Government leaders press California Public Employees' Retirement System to create fund for future retiree health benefits
Motivated by a change in accounting rules, city and county government leaders are pressing California Public Employees' Retirement System (CalPERS) to set up a fund in which their agencies would annually invest tens of millions of new dollars to cover future health benefits for retirees. CalPERS is seeking legislative approval. Recent accounting rules changes require officials to book the long-term cost of employee health retirement benefits on balance sheets and disclose how much is needed each year to fund the entire obligation. Because of medical inflation and an aging population, few agencies have extra funds to cover future benefits, with less than 10% having put money aside to cover future costs. Most government agencies are just beginning to assess their liabilities and map out a payment strategy. While officials are not compelled to set aside money to pay down the debt, experts anticipate many governments will start socking away some funds, often turning to giant pension systems such as CalPERS to invest the money, because carrying such a large liability wouldn't look good to their credit rating agencies. "For a number of districts, it would be a lot more convenient for them to have (CalPERS) as an option," says Neil McCormick, executive director of the California Special Districts Association. CalPERS would have to set up its own actuarial consulting unit and recruit new employees with expertise in the retiree health benefits field in order to educate smaller public agencies about their options. The California School Boards Association (CSBA) has established a similar program for elementary and high school districts, with three districts committing to the program so far. CSBA has met with over 100 districts to inform them of the new accounting rules and their new program.
Sacramento BeeBy Gilbert Chan
[Link to full story][
Editor's Note: The new accounting rules referred to in the above article are laid out in Governmental Accounting Standards Board Statement 45 (GASB 45). For additional information on GASB 45 and on the CSBA program, see below.]
[NSBA School Law pages on GASB 45 deadlines]