How Local Governments Are Addressing Retiree Health Care Funding

Source: Jerrell D. Coggburn, Center for State and Local Government Excellence, August 2010

From the summary:
This new issue brief finds that the economy has slowed the ability of local governments to address long-term funding of their retiree health care obligations.

The brief follows up on a 2009 survey in which 206 local governments indicated they were likely to adopt a long-term strategy to strengthen their retiree health care funding, including

* establishing a Section 115 trust (governmental); medical subaccount [401(h)]; or Voluntary Employee Beneficiary Association (VEBA) trust [501(c)(9)];
* issuing OPEB bonds;
* increasing the years of service for vesting for RHC;
* increasing the age at which RHC is available;
* terminating retiree health care for all new hires.

Since then, the economy, insufficient revenues, and competing budget priorities have posed the greatest impediment to their plans.

The new brief finds that many jurisdictions are making sweeping changes in their retiree health care plans:

* 36 percent have increased or plan to increase the years of service required to vest.
* 11 percent have increased the retirement age.
* 39 percent have eliminated or plan to eliminate retiree health benefits for new hires.

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