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Good News on Retiree Health Insurance

by William Dowd

Just in case you missed it, a state commission formed by Governor Patrick last year to develop solutions for the huge unfunded liabilities for public employee retiree health insurance released its report last week. It contains a number of significant proposed reforms to the eligibility rules for the benefit. Not unexpectedly, the proposed reforms are just a first step, and are acknowledged as such in the report. But it is an improvement over the status quo, and will both save lots of money and preserve a very generous benefit for retirees and employees.

Here are the major changes to retiree health insurance that the commission proposed:
1.      Delay the age of eligibility from age 55 to age 60 for most employees.
2.      Pro-rate the Town’s contribution based on years of service.
3.      Increase the minimum required years of service from 10 to 20.
4.      With the exception of current retirees and those close to retirement, the changes will apply to CURRENT employees, not just new hires.
5.      Make the benefit available only to those on the payroll at their retirement unless the employee has more than 25 years of service in which case they have 5 years to enroll.
6.      Pro-rate the Town’s contribution for part-time employees based on the number of hours worked. This is actually already in place for state employees, and long overdue in the Town.
These changes will save the state and cities and towns literally billions of dollars over the next 30 years. It will save millions of dollars for Holliston property taxpayers alone.
While the report could have – and should have – gone much further, these changes are noteworthy. More changes will be needed, but we need to be thankful for what’s been put forward, and get to work adopting them.
All of these proposed changes are milder versions of the changes I’ve proposed for almost two years now. For those who have a hard time finding my suggestions for improvement, you can look on this site under Comments, back to 4/12/11. You can read them there and see the similarity between my suggestions and those of the Governor’s Commission.
To get this done, the proposals need to be voted by the legislature and become law. The Governor has agreed to include them in his FY14 budget submission, and our Selectmen and FinCom should actively, officially and enthusiastically support them. Once these changes have been enacted, the Town can get a revised valuation of its retiree health insurance liability and build an accurate, credible and sustainable funding policy.

Comments (7)

With all due respect Bill, you don't know what the public employee above does. I don't know either but I'll give you an example of what they are saying being true. State employed attorneys (assistant DAs and public defenders) start off making 37,500 per year. And their pay does not increase quickly. Almost all of them could double their pay by moving to the private sector, in fact many do which is why public defenders and DAs offices have such outragously high turnover. The ones who stay for their entire careers are incredibly dedicated public servants who put justice and community before personal profit. This is just one example, there are several highly educated extremely skilled folks who willingly make significantly less to remain in public service. Your comment that someones credibility is immediately shot for pointing this out devalues some of the more legitimate points you make about government finances. You should really get more educated about what highly educated skilled workers make in government before you insinuate people are liars.

Unfair accusation | 2013-01-30 19:51:31

Piggybacking on Sean, here are the Tax Breaks proposed for elimination under Duval Patricks plan. Many of the population are probably not aware of this. The tax plan Governor Deval Patrick proposed this week would eliminate a flurry of personal tax breaks - from deductions for business lunches and charitable contributions to obscure provisions sparing taxes on settlements with coal miners and septic system upgrades. Administration and Finance officials stressed that under the governor's plan, all taxpayers would see their personal exemption rate doubled - meaning many wouldn't be taxed on the first $8,800 they make - and that they aim to simplify the tax code and eliminate special treatment for subsets of taxpayers. Exemption of Capital Gains on Home Sale: This means when you sell your house you will be required to give the state 5% of what you have earned in profit from the sale. Among the tax breaks that would remain untouched, though, are the earned income tax credit for low-income people, which costs the state about $132.3 million a year, and a film production tax credit that helps about 50 filmmakers save an average of $52,000 a year. The sortable table below shows the tax breaks Patrick has proposed for elimination and, where available, the average amount a taxpayer is currently saving on the deduction. Tax breaks for elimination Revenue Est. # of Avg. (mil) Beneficiaries savings Deduction for Employee Contributions to Public Pension Plans, Social Security and Railroad Retirement $299.6 3,585,000 $84 Exemption of Capital Gains on Home Sale $239.6 55,000 $4,356 Exemption of Interest on Life Insurance Policy and Annuity Cash Value $210.8 N.A. N.A. Deduction for Dependent Under 12 $135.8 510,000 $266 Exclusion from Gross Income of Parking, T-Pass and Vanpool Fringe Benefits $38.8 N.A. N.A. Tuition Tax Deduction $35.9 65,000 $553 Exemption of Premiums on Accident and Accidental Death Insurance $23.7 1,970,000 $12 Exemption of Scholarships and Fellowships $19.1 255,000 $75 Deduction for Child Care Expenses $15.4 54,000 $285 Septic System Repair Credit $12.5 11,000 $1,139 Health Savings Accounts exemption and deduction $12.3 10,000 $1,232 Exemption of Premiums on Group-Term Life Insurance $11.5 N.A. N.A. Exemption of Dependent Care Expenses $9.0 N.A. N.A. Exemption of Workers' Compensation Benefits $8.5 N.A. N.A. Employer-Provided Education Assistance $8.4 N.A. N.A. Personal Exemption for Students Aged 19 or Over $8.4 N.A. N.A. Exemption of Meals and Lodging Provided at Work $7.7 N.A. N.A. Commuter Deduction $6.7 225,000 $30 Exemption of Interest on Savings in Massachusetts Banks $5.1 505,000 $10 Credit for Removal of Lead Paint $2.5 1,850 $1,354 Renewable Energy Source Credit $1.3 2,000 $658 For the entire table see:

The Horrible Tax Implications for Duval Patricks plan | 2013-01-30 10:06:12

State/Public employee's should remember who is running Bacon Hill. I'm actually surprised they even addressed this. It just shows that the system as it is, is ridiculously unsustainable. It is no fault of the public employee nor people like Mr. Dowd, who I might add has been trying to expose and warn the populous with the truth, only to be shunned and ridiculed endlessly...kind of like "shoot the messenger". Nobody wants to see these cuts nor wants people to lose their jobs but the way it is set up is fool proof for bankruptcy/ major tax increases and horrific burdens put on ALL people in the public sector and believe it or not, worse on the private sector tax payers. I hope people took in the rest of the governors proposals. They are appalling. Get ready, the switch on the fan just got turned on.

Sean | 2013-01-30 06:11:37

Mr. Dowd, you have no idea what I do for a living, nor my background or credentials, and I have no wish to share them to be subject to your personal insults, and therefore you have insufficient information to be telling me to get my facts straight. However, I can absolutely assure you that I do indeed make half what I would make in the private sector, and that I work in the public sector because I am a believer in the mission of my work and serving the public good rather than work for a for-profit company in my particular field of work. And I have many colleagues of which I can say the same. Not enough will be grandfathered -- this is a huge hit to many hardworking and decent people who have contributed to the system for years, but are not close enough to the cutoff to be grandfathered in. I have less of an issue with raising the retirement age in line with what it is for social security or the right to access the medical benefits also in line with access to Medicare for those who qualify for social security. However, the percentage of one's income being kicked in should then also be in line with social security -- at 6.2% instead of 9% plus an additional 2% of whatever one makes over $30K.

Just another state employee | 2013-01-29 20:17:26

Right now, I have to pay $800 per month to have health insurance for my family . My hourly rate was slashed by 40% back in 2008 when the economic crisis was in full swing. I'm not sure how this compares with what municipal employees are dealing with, but what I am sure of is that I can no longer handle any more prop 2.5 overrides, and will fight like heck to oppose them.

Just Another Observer | 2013-01-29 19:51:03

Please get your facts straight. The program is not just the right to buy a coverage to supplement Medicare. It provides government subsidized coverage before age 65 and government subsidies to the Medicare supplement. And current retirees and those close to retirement ARE grandfathered. These proposed changes came from a group made of of people in the plan, including union reps. The changes are only the beginning of what's really needed - they even admit it in their report. And your credibility is shot with the whole "I make half what I would in the private sector." Grossly untrue. Please get your facts straight.

Bill Dowd | 2013-01-29 18:52:40

The bill will be submitted as a standalone: It impacts ALL public employees in MA. What the retiree medical benefits are in reality is the ability to purchase, for a premium, supplemental medical insurance to add to standard Medicare. Yes, it will save money on paper (in theory -- although more people will use emergency services which cost more money if their healthcare benefits are whittled down). No, it will not save lives. As a state employee myself, this is a smack in the face, as I make about half what I would in the private sector, and mandatorily contribute 11% of my income to the SRB in lieu of 6.2% to SS(FICA) and pay health insurance premiums equivalent to those of a private employee. I do appreciate the financial challenges facing towns in particular, and the state at large. However, I am sorry to see the state NOT grandfather those who have been promised one thing, as has been its practice in the past.

Just another state employee | 2013-01-29 15:00:16