Actuary: Brainerd’s retiree-benefits trust covers ~80% of liability; annual OPEB levy remains available

An actuarial presentation at the Sept. 23 Brainerd School Board meeting showed the district’s accrued liability for other post‑employment benefits — chiefly retiree medical and dental — is about $19.9 million, with an irrevocable OPEB trust valued at roughly $15.9 million as of July 1, 2024.

Jill Ertel, an actuary working with the district’s consulting firm (HLDI/USI), told the board the district is about 80% funded on its current accrued OPEB liability. The remaining unfunded portion is roughly 20% of the accrued liability.

“How much do you have to pay out approximately each year in these OPEB benefit payments?” a board member asked; Ertel said the expected benefit payments for fiscal 2024–25 are roughly $2.3 million, with about $1.6 million being direct subsidized benefits paid by the district and the rest due to implicit rate subsidies for early retirees.

Why it matters: OPEB liabilities are an ongoing obligation that can affect long-term district finances and creditworthiness. The district’s trust and asset policy influence how much general‑fund revenue must be directed to pay retiree benefits in future budgets.

Levy option and funding levers: Ertel outlined three primary funding levers: the irrevocable OPEB trust, general fund contributions and an annual OPEB levy authorized by state statute tied to the district’s unfunded accrued liability. Using preliminary numbers, she estimated the district could levy up to about $400,000–$450,000 for the 2024–25 cycle if it chose to do so; the levy is an annual, discretionary decision and does not have to be used every year.

Ertel explained the OPEB levy statute was enacted as part of a historical window when districts could issue OPEB bonds; annual levies are now limited by statute and the district’s funded percentage of accrued liability. The consultant also said most of the remaining OPEB liability results from “implicit” subsidy — the difference between group blended premium rates and the higher expected claim costs of early retirees — and that the state statute requires offering group‑rate continuation only until Medicare eligibility.

Trust investments and returns: The OPEB trust’s asset mix and investment policy are under district control. Ertel said the trust’s mix at mid‑year was roughly 65% fixed income and 35% equities, with recent annual returns ranging from roughly 3.3% to 9.9% over the last two years; the district’s assumed return target is about 5%.

Process vs. decision: The presentation was informational; the board did not adopt an OPEB levy. Board staff noted the annual levy would require an MDE application and routine review; the board could elect to levy in a given year, reduce the levy in a later year or elect not to levy if the trust or other revenue sources suffice.

Ending: The actuarial update will be used for financial disclosures under GASB 75 and to inform future budget choices; district staff said they will continue to coordinate with the actuary and the Minnesota Department of Education on any levy application.