The Internal Revenue Service (IRS) has ruled that employee contributions to a trust fund established by Bristol, R.I., to fund post employment benefits are tax exempt. The ruling sets a precedent for other cities seeking similar solutions to pay for Other Post Employment Benefits (OPEB).

Bristol began putting aside money to cover OPEB in its 2003-2004 budget, well in advance of a 2007 deadline for providing such funding set by a Governmental Accounting Standards Board statement issued in 2004. Employees also began deducting contributions from their pay, and the money was deposited in a trust fund to be invested. “The accumulated cost and liability [of OPEB] to municipalities is sizeable,” said Sandra Matrone Mack, an attorney with Providence, R.I.-based Hinckley, Allen & Snyder, which represented the town in its appeal to the IRS.

The IRS ruled that future premium payments are also tax exempt.