Connecticut Unfunded Liability Reduction Plan: Ideas for Coral Gables
September 8, 2010 Leave a comment
Other governments are facing the same issue of unfunded liabilities for pension and health benefits. The following is a proposal from the Governor of Connecticut to face a large unfunded liability of $34 billion.
Very important to note that not only does the pension fund have unfunded liabilities, but the unfunded health benefits are also larger in Connecticut.
In some regard these changes seem tougher than the changes that are being explored with the unions by the City of Coral Gables.
The proposals include establishing a defined contribution plan for new employees, capping pension salaries at $100,000, increasing the normal retirement age to 65 and the early retirement to 60, and hiking the early retirement penalty.
The plan includes
Under a recent state union agreement, current employees with less than five years of service and all new employees must contribute 3% of their earnings to help pay for retiree health benefits. Previously, there was no contribution from active employees to fund retirees’ health plans. [Does this remind you of Coral Gables.]
Establishing a rule that there would be no cost of living adjustment (COLA) in years where there are negative investment earnings.
Moving final average salary computation from three years to five years for pension purposes.
Reducing the timeframe for buying back military and other service.
Reducing the anti-spiking provision from 30% to 18% over the previous two years’ earnings.
The governor called for changes in the “Rule of 75” to a “Rule of 80” for retiree health insurance and increasing the premium share for every five years of service below 25…
[The Governor] also wants to increase the premium share for retiree health insurance to active rates for the former employee and a higher amount for dependents and wants to reduce long-term health cost trends through service delivery changes such as higher co-pays for emergency room and specialist visits…
“…The problem in Connecticut has accumulated over decades, to the point where we have about $25 billion in unfunded liabilities for retiree health benefits and about $9 billion for retiree pensions.”