Balancing Dollars and Health Sense: A Framework for Decision Making on Funding State Retiree Health Care Benefits
Now that state and local governments have begun to account for their future retiree health care costs (as opposed to using the traditional “pay-as-you-go” method to fund benefits), it has become clear that many retiree health plans are not adequately funded. Michigan’s is one such plan, with an estimated $22.7 billion in unfunded liabilities.
This report examines several states’ funding models and makes a set of recommendations to help Michigan policy makers better understand the scope of the issues and the options they may want to consider to reduce the state’s unfunded liabilities. Among the report’s recommendations are:
- Establish a nonpartisan commission to develop a plan and keep the public and state employees
informed of its progress. - Create an irrevocable 115 Trust Fund and consider multiple approaches to fund it.
- Merge administration of plans managed by the state as much as possible to unify the purchasing
process and increase bargaining power, while keeping employee group plans separate. - Assure current retirees they will receive promised benefits.
- Balance the need to control costs with the need to keep the plans affordable for employees.
- Include incentives for employee wellness.
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