Liability is a word no one is particularly fond of, but make it a $10.5 million unfunded liability and it’s positively cringe-worthy.

Due to Mattapoisett’s health insurance benefits for retired employees, that number is one officials have to address, and Town Administrator Mike Gagne is pushing for a vote to correct the problem at Town Meeting.

The federal government issued a policy approximately five years ago requiring cities and towns to evaluate the liability of “Other Post Employment Benefits” aka health insurance for retirees.

In 1956, Mattapoisett approved a statute in which the town agreed to pay 50 percent of benefits for retired employees.

“It concerns me that this is a liability that basically we haven’t addressed since 1956,” he said.

Since then, said Gagne, the town has operated on a “pay as you go” plan.

“The problem is not everyone is going to be aging and dying over a consistent schedule,” said Gagne. And if a larger number of employees retire in a particular year, the town will have a significant “bump” in insurance liabilities, he explained.

The town's Auditors said the unfunded liability will grow by $.5 million a year if not addressed, said Gagne. That could affect the town’s loan rates.

The problem is not unique to Mattapoisett, said Gagne, but many municipalities have chosen to ignore the looming debt.

“It’s becoming such a significant known liability that financial houses are looking at it and saying you can’t ignore that,” said Gagne. “I don’t want our municipal bond ratings to go in the tank.”

Gagne said the town has already made progress towards minimizing the liability. The town put aside $25,000 in a stabilization fund in 2011, doubling that to $50,000 the following year, and $100,000 in 2013. Including interest, there is approximately $190,000 in the fund today. “Mattapoisett has been on the forefront of this,” he said.

For the past several years, the town has begun to put money into a stabilization fund to limit the liability. The town also saved approximately nine percent in overall health insurance costs by adjusting insurance plans for existing employees. New hires were also put on a 50-50 insurance payment plan versus the 75-25 plan put in place in 1956.

Gagne said there are no plans to change the retirement health benefit structure, though there is talk of drafting a list of eligibility requirements at the state level.

"We're going to wait to see what the state adopts," he said.

The next step, said Gagne, is pushing for the adoption of an irrevocable trust in lieu of a stabilization fund, which would allow the town to earn higher interest rates for the $10.5 million liability. Payouts would only be available for retirement benefits.

By incorporating approximately $300,000 a year into the annual budget, plus interest from the trust, the town should be able to fully fund the liability in 30 years, said Gagne.

“Granted there will be sacrifices,” he said.

As the Finance Committee and Selectmen work on next year’s budget, they are favorable to putting the trust on the Town Warrant.

“Our Finance Committee is concerned about [the liability], and we have expressed it for a couple of years,” said Finance Committee member Gary Johnson.

Although the members haven’t voted on the trust yet, he said it looks like the best option for the town.

“The problem is still finding the money you can set aside,” Johnson said. “Nobody wants to raise taxes. We’re trying to be as conscientious as we can, and see where we can find the funds.”

And one of the most important points, said Gagne, is that something is done.

“[The trust] will fluctuate depending on earning, but at least we’re not taking that liability and casting it on future generations at a growing rate of $.5 million a year,” he said.

And saying it’s too big to deal with is not an option, said Gagne.

“That’s not gonna fly.”