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Message to County Employees Lays Out Retiree Health Care Crisis and Reform

Publish Date: 09/30/2013

Retirees’ Health Care Benefits Underfunded by $1.3 Billion



Annapolis, MD (September 30, 2013) –  County Executive Laura Neuman has been holding a series of employee town hall meetings in which she has been thanking employees for their service, listening to their concerns and sharing information about important County issues. One of those emergent issues is retiree health care benefits.


Based on the County’s latest actuarial findings on employee health care benefits, coupled with an extensive report by three County Council members and representatives of the County’s collective bargaining unions, the County Executive today sent an electronic message to all employees explaining the situation and indicating her intention to work with her County Council colleagues and unions to find a solution that will fund employee retirees’ health care benefits while also keeping the County’s finances solvent.


“I applaud the work of the Collaborative Benefits Committee for their leadership and hard work on a report that paints an ominous but realistic picture of our finances based on our employee retiree health care obligations,” said Executive Neuman. “I asked our Finance Department to conduct additional assessments and they uncovered an even more desperate situation that requires immediate attention.”


To date, the County has underfunded the amounts needed to pay the costs of retirees’ health care benefits – commonly referred to as the OPEB (other post-employment benefits) unfunded liability. The number most often discussed is an annual funding need of $72 million. The latest actuarial figures, however, put this need at a much higher level; in fact, the County will need $110 million annually – 53% more than the $72 million annually estimated. This has resulted in retirees’ health care benefits being underfunded by $1.3 billion. To put this in perspective, $1.3 billion is the equivalent of $2,400 for every resident in Anne Arundel County. If the County funded the annual shortfall, it would need to have every man, woman and child pay $160 every year for the next 30 years. That $1.3 billion deficit grows every month and puts at risk Anne Arundel County employees, retirees and taxpayers.


Today, County employees and their spouses are receiving, upon retirement age, a health care benefit for which the County pays 80 percent of the health insurance premium costs. Retirees are eligible to receive that benefit after having worked for the County for only five years. Public safety workers are eligible after 20 years of service.


“The cost of providing that level of benefits is simply unsustainable,” Executive Neuman said. “Benefit costs need to be managed through changes to the amount Anne Arundel County will share in the employer’s costs, as well as the number of years an employee has to work before becoming eligible for this particular retirement benefit,” Executive Neuman added.


“I stand at the ready to work with our County Council and bargaining unions – whether that means introducing legislation together or supporting legislation introduced. I will support anything that keeps our County’s finances stable, protects taxpayers’ dollars while at the same time giving our employees peace of mind during their retirement years.”


A copy of the electronic message to employees is attached.

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