Category Archives: Benefits

Weathering the Gathering Storm Over Post-Retirement Health Care Benefits—Vested or Not

Source: Jeff Sloan, Genevieve Ng and Merlyn Goeschl, CPER Journal, no. 184, June 2007
(subscription required)

The convergence of new reporting standards by the Governmental Accounting Standards Board (GASB), the rising cost of health care, and the huge number of baby boomers nearing retirement age have knocked the public employment sector on its ear. In the past, public employers typically operated on a “pay as you go” model for other post-employment benefits (OPEBs), without reference to any future unfunded liabilities. However, the new GASB rules, which began taking effect in 2005, require public employers to account for and disclose their outstanding future OPEB liabilities, in much the same way they are required to do for pension benefits. Although OPEBs include benefits like post-employment life insurance plans, disability, and long-term care, retiree health care benefits account for the bulk of the unfunded OPEBs facing public employers today.

GASB Statement 45 on OPEB Accounting by Governments – A Few Basic Questions and Answers

Source: Governmental Accounting Standards Board, Statement 45 on OPEB Accounting by Governments – A Few Basic Questions and Answers

1. Why was Statement 45 on OPEB accounting by governments necessary?
Statement 45 was issued to provide more complete, reliable, and decision-useful financial reporting regarding the costs and financial obligations that governments incur when they provide postemployment benefits other than pensions (OPEB) as part of the compensation for services rendered by their employees. Postemployment healthcare benefits, the most common form of OPEB, are a very significant financial commitment for many governments. ….

The Illinois Public Pension Funding Crisis: Is Moving from the Current Defined Benefit System to a Defined Contribution System an Option That Makes Sense?

Source: Jourlande Gabriel and Chrissy A. Mancini, Illinois Retirement Security Initiative, A Project of the Center for Tax and Budget Accountability, 2007

from the press release:

Springfield, IL (Monday, May 7, 2007) – A new study released today at the Statehouse has found that – contrary to widespread perception – switching from Illinois’ current defined benefit system to a defined contribution system will do nothing to solve the state’s $40.7 billion unfunded pension liability and would likely result in much lower retirement benefits for public employees and higher costs for taxpayers.

The study, “The Illinois Public Pension Funding Crisis: Is Moving from the Current Defined Benefit System to a Defined Contribution System an Option that Makes Sense?”, was conducted by the Illinois Retirement Security Initiative, a project of the Center for Tax and Budget Accountability. The study finds that the conventional wisdom that switching to a defined contribution system will solve the state’s massive unfunded public employee pension liability is provably false.

Working Sick, Getting Stiffed: How Some of America’s Biggest Companies Fail Their Workers and Jeopardize Public Health

Source: Association of Community Organizations for Reform Now, Inc. (ACORN), March 1, 2007

ACORN’s Healthy Workers, Healthy Families Campaign calls on businesses to provide workers with a fair number of paid sick days a year. We also call on Congress and state legislatures to pass laws guaranteeing that all workers have paid sick days.

Nearly half of American private-sector workers have no guaranteed paid sick days – yet everyone gets sick and everyone needs time to get well. Workers also have families and responsibilities to care for sick children and other relatives who need them.

ACORN called 50 of the largest food service and retail companies operating in America and asked if they provided their hourly workers with paid sick days. Despite the close contact with the public that characterizes jobs in these industries, a near-majority of the companies for which we gathered information were clear that they did not offer paid sick days to hourly employees.

Consumer-Driven Health Care in Its Adolescence

Source: Kevin O’Hara, Employee Benefit Plan Review, March 2007

As the groundswell continues for the implementation of the American health care model’s latest panacea, consumer-driven health care (CDHC), it becomes important to take a moment or two to review the progress to date. The popularity of CDHC plans has grown steadily in recent years with projections for their adoption rate to accelerate as early missteps are corrected. Difficulties encountered in the communication and administration of CDHC benefits short-circuited extremely optimistic early forecasts of their penetration rate as a percentage of all sponsored plan offerings. Recent surveys, such as the Kaiser Family Foundation Employer Health Benefits 2006 Annual Survey, indicate a continued increase in CDHC enrollment but at a much reduced rate than first anticipated.

The Great Divide: When Kids Get Sick, Insurance Matters

Source: Families USA, Publication no. 07-102, February 2007

Extensive research has documented the positive effects that health insurance has on a child’s physical, developmental, social, and emotional health. Children who have health insurance are more likely to have a relationship with the same doctor over time, receive regular well-child checkups, and have their medical, dental, vision, and other health care needs met. But what happens when an uninsured child is seriously injured or develops a condition that requires hospitalization? Does health insurance make a difference in the child’s treatment and health outcomes? The answer is an emphatic “yes.”

Unwilling Volunteers: Tennesseans Forced Out of Health Care

Source: Families USA, Publication no. 07-103, April 2007

In 2005, Tennessee Governor Phil Bredesen made the largest cuts in health coverage in our nation’s history. Thousands upon thousands of people were dropped from TennCare, the state’s innovative Medicaid program. Others who remained in the program had their benefits slashed. It was obvious that these drastic cuts would cause enormous harm. The governor, however, dismissed these concerns and moved forward with his plan.

Governor Bredesen not only touted his plan within Tennessee, but he also recommended that other states make similar changes. At the time he was promoting Medicaid cuts, many states were facing budget crunches and looking for ways to cut costs. The TennCare cuts became a potential forerunner of what could happen to health coverage programs across the country.

Against this backdrop, it is instructive to look beyond the numbers and see what has happened to the real people affected by the TennCare cuts—that is what this book is designed to do.

San Francisco’s Paid Sick Leave Law: A Canary in the Coal Mine?

Source: Maureen Minehan, Employment Alert, Vol. 24 no. 5, March 1, 2007
(subscription required)

In November, voters in San Francisco approved proposition F, a bill that requires employers within San Francisco’s city and county limits to provide an hour of sick leave to full-time, part-time, and temporary employees for every 30 hours worked. While it may be tempting to dismiss the law as something only a liberal city such as San Francisco would pass, doing so would be a mistake. Similar laws have been introduced in state legislatures and a federal paid sick leave bill is pending before Congress.

Old Promises, Emerging Bills: Considering OPEB in Public Finance Ratings

Source: Fitch Ratings, March 22, 2007
(subscription required)

As the first deadline for implementation of Governmental Accounting Standards Board Statement No. 45 (GASB 45) approaches, Fitch Ratings has further developed its thinking on the credit implications for state and local governments of providing long-term funding for other post-employment benefits (OPEB). This report follows up on Fitch Research in June 2005 titled “The Not So Golden Years (Credit Implications of GASB 45)” (available on Fitch’s web site at www.fitchratings.com). It focuses on how the various approaches to managing and funding the liability will affect Fitch’s credit analysis, rather than on meeting the reporting deadlines set forth by GASB 45, as Fitch expects such compliance from issuers it rates. Failure to comply will be considered a weak management practice. This report also examines several governments that have taken prudent actions related to OPEB.

Health Savings Accounts in National Compensation Survey Data

Source: Alan Zilberman, Bureau of Labor Statistics, November 29, 2006

The Bureau of Labor Statistics (BLS) recently reported that 6 percent of private industry workers have access to a health savings account (HSA), a relatively new kind of employer-provided health benefit. These data were published in the summary National Compensation Survey: Employee Benefits in Private Industry in the United States, March 2006. Data on HSAs currently are available for 2005 and 2006. BLS plans to continue to collect HSA data on workers in private nonagricultural industries.