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e-Li: Electronic Library

Unfunded Pension or Other Post Employment Benefits (OPEB)

Unfunded pensions and Other Post Employment Benefits (OPEB) are considered an obligation of a county, and generally are long term in nature. These obligations were established when a government made promises to employees to be paid out at a future time with future revenues. These promises, in one sense, are no different than the current promise to pay obligations of notes, bonds and leases. However, the treatment of unfunded pensions and OPEB are entirely different. Further, most Tennessee county governments are members of the Tennessee Consolidated Retirement System that holds the retirement assets, and thus these liabilities. If any unfunded pensions exist, they are held by the retirement system. County obligations, if any, are OPEB. An example is when a county has promised retired employees that the local government will pay a portion of the health insurance premium until the retired employees are Medicare eligible. Thus the employee is no longer working, but is receiving benefits where the cost of the benefits has not been set aside into a trust. Tennessee law allows a local government to issue debt for certain unfunded pension obligation (reference T.C.A. § 9-21-127).