COLUMBUS — Seeking to keep its health-care fund solvent until it can afford to put money back into it, the Ohio pension system that represents most state and local government workers on Wednesday reduced benefits for current and future retirees.
The board of trustees of the Ohio Public Employees Retirement System voted 9-2 to end its group coverage for retirees under the age of 65. Instead it will partially subsidize their cost of purchasing policies on the open market.
The changes, which will take effect in 2022, would also reduce the base monthly allowance for retirees over the age of 65 who use the pension system's health-care fund to supplement their Medicare coverage.
Future retirees may have to work longer to be eligible for health-care benefits.
State law requires the pension system, the largest in Ohio and 12th largest in the nation, to provide for the pensions of its 1.1 million members, but health-care coverage is optional.
“The employer contribution must first go to fund pension and secondarily it can go to fund health care,,,,” Karen Carraher, the system's executive director, said before the vote.
In addition to the employees' contributions of 10 percent of salary and investment earnings, OPERS needs the entire employer contribution to bolster the pension fund.
“That leaves nothing to fund health care,” Ms. Carraher said. “The last good numbers show us that the health-care fund, with the amount that's in there, could last 11 years with no additional funding. That health-care funding is supposed to cover both current and future retirees.
“Also, based on current projections, we would not be able to contribute to health care for at least 15 years,” she said. “So obviously the math doesn't work.”
The fund last year reduced its investment earnings projections for the pension side of the system, so the 4 percent of employer contributions that would have otherwise gone into the health-care fund have instead gone into the pension side.
The pension fund has a projected $24 billion unfunded liability. The board voted in September to ask state lawmakers to allow a one-time, two-year freeze in its cost-of-living increases in pension checks, beginning in 2022, to reduce that by $3.4 billion. It would also reduce the estimated time period needed to erase the shortfall from 27 to 21 years.
Changes in mandatory pensions require legislative approval. Health-care changes, as an optional offering, do not.
“Anyone currently receiving health care will continue to receive health care,” Ms. Carraher said. “They're not being kicked out.”
But there will be reductions, with the biggest changes coming for those who choose to retire before age 65.
The health-care fund currently pays for between 51 percent and 90 percent of the health-care costs for that population. The board voted to end that group coverage and instead provide a base monthly allowance of $1,200 for the first three years to help subsidize premiums, deductibles, and co-payments in the private insurance market.
Individuals, however, can receive anywhere between 51 percent, and 90 percent of that $1,200 base, depending on a variety factors such as age, years of service, and whether they are in populations that had been grandfathered in under previous reforms enacted over the years.
Ms. Carrahar agreed with a board member's concern that $612, or 51 percent, may not go very far in today's health-care market.
“The under-65 population, their world is rough,” she said.
For the over-65 population, the new monthly allowance base to supplement Medicare coverage will be $350. That's a decrease of $100, but the reduction in actual monthly payments would range from $51 to $90, again depending on which category the retirees fall into.
The changes also try to address inequities that have crept into the system over the years as a result of groups of retirees who had been grandfathered in, or protected from prior cuts. Some members with 30 or more years under their belts have complained that others with a fraction of their time currently receive more because they'd been grandfathered in.
“I'm not saying that [members] like it, but they do understand it, and they accept it, as we have been out presenting,” said Allen Foster, the system's director of benefits administration
The two negative votes came from Randy Desposito, the board's representative for non-teaching college and university employees, and Tim Steitz, representative for miscellaneous employees.
Mr. Desposito is the president of AFSCME Local 2415, which represents a significant number of employees at the University of Toledo Medical Center, the former Medical College of Ohio.
Mr. Desposito said that, while he agrees that changes need to be made, he opposed Wednesday’s vote because the same retirees, who live on a fixed income, will also face a two-year freeze on cost of living increases, something approved by the board several months ago.
“Really in my opinion I thought it was adding insult to injury," he said.
Mr. Desposito also said that increased contributions, potentially from both employees and employers, should be considered to sure up the pension plan, rather than cuts to benefits.
The board represents one of five Ohio public employee pension funds, not all of which still offer health care as a perk. The other funds cover teachers, other school employees, police and firefighters, and the highway patrol.
First Published January 15, 2020, 7:55 p.m.
