“Earlier, we reported that State Comptroller Martin Benison had placed a $13.28 billion price tag on the Commonwealth’s healthcare liability for state retirees enrolled in the GIC (Group Insurance Commission),” according to Association Legislative Liaison Shawn Duhamel. “It could reduce the price tag to $7.56 billion if this liability is pre-funded in an irrecoverable trust, and that’s exactly what the state did here.”

As part of the final ’08 budget, the state has created a GASB trust, known as the State Retiree Benefits Trust Fund, that will be administered by the PRIM (Pension Reserves Investment Management) Board. Funds, deposited into the trust, will be invested by PRIM in order to “meet the liabilities of the state retirement system for health care and other non-pension benefits for retired members of the system.”

According to the new law creating the trust (Section 24, Chapter 32A), GIC Executive Director Dolores Mitchell and Administration and Finance Secretary Leslie Kirwan, or their designees, will be PRIM Board members exclusively in connection with the trust and the new Section 24. Beginning now, PRIM will be transferring funds from the trust to the GIC, in order to pay the current healthcare costs of state retirees.

“In order to meet these current retiree costs, as well as the unfunded liability for future costs, the budget appropriates over $343 million to the GASB trust,” reports Duhamel.  “And at the end of this fiscal year (June 30, 2008), the budget calls for the balance of the Tobacco Settlement funds to be transferred into the GASB trust.”

How the trust will be funded after that (beginning July 1, 2008) will undoubtedly be determined by a special commission, created by the budget. This commission consists of eleven members from the administration and the legislature who will investigate and study the state’s liability for future retiree healthcare costs and its compliance with GASB. By the end of this year, the special commission, chaired by the Senate and House Public Service Committee chairmen, will report its recommendations, including any proposed legislation, to the legislature.

Local Option For Municipalities

In addition to state governments, cities and towns are required to comply with GASB.  To address this obligation, our Association had introduced legislation, sponsored by House Public Service Chairman Jay Kaufman (H1140).

H1140 would allow a municipality to establish a GASB (Irrevocable) trust in which funds would be set aside to meet the unfunded liability associated with retiree future healthcare costs. Ed Note:  Our Association had introduced comparable legislation for a state GASB trust (H2605), several provisions of which are contained in the state budget.

While H1140 is on the House legislative calendar for enactment (at press time), the state budget also addresses the local aspect.  Specifically, the new Section 24, enacted as part of the budget, allows local retirement boards to authorize participation in the State Retiree Benefits Trust Fund, if it so chooses.