ANAAPOLIS, Md. - Anne Arundel County is dealing with a unfunded liability of $1.3 billion in relation to retiree health benefits, a cost that is only expected to grow if no action is taken, County Executive Laura Neuman said.
To try and attack this “ongoing crisis,” Neuman submitted a bill to the County Council, which among other things proposes changes to the structure of the county's retiree health benefit program, ties contributions to length of service, makes changes to credited service for new employees, makes changes to spousal coverage and addresses how the county will participate in Medicare plans.
"This problem has been building for years and talked about for years, with no movement," Neuman said in a statement. "When I learned of this problem just weeks into my administration, I made a decision to work with our stakeholders to solve the problem - together. Every year we put off this problem, the potential deficit grows. Delaying reforms to our retiree health care plan costs taxpayers millions of dollars. The reforms that I am proposing are estimated to save $40 million towards our annual required contribution of $110 million."
According to a county news release, this move follows a Sept. 30 letter to employees in which Neuman described the under-funding of the county's retiree health care benefits. She said the county needs to set aside as much as $110 million annually to ensure that there are funds available to pay current and future retirees health care benefits. This lack of savings for retiree health care has resulted in an unfunded liability of $1.3 billion.
Currently, County employees, their spouses and their eligible dependents are receiving, upon retirement age, a health care benefit for which the county pays 80 percent of the health insurance premium costs. Retirees are eligible to receive that benefit after having worked for the County for as little as five years. Public safety workers are eligible after 20 years of service.
One of the key contributing factors that led to this deficit is that health care costs for the County have been growing at a rate of more than two times the rate of the County budget. This escalation of health care costs, combined with no consistent annual set aside for a fund for retiree health benefits, is forcing Anne Arundel County to make tough choices.
“We are not alone," said County Controller Julie Mussog in a statement. "This is a problem shared by other state and local governments, as well as the private sector; we need to address this problem now."
While the retiree health care program does not have an allocated fund, the county's pension fund is stable and has approximately $1.5 billion in assets.
Neuman said her bill includes the following highlights:
"I think we have submitted a very fair and thoughtful bill," said Neuman in a statement. "There is no perfect solution. We have worked collaboratively with our stakeholders and have heard from representatives from the county's collective bargaining unions and a number of County Council members. We understand that a similar bill is being introduced by a member of the County Council. If that happens, we will, without hesitation, support any measure that solves this problem."
After formal submission, the bill to address retiree health care benefits will likely be heard in November.
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