Retiree health program proposes solvency plan

November 7, 2013 • State News

SANTA FE, N.M. (AP) — State and local government workers and taxpayers would chip in an additional $90 million a year to improve the finances of a program providing health care insurance to retired public employees under a proposal endorsed by a legislative study committee Thursday.

Mark Tyndall, executive director of the Retiree Health Care Authority, said the health care program is projected to run out of money in 2029 if nothing is done, but solvency would be extended to 2043 if the proposed increases in payroll contributions become law.

The Legislature’s Investments and Pension Oversight Committee endorsed the proposal on a 5-3 vote, agreeing to introduce the measure in the legislative session that convenes in January. The governor and Legislature must approve any contribution increases before they could take effect.

For a government worker or educator earning $40,000 annually, the proposal would cost an extra $300 a year once the higher payments are fully implemented. A worker’s payroll contribution rate would increase by 0.75 percent over three years, starting in July.

For the same worker earning $40,000 a year, a governmental employer would pay an additional $600 annually once a proposed 1.5 percent payroll contribution rate increase is phased in over six years.

Under the proposal, about 100,000 public employees would make an additional $30 million in annual payroll contributions while governmental employers — meaning taxpayers — increase their payments by $60 million a year once the increases are fully implemented.

The health care program is financed by government workers and taxpayers as well as insurance premiums paid by about 55,000 retired public employees. The program also receives investment income from its balances of about $300 million.

Tyndall said the authority’s governing board has taken steps to improve the long-term finances of the health care program by raising insurance premiums for retirees and their families, scaling back insurance plans to require higher co-pays and deductibles, and requiring retirees to pay a greater share of prescription drug costs.

“Everyone has had to step in and make some sacrifices,” he said.

The projected cost of providing insurance benefits to future retirees is about $3.6 billion greater than the program’s assets and anticipated revenues. That unfunded liability has dropped from $4.1 billion in 2007, however.

But opponents expressed reservations about requiring current workers to increase their payments when there’s no guarantee the health care program will remain solvent beyond 30 years.

“All this does is kick the can down the road,” said House Republican Leader Donald Bratton of Hobbs.

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