SUNBURY -- An unfunded state mandate that requires municipalities to plan ahead for retired employees' health care could cost the city $150,000 annually for the next few years.

City Councilman John Shipman said the Governmental Accounting Standards Board issued the directive, known as GASB 45, to make government employers accountable for their retirees' health benefits.

The city plans to enter into a contract with Conrad Siegel Actuaries, of Harrisburg, to have the firm perform an actuarial study. The study will project the cost of health care for the city's 15 retired police officers, the only retired employees who receive benefits, over the next several years.

Based on that information, Shipman said, the city will have to begin setting aside money every year into a liability fund to pay off the future cost of the retirees' benefits.

The problem is, the city also will have to continue to pay for health care for retired officers out of the general fund while they're building up the liability fund, he said.

The city already pays $250,000 a year for benefits for retirees. Funneling money into the liability fund could cost the city an additional $150,000, according to Shipman. That figure is based on what the city puts into its liability fund for pensions.

That cost will recur for at least the first few years while the city pads the health care liability fund, he said.

The city pays about $800 a month for health benefits for a single retired officer and just north of $1,500 for families.

Starting with the 2010 budget, the city will have to begin channeling money into the fund.

City clerk Terry Specht said implementation of GASB 45 is scheduled by population and larger municipalities have already begun the process.

"The good news is the current police officers are not entitled to retirement health benefits," Shipman said, noting that the city eliminated that clause from the police contract in 1988. "So at least our future liability is not going up."

There's a possibility the state might help shoulder the financial burden, but Shipman said he's not holding his breath.

"Any idea the state might help is purely speculation," he said. "I think the state is just sitting back to see how bad it really is. If it ends up a catastrophe, I think the state will step in."

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