Snow Hill, Maryland – Worcester County is making giant strides toward fully funding Other Post Employment Benefits (OPEB) Trusts for County and Board of Education (BOE) retirees. That’s according to a valuation by Menard Consulting, Inc., which confirms that in fiscal year (FY) 2024 Worcester County’s OPEB liability for the BOE decreased by $44.8 million. This brings the County much closer to the goal of eliminating the need for General Fund revenues to pay the cost of healthcare benefits for retirees.
“The County and BOE Trusts are investment vehicles that the commissioners established to pay the cost of promised future medical and drug benefits for retirees,” Commissioner President Ted Elder said. “The commissioners have adhered to an aggressive investment policy to build trusts that are capable of generating the dividends and interest needed to pay anticipated annual OPEB costs.”
The trusts were established to meet Governmental Accounting Standard Board (GASB) mandates requiring public sector employers to account differently for certain non-pension benefits that are provided to their employees during retirement.
The unfunded OPEB liability, which is the anticipated cost to the County to fund benefits for retired employees, was $437 million in FY21. That liability decreased by $365 million in just three years. Today the County Trust is fully funded and reflects a net asset of $22.8 million. With a long-term expected 7% rate of return, the County Trust should generate enough interest and dividends to pay all future OPEB costs for retired County employees in perpetuity.
The BOE Trust liability, which was $139.6 million in FY23, decreased to $94.8 million in FY24 due to increased investments made by the commissioners. Like the County Trust, once fully funded the BOE Trust should generate enough interest and dividends to pay all future OPEB costs for retired BOE employees.
“The existing unfunded OPEB liability has a direct impact on the County’s credit rating, borrowing power, and interest rates on debt for capital construction projects, like the upcoming project to build a new Buckingham Elementary School (BES),” Chief Administrative Officer Weston Young said. “Transforming the BOE Trust from a liability to a net asset is critical to ensuring the County’s continued ability to secure low-interest loans for BES and other capital projects.”
OPEB Trusts are not reserve funds and may not be diverted to purposes other than providing benefits to participants and beneficiaries under the County and BOE plans.