AYER -- The Ayer-Shirley Regional School Committee was given quite a bit of food for thought Tuesday night, as Linda Bournival, of KMS Actuaries LLC, presented a summary of her actuarial valuation of the district's "postemployment benefits other than pensions."
In order to estimate the district's future liabilities, she based her calculations on participant census data and other information provided by the district as of July 1, 2011.
Bournival explained that Government Accounting Standards Board statement 45 requires employers to measure and report the liabilities associated with nonpension-related benefits, or other postemployment benefits (OPEB).
Those benefits may include post-retirement medical, pharmacy, dental, vision, life, long-term disability and long-term care benefits that are not associated with a pension plan. Government employers required to comply with GASB 45 include states, towns, education boards, public schools and all other government entities that offer OPEB and report under GASB.
Although the school district is currently funding these benefits on a pay-as-you-go basis, employers do have the option to establish and fund an irrevocable trust or set aside a dedicated reserve account, Bournival stated.
A summary based upon the current pool of employees showed that if all current employees worked to retirement, the actuarial accrued liability (AAL) as of July 1, 2011, would be about $12.5 million, or $12.
The AAL was calculated using a discount rate of 4.0 percent for a pay-as-you-go program. Bournival also presented data showing the principal valuation results for a fully prefunded dedicated trust with an 8.0 percent rate of return. In that scenario, the AAL would be $5.9 million.
At present, the district has only three retirees, but because there are 18 active employees age 60 and older, district payments are expected to increase significantly over the next several years.
Bournival explained that the results of the valuation were derived under the model of a "closed group," in which there are no new employees.
When we prepare the report, it is a snapshot -- who you have right now," she said.
She added that the district should be thinking about the OPEB while the employees are still working and contributing to the program.
"They are putting in what they can get out of their budget. The slow and steady contributions add up," she said. "There are policies you can establish and schedules you can arrange, and you can possibly prefund some of expected future payments."
She also suggested that the committee consider the impact of 50 percent coverage to surviving spouses. Currently, spouses contribute 100 percent to such policies.
State pension changes
Other considerations are the recent changes in the Massachusetts public pension system, which was designed to create cost savings for the state and to encourage employees to work longer.
Those changes increase the minimum retirement age from 55 to 60 for post-April 1, 2012, hires. Although the current policy change impact is very minimal, delayed retirements would generally reduce costs, Bournival said.
She added that rating agencies are now looking more closely at pension obligations and OPEB liabilities.
It is unlikely you would be downgraded, but these things should be considered," she said. "The state may at some point require prefunding."
ASRSD Finance Director Evan Katz suggested the School Committee submit the actuarial valuation along with its pension report to the state auditing committee.
School Committee Chairwoman Joyce Reischutz said Enrico Cappucci, who represents Shirley on the Joint Boards of Selectmen, had asked her to attend the Nov. 19 JBOS meeting and comment on the interest the School Committee may have if the Devens education contract were reopened.
Last summer, MassDevelopment and the Harvard School Committee signed a new contract for Harvard schools to continue to provide educational services for Devens students in grades pre-K through 12 through June 30, 2015. Devens students who are enrolled in the Harvard Public Schools at the time the agreement is terminated would be entitled to continue to attend Harvard Public Schools until they graduate.
Reischutz said members of the JBOS expressed concern that they were not informed that the contract was being renewed.
She said the JBOS is an advisory committee "so that Devens takes all the towns into consideration," and that there were one Devens, two Ayer, two Shirley and one Harvard representative at the meeting.
The whole process has been really strange," remarked School Committee member Dan Gleason.
"I had never seen a public contract with a high bidder," he said of the previous two contracts -- one for elementary school students and one for middle and high school students -- which expired on June 30. Harvard won those contracts despite having higher costs than other bidders.
"I think there should be some kind of bidding contract," he said, referencing Chapter 498, the 1993 Act Creating the Devens Enterprise Commission. You can't just keep moving kids from school system to school system.
"That is why Cappucci raised some questions about who opens the contract," said ASRSD Superintendent Carl Mock. "He feels it should be brought to the JBOS for informational purposes."
Katz relayed that there are currently 77 Ayer-Shirley students at Devens.
"These guys aren't following 498," grumbled Gleason.
Reischutz concluded the discussion by saying that the JBOS suggested the School Committee "let them know that we are out here."
Mock said the new district had sent its fiscal 2012 financial report summary to the Department of Education.
"We are wrapping up the audit and will have a draft report in a few weeks," said Katz.
"The preliminary results are that things are looking good," added Mock.
Overall, the district had a good year financially in fiscal 2012, ending with a projected $150,000 in the excess & deficiency fund.