The Center for State and Local Government Excellence has cited Oakland County government for its “multi-faceted approach” in addressing liability issues regarding post employment pension obligations for employees and retirees.
In its 13-page report entitled: “Prefunding Other Post Employment Benefits (OPEB) in State and Local Governments: Options and Early Evidence,” the Center noted that Oakland County began prefunding its retiree healthcare liabilities in 1987, doing away with the “pay as you go” approach in favor of calculating accrued liabilities and funding the associated Annual Required Contribution (ARC). The county issued $557 million in taxable Trust Certificates in July 2007 at a rate of 6.23 percent over 20 years to fund its OPEB liability.
The report notes that despite experiencing investment losses due to a declining economy, the county nevertheless still managed to fully fund its $60.2 million ARC in 2008.
“We are extremely proud of the fact that Oakland County is the first county in America to fully fund employee and retiree healthcare through a Voluntary Employee Benefits program (VEBA),” said Oakland County Executive L. Brooks Patterson.
The Center, in its report, also noted in addition to the OPEB bond funded VEBA the county established a new Defined Contribution Retirement Plan for employees hired after January 1, 2006. These newer employees, as pointed out in the report, are enrolled in a Healthcare Savings Plan where they become 60% vested after 15 years of service and fully vested after 25 years.
The creative and innovative use of Trust Certificates has enabled Oakland County to save taxpayers about $150 million over the next two decades.
To view the entire report online, go to: http://tinyurl.com/prefundingOPEB