March 10, 2017

Worcester's unfunded employee benefits total $861M

Grant Welker
Worcester City Hall

The city of Worcester is behind by $861 million on what it owes retired city workers and is slated to owe current employees for health care and other benefits, according to a new report.

That liability exceeds the city's annual operating budget, and is projected to more than double in the next roughly three decades to over $2.5 billion, according to the report, which was written by the nonprofit Worcester Regional Research Bureau and presented to the City Council this week.

"It is unsustainable," the research bureau said of the city's liability for what are known as OPEB, or other post-employment benefits, costs.

"The OPEB liability will be a difficult challenge for Greater Worcester communities for decades to come. It requires intentional and strategic action today, or it will one day prove insurmountable."

So far, Worcester has set aside only about 1 percent toward its liability, or just under $8.9 million, the report said.

The employee retirement benefits are so high because there are so many who are eligible: about 4,200 current Worcester city workers and nearly 5,100 retirees. Employees' survivors are also eligible for the benefits.

Worcester uses a pay-as-you-go system for paying for such benefits, with those costs allocated annually within the city budget.

The research bureau found many surrounding towns have also done little or nothing to pay down their OPEB liabilities. Those communities include Auburn, Boylston, Grafton, Holden, Leicester, Millbury, Paxton, Shrewsbury and West Boylston. None have set aside more than 10 percent of their liabilities, the report said.

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