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Legacy retiree healthcare costs under control

By Lisa Brody


In a presentation to Bloomfield Township trustees on Monday, August 28, finance director Jason Theis explained the township's legacy costs of defined benefit and defined contribution retiree health care costs are proceeding well towards their funding mandates and are being overseen by an outside actuarial firm, Milliman.


Theis explained that there are two forms of legacy costs, pension and health care, in the form of defined benefit, which is a fixed, pre-established benefit for employees at retirement. It has been closed to new hires in the township since 2005, other than for fire, which has been closed to new hires since 2007. As of January 1, 2023, it is 89 percent funded.


Theis said for the defined benefit pension fund, as of Milliman's latest actuarial report, there are 99 active retirees that are still eligible to receive that benefit, and 15 inactive, who are no longer working for us but worked long enough to vest some sort of benefit. Overall, there are 309 retirees and beneficiaries that are already benefitting from the fund.


In order for the township to determine how much it will have to contribute for the upcoming fiscal years, Theis said the most recent pension actuarial uses January 1, 2023 census information for fiscal year March 31, 2025, which is the end of the township's next fiscal year.


“2022 ended with a decline in the market value of invested pension assets of 6.2 percent – the largest decline in the past five years,” Theis said. “The actuary's assumption is to earn 6 percent a year. I would equate that to a market loss of almost $29 million at the time this report had to be done.”


Theis said it affected the long-term forecast, as it was projected that the defined benefit payment was to have been $4.7 million; the actual payment because of the market loss in 2022 will be $5.57 million.


The other legacy plan is the defined contribution retiree health care plan, which is also referred to as OPEB – other post-employment benefits plan. Like the pension fund, it was closed to new hires in 2011. Now, all new hires since have been enrolled in health savings accounts.


Currently, there are 123 active retirees using the defined contribution retiree health care plan; two inactive; and 380 retirees and beneficiaries. As of March 31, 2023, it was 22.6 percent funded. Until 2012, the township approached it as a “pay-as-you-go” plan with a minimal balance. Treasurer Brian Kepes noted that between 2012 and 2022, the township has contributed $17.7 million, with the assets held in five separate investment portfolios.


Public Act of 2017 requires more reporting and funding of OPEB accounts by municipalities, and determined that Bloomfield Township was underfunded because it was less than 40 percent funded – “it was only 3.4 percent funded at that point,” Theis said. “It must be at least 40 percent funded by 2047, 30 years after the enactment of the law.”


As of April 1, 2022, the value of the OPEB accounts was $22.6 million, 22.8 percent funded.


“Our most recent corrective action plan filed with the state illustrated we could be 40 percent funded by 2032, and 100 percent funded by 2042 – before the end date,” Theis reported.


After the presentation, supervisor Dani Walsh asked the actuary if the township was on the right track moving forward. He responded that continuing to fund a percentage above what is required by the state is great, and “currently, the approach is really solid.”

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