Actuary Updates Lansing Retiree Health Care Gap Estimate

0

LANSING – Bad news: Lansing faces a looming deficit estimated at hundreds of millions of dollars over the next few decades.

The good news is that the city is finally starting to invest enough money to cover the costs of its retirees’ inheritance, an actuary told city council this month.

Lansing has not set aside enough money to cover the city’s future health care and pension costs for retirees. Yet the latest estimate, presented by Greg Stump with Boomershine Consulting Group, fixes Lansing’s unfunded liability for retiree health care at $ 247 million, a reduction of several million dollars.

Stump is still working on an updated estimate of Lansing’s unfunded pension liability, which should be available later this year, said city strategy director Judy Kehler.

A city’s total inheritance costs include its unfunded liability for retiree health care costs and retirement costs.

After: Lansing City Council agrees to use grant and city money to hire five new police officers

Winners and losers: A Guide to Grand Lansing’s Imbalanced Post-COVID Economy

Lansing’s estimates of its total unfunded liabilities have fluctuated by hundreds of millions of dollars over the past few years. Factors such as the health of the stock market and the estimated lifespan of employees can affect the projections.

A report submitted by Lansing to the Michigan Treasury Department in December for the fiscal year ending June 30, 2020 put the city’s total unfunded liability at $ 906.9 million, including $ 563.5 million in costs of health care and $ 343.4 million in retirement costs. The previous year, Lansing estimated its total unfunded liability at more than $ 736.6 million, including $ 431.3 million for retiree health care and $ 305.3 million for pensions, according to the city.

The actuarial estimate being prepared by Boomershine Consulting is a more “accurate” figure compared to recent reports submitted by the city, as required by Michigan Public Law 202, Kehler said. Actuarial analysis adjusts discount rates and uses a lower estimated rate of return on investments, forcing Lansing to increase its annual contributions to legacy costs.

The new estimate also takes into account recent changes, Kehler said, such as the move of city retirees over 65 to a Humana Medicare Advantage plan. City officials expect to save $ 3.5 million per year from the change, which took effect in early 2021.

And Lansing will eventually shut down its retiree health care system entirely.

In March, the union representing Lansing firefighters finalized a contract that eliminates city-sponsored retiree health care for new hires.

The city’s other bargaining units also have contracts that eliminate post-employment health care for new hires and Lansing was already in the process of eliminating retiree health care for non-union employees.

Lansing’s unfunded liability has been growing for decades, with the city making contributions below maintenance amounts. Over the past decade, however, the city has increased its contributions to turn the tide. Contributions will exceed maintenance amounts in 2021, Stump said, beginning the process of closing the gap.

“We’re at a crossroads,” Stump told city council in June.

After: Lansing to end retiree health care for all employees after reaching deal with firefighters

Related: Lansing and retirees reach agreement on healthcare benefits

After: Retirees protest outside Lansing mayor’s house against planned changes in healthcare

In the next fiscal year, Lansing is expected to make about $ 60 million in health care and retirement payments to retirees, which is 26% of the $ 238 million budget approved by city council in May.

The city’s pension system was 64.7 percent funded for police and firefighters, but 56.7 percent for other employees, which is considered underfunded, according to a report submitted to the Treasury Department of Michigan in 2020. Funding levels for Lansing’s retiree health systems were low enough. to trigger the state designated “underfunded” status at 13% for police and firefighters and 27.4% for other employees.

According to the city’s financial health team, several factors fueled Lansing’s long-term unfunded liability crisis, including rising healthcare costs and contributions that did not match increased coverage. The team also highlighted people living longer, a long-term underperforming stock market, and a reduction in the number of city employees since the Great Recession, which means fewer active employees are contributing to the system for the better. cover retirees.

Contact reporter Sarah Lehr at [email protected] Follow her on Twitter @SarahGLehr.


Source link

Leave A Reply

Your email address will not be published.