[Dec 18, 2006]
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).
