New Report: Massachusetts Municipalities Face Staggering Retiree Health Care Liabilities

The fifty largest cities and towns in Massachusetts face a $20 billion liability for retiree health care benefits that threatens to wreak havoc with local government services, according to a new report recently released by the Massachusetts Taxpayers Foundation.

The report, Retiree Health Care: The Brick That Broke Municipalities’ Backs, is the first analysis of municipal retiree health care liabilities in Massachusetts. The $20 billion represents what these governments must pay in today’s dollars for the lifetime health care benefits already earned by 150,000 current employees and retirees in the 50 communities.

According to the report finds, the retiree health care liability for these fifty communities is 99.98 percent unfunded and two-and-a-half times larger than their unfunded pension liability. The report concludes that funding these obligations would place an overwhelming burden on taxpayers.

The report offers a number of recommendations (most of which would require changes in state law) to reduce liabilities and to control the growing costs of retiree health care. These recommendations include:

• giving local officials the authority to adjust health plans outside of collective bargaining;
• contributing set dollar amounts and cap municipal contributions instead of tying contributions to a percentage of the premium;
• basing benefits on years of service as is done with pensions, rather than providing full benefits after 10 years of service;
• raising the retiree health care eligibility age from 55 to 62;
• for part-time employees, increasing the minimum eligibility hours to 1,400 per year and prorate benefits;
• ending spousal/dependent coverage for future retirees; and
• improving public access to information and centralizing reporting in the state.

To access this report, please visit:

Retiree Health Care: The Brick That Broke Municipalities’ Backs (February 2011)