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States Begin Taking Steps To Address Collective $1 Trillion Unfunded Retiree Health Care Liability
State and local governments have begun to take "aggressive steps" to reduce liabilities of more than $1 trillion for health benefits for about 25 million current and future retirees as a result of a new accounting rule that took effect on Friday,
USA Today reports (Cauchon,
USA Today, 12/18). Under the rule, established by the Governmental Accounting Standards
Board, state and local governments for the first time must report their current and future liabilities for health and other benefits -- such as dental, vision and life insurance. State and local governments must pay their liabilities over a 30-year period (
Kaiser Daily Health Policy Report, 11/2). In response to the rule, state and local governments have begun to reduce retiree health benefits, allocate funds to cover future liabilities and shift costs to Medicare. For example:
- The West Virginia pension board on Wednesday plans to vote on a measure that would shift prescription drug coverage for retirees to Medicare;
- North Carolina will require state employees hired after Oct. 1 to work 20 years, rather than five years, to qualify for full health benefits;
- The San Diego City Council this month eliminated retiree health benefits for some city employees; and
- South Carolina Gov. Mark Sanford (R) plans to propose a $245 million trust fund to help cover liabilities for retiree health benefits, and Georgia, New York City, Vermont and Virginia have established or considered similar trust funds.
Ted Cheatham, director of the
West Virginia Public Employees Insurance Agency, said, "By tackling this early, we hope to save money in the long run." Charles Agerstrand, a retirement consultant for the
Michigan Education Association, said, "These benefits are affordable as long as we do something now. If not, we're heading for a major collision" (
USA Today, 12/18).
"Reprinted with permission from
http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at
http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation . © 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.
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