retirement Administration Commission website devoted to reports from the town of Southbridge.


  1. On a national basis, a study published by the Center for Retirement Research at Boston College in March of 2016 found, “Our analysis of this issue provides a comprehensive estimate of OPEBs with the latest available data. The key takeaways are as follows. First, total unfunded OPEB liabilities are estimated to be $862 billion, nearly two thirds of which is held at the local level. Second, unfunded OPEB benefits are equivalent to 28 percent of unfunded pension benefits – when pension benefits are calculated with an interest rate comparable to OPEBs. And, finally, while OPEB liabilities are large, several factors limit their potential drain on state and local resources.” (

  2. Time for a changeJuly 8, 2016 at 6:52 PM

    Cnn Money says "Just how common are defined benefit plans?
    Not very. The percentage of workers in the private sector whose only retirement account is a defined benefit pension plan is now 4%, down from 60% in the early 1980s.
    It's time that government employees are treated the same as other people.


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