A brief look at "Other Post Employee Benefit Plans: A Case for Shifting to the Defined Contribution Approach", or, what's going to become of the sick leave conversion program
http://www.alec.org/AM/Template.cfm?Section=Public_Employee_Other_Post_Employment_Benefit_Plans&Template=/CM/HTMLDisplay.cfm&ContentID=15517
Article summary: "The solution to the funding crises in state pension plans will require fundamental reform. Everything should be on the table, including changes in benefits and increased employee contribution rates, as well as employer contribution rates. These plans should consider replacing their defined benefit plans with defined-contribution plans for new employees."
A ~30 page discussion, which is more informative than the 1 second sound clip of "We're broke" on repeat.
link: http://www.alec.org/am/pdf/tax/alec_opeb.pdf
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- Page 7 is interesting. They focus on a $5/hr difference in benefits while they show a wage difference of $6/hr, using simple percentages instead to divert attention. Could it be because the higher wages are justified as perhaps the jobs you are comparing are not apples to apples? Seems to me that if you wanted to rag about cost, you'd rag about the $6/hr wage difference, not the $5/hr benefits difference.
- Read the right hand column on page 15. I've copy and pasted it here for your perusal.
The Decrease in Private Sector Retiree Health Benefits
Not surprisingly, private sector companies began
to reform their retiree health benefits to reduce
or eliminate these costs. From 1997 to 2008, the
share of workers in the private sector who were offered
health benefits in early retirement fell from 31
percent to 22 percent. Over this same time period,
the share of workers eligible for Medicare in the private
sector who were offered health benefits in retirement
decreased from 28 percent to 17 percent
(Fronstin, 2010).
This trend away from retiree health benefits was even
greater in large private firms with more than 500 employees.
The share of these firms offering health benefits
to early retirees decreased from 46 percent to
28 percent while the retiree health benefits to Medicare
eligible retirees in these firms decreased from
40 percent to 21 percent (Fronstin, 2010).
By 2006, more than half of large private sector employers
had closed their subsidized retiree health
benefits to new employees. Many firms continued
to offer retiree health plans, but required employees
to pay the full cost of the health insurance. These
are referred to as “access only” plans. In 2009, 46
percent of private sector employers offered “access
only” plans to early retirees and 41 percent offered
these plans to Medicare-eligible retirees. Many retirees
continue to enroll in these “access only” plans because the group-based premium for health insurance
is lower than that available in the non-group
market (Fronstin, 2010).
me
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While it may be a reality it is not a triumph. Corporations are forgoing healthcare at an alarming rate because they found they can dump folks on Medicare. No wonder the costs of Medicare are skyrocketing? Of course, the tea party also has an axe of grind with Medicare costs, with a $500M cut in Wisconsin alone, and refuse healthcare reform that could lower costs. This is a 'have cake and eat it too' moment.
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- The bottom left hand column on page 17 argues that bailing out pension and health plans is bad. Fine, but if we are unwilling to socialize this risk, why should I as a taxpayer be willing to socialize the risk of a corporation? Why are the states not 'too big to fail', yet the banks are? Mixed message much? I agree that California is in one hell of a world of hurt, but I'm not sure Wisconsin is California.
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- From page 27:
Legislators have an incentive to offer generous retiree health insurance plans as an alternative to higher wages and salaries. The latter must be paid for out of current budgets while the cost of retiree health insurance is deferred to the future. If unfunded liabilities accumulate in these plans, those costs will also be incurred by future generations. Another moral hazard is introduced if state legislators anticipate that the federal government will bail them out when they cannot pay for the generous pension and health benefits they have promised to retirees. In short, all the incentives are wrong in defined-benefit retiree health plans. Rather than address the problem of growing unfunded liabilities in OPEB plans, the incentive is to defer the problem to future generations.
me
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I started thinking to myself at this point; you know, they're right. Shame on us public workers for accepting deferred compensation. Boy were we idiots. We should have demanded the $$$ up front.
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And finally, another shoutout to a Tier 1.5 friend
- Page 2: Thanks, University of Kansas School of Business!
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