How Local Governments are Addressing Retiree Health Care Funding

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As health care costs and the number of retirees increase, state and local governments are closely examining their approach to post-employment benefits other than pensions (OPEB). Although a number of governments have made promising starts, the fact remains that there are hard decisions to be made about who is eligible for retiree health care coverage and when.

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

  • 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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