Harvard’s unfunded liability for paying health care benefits to retired town employees will triple over the next 30 years, but that increase will be about 7 percent less than originally projected, according to revised numbers presented to the town last Wednesday.
At the Finance Committee meeting on Nov. 19, Lorraine Leonard, finance director, read from a letter she had received earlier that day from KMS Actuaries, a Manchester, N.H.-based firm hired by the town to conduct this year’s analysis. The letter stated that a revised projection with slightly lower numbers was based on new rules adopted by the Harvard Board of Selectmen last March. Those rules lowered some of the potential costs of Other Post-Employment Benefits (OPEB) paid by the town. OPEB is a category that covers medical, dental, and life insurance benefits and is separate from employee pensions, another employee benefits cost that can result in future unfunded liabilities for local governments.
Unavoidable liability
On Nov. 7 the Press reported the original KMS numbers, which projected Harvard’s unfunded OPEB liability at $22.89 million as of July 1, the start of the current fiscal year. Even assuming a continuing town contribution of $425,000 per year into an OPEB trust fund, KMS had projected that the unfunded liability would rise to $70.4 million as of fiscal 2044—a 207.5 percent increase.
The revised numbers provided by KMS showed a slightly lower unfunded OPEB liability of $21.95 million as of July 1 and projected that number would rise to $66.05 million as of fiscal 2044. That would still represent an increase of more than 200 percent in the unfunded liability from the current fiscal year, but that increase is 6.6 percent lower than KMS’s original projection.
Based on the earlier projection, Finance Committee member Bruce Nickerson had suggested that the town might have to set aside $600,000 a year to keep the town’s unfunded OPEB liability under control. Nickerson was out of town last week and did not attend Wednesday’s Finance Committee meeting. Reached at his home on Monday, he said he had not yet seen the revised report and wanted to reserve comment on it.
