Monday, September 25, 2006

Public Benefits Could Break the Bank, Part Two

A California specific focus on the issue.

An excerpt.

A look at how new accounting rules will affect California
By BOB PORTERFIELD, - Associated Press Writer Published 12:04 am PDT Monday, September 25, 2006

It has all the makings of California's next multibillion-dollar taxpayer headache.

New accounting rules require public agencies to disclose the future cost of health care and other benefits - such as dental, vision and life insurance - promised to retirees alongside traditional pensions.

In California, half the state's employees have reached retirement age or will become eligible to retire within a decade. And the death of a retiree doesn't always reduce expenses because many agencies continue providing benefits to survivors.

According to the California Department of Personnel Administration, a fully vested state employee who lives for 20 years after retirement could receive nearly $500,000 in benefits outside their pension.

All government agencies that provide health care and other non-pension benefits to retired employees are affected by the new rules, from the largest municipality to the smallest cemetery district. Here's a look at how it will impact different levels of government:


The biggest share of retiree health benefits is borne by the state.

California pays $394 to $933 per month in health care costs for each retired state employee, depending on the type of coverage and level of vesting.

The California State Public Employees Retirement System, or CalPERS, is the nation's largest pension fund. It administers health benefits for more than 180,000 retirees, but no estimate of future liabilities has been made because the state has yet to calculate its share.

Another plan, the Long Term Care Fund, which allows retired public employees and their families to pay for their own long-term care at below market rates, provided benefits to nearly 3,000 retirees and their family members in 2005. It projected its future liabilities at $2.24 billion. This could be particularly painful since the participants pay for the program out of their own pockets.