Magazine article Public Management

Accrued Health Care Benefits

Magazine article Public Management

Accrued Health Care Benefits

Article excerpt

Public managers across the United States often ask me how they can provide affordable health care benefits to their retired employees. For some public officials, this is one of the most difficult challenges they face today.

Even for the most experienced public officials, meeting health care obligations to retirees without depleting government budgets is an enormous challenge, especially when making decisions that might alienate taxpayers, current or former employees, or both.

Consider that the cost of health care benefits for employers has been increasing dramatically for years, and no consensus exists as to when double-digit inflation in health care costs may end.

Next, consider a new rule from the Government Accounting Standards Board. The GASB rule requires that the costs for retiree health care benefits earned by individuals while employed should be accrued while they are employed. Additionally, employers who have been promising these benefits and not setting assets aside to pay for them have created an accrued unfunded liability that must be accounted for under the new standard. This change could generate a financial liability that might weaken many local governments' balance sheets, already under pressure from budget constraints and pension funding shortfalls.

Fortunately, a solution is available to public managers: employer retirement health investment programs. These separate, dedicated trusts--like ICMA-RC's VantageCare RHS Employer Investment Program--help employers to put aside funds to meet their anticipated obligations. …

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