Retiree Health Plans in the Public Sector

Retiree Health Plans in the Public Sector

Is There a Funding Crisis?

Robert L. Clark and Melinda Sandler Morrill

While retiree health plans are a dying benefit in the private sector, all US states and many local governments extend health insurance coverage to their retired employees. This book is the first to thoroughly examine public sector health insurance plans. Retiree Health Plans in the Public Sector provides a detailed description of the current plans offered and compares how they vary across states.

Chapter 4: Funding and Liabilities of State Retiree Health Plans

Robert L. Clark and Melinda Sandler Morrill

Subjects: economics and finance, public sector economics, social policy and sociology, ageing

Extract

Every state offers its employees the opportunity to remain in the state health plan after they retire, provided the employee has reached the retirement age and has sufficient years of service. In this chapter, we review how the liabilities of state retiree health plans are calculated and what factors are important in determining the extent of unfunded liabilities in a given state. We also present an analysis of the total unfunded liability levels in the United States. As we learned in Chapter 3, retiree health plans differ substantially across the states. Chapter 5 explores how the differences in the plans have led to tremendous variation in the annual cost and unfunded liabilities associated with this employee benefit. We see that while some states are facing staggering levels of unfunded liabilities, other states have more manageable financial liabilities. Only recently has the cost of retiree health plans in the public sector received much attention. The rapid increases in the annual cost of providing health insurance to retirees and the newly released financial data have produced a reassessment of these plans in many states and demands for a more comprehensive analysis of retiree health insurance in the public sector. Chapter 1 described the accounting rules issued in 2004 by the GASB requiring government employers to prepare actuarial reports detailing the accrued liabilities associated with their retiree health plans. The calculations required by the GASB 45 rule are based on the parameters of the health plan provided to retirees, the population covered by...

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