MOUNT PLEASANT -- The town could owe up to $20 million in 10 years unless it makes changes to its current employee retirement package.

Mayor Billy Swails said the matter is the biggest problem facing the town in the next decade. Under the current system, a retiree with 20 years of service pays 5 percent of health insurance premiums. The town picks up the rest.

"It's a sweetheart deal," Swails said. The arrangement between the town and retirees continues even when a retiree reaches 65 and is eligible for Medicare. In that case, the town pays 95 percent of a supplemental policy.

"We're going to run this town as a business. I can't think of any other business that offers this to employees," he said.

Those already retired will not be affected, but the more than 500 current town employees could see their retirement package shrink.

Starting in the 1980s, the town offered a lifetime of attractive retirement medical insurance in lieu of more pay. But it never put away a dime to pay for the promised benefits, Town Administrator Eric DeMoura said.

The estimated $20 million unfunded liability could affect the town's ability to provide services or make improvements such as new roads. Worst case scenario, the situation could bankrupt the town, he said.

Options on the table include raising the "vesting period" from five years to 20 years.

"No one owes you anything unless you've been here 20 years," DeMoura said.

He will make a recommendation to Town Council on how to address the problem.

In 2008, the city of Charleston dealt with the issue when it took steps to end taxpayer subsidies of retiree Medicare supplemental policies, said Steve Bedard, the city chief financial officer.

However, the city uses its buying power to offer Medicare supplemental policies at more attractive rates than an individual retiree could buy on his own.

"We don't put in a penny after someone turns 65," he said.

In North Charleston, retirees who worked for the city 20 years pay half of the cost of medical insurance premiums. Retirees with the city 30 years pay 33 percent. When a retiree reaches age 65 and is eligible for Medicare, he is dropped from the city health coverage, said city spokesman Ryan Johnson.