Get AI Briefings, Transcripts & Alerts on Local & National Government Meetings — Forever.
Actuaries report sharp rise in Southborough’s OPEB liability to about $59 million; town funding still low
Loading...
Summary
KMS actuaries told the Select Board the town’s total OPEB liability rose to roughly $59.0 million and the net OPEB liability to about $54.4 million, driven mainly by steep health‑plan premium increases. The town’s trust is about 7.9% funded; current funding policy contributes $250,000 per year with a plan to reallocate pension contributions after 2037.
KMS consulting actuaries presented the Town of Southborough’s full FY2025 OPEB valuation at the Select Board meeting on March 17.
The firm reported a total OPEB liability of approximately $59,017,000 and a net OPEB liability of roughly $54,372,000, producing a funded ratio near 7.87%, Michael Bubelow of KMS told the board. “The net OPEB liability is about 54,372,000,” he said during the presentation.
Actuaries said the largest single driver of the increase was unusually large premium growth for the town’s Medicare Advantage plan and other health plans. Amanda Makarovich noted the valuation reflects both experience losses and assumption changes, including separate trend assumptions for Medicare and non‑Medicare plans under the town’s benefit design.
KMS highlighted that an unusually large increase in the Aetna Advantage plan premiums accounted for a major portion of the valuation change. The firm also reported favorable investment returns in the town’s OPEB trust—about an 11.8% rate of return for the year—which helped partially offset liability growth.
Under Southborough’s current policy the town contributes $250,000 per year to the OPEB trust; actuaries said two $250,000 contributions were made in FY2025 and that no trust contribution is expected in FY2026 because of timing. The presenters explained the town plans to reallocate pension contributions to OPEB beginning when the Worcester Regional retirement system is fully funded (projected in the current plans around 2037), which would materially increase funding for retiree benefits.
Select Board members pressed for clearer projections of funding options and the timing of full funding. KMS offered to model alternative funding scenarios and run projections that show the impact of redirecting pension contributions or increasing annual contributions earlier than the 2037 pivot point. “We can definitely prepare that projection,” the actuary said.
Board members discussed potential offsets, including increasing retiree cost shares (statutory splits allow changes up to 50/50), plan design changes, or phased funding increases. Several members urged the administration to return with alternative funding scenarios and clearer visuals showing impacts on the tax rate and long‑term trust balance.
Next steps: KMS agreed to provide additional modeling at the Select Board’s request; the board and finance staff will review possible policy changes ahead of the next budget cycle.
