Friday, May 7, 2010
I was in training the past couple days and we talked quite a bit about OPEB (other post employment benefits). Right now as far as the accounting profession is concerned that has the highest probability of bankrupting local and municipal governments in the next few years. The underlying fundamental concept is the implied rate subsidy that is provided by allowing retirees to participate in government health care plans. Since they’re older they cost more to insure and drive the rates up for the plan as a whole. It’s a recent development that governments have had to start recognizing the liability in the past few years. As the baby boomers retire over the next few years this could easily push the liability so high that the overall fund balance goes negative and the local government then may proceed with bankruptcy as I understand it.
Posted by Paul Alldredge at 1:49 PM