Monday, June 29, 2015

Hidden Meaning?

The website has a piece on new accounting standards aimed at retiree health care plans (such as the one operated by UC). Such plans have typically not been pre-funded, unlike pensions. The new standards are intended to display the incremental yearly costs of retiree health care promises. One thing, though, about retiree health care that differs from pensions. UC in particular takes the position that retiree health care is not a legal obligation (unlike pensions) and instead is just a nice thing the university does. But it is something that UC is free to take away. Were there to be pre-funding including an employee contribution, it would be hard to maintain that position, as we have noted in prior posts. How could employees be asked to pre-fund a benefit that was not theirs? Requiring an employee contribution would seem to create a legal obligation.

If you scroll down the Calpensions article, hiding towards the bottom you will find:

...Last January Gov. Brown proposed a long-term plan to cut costs. State worker retiree health care would be shifted from “pay-as-you-go” funding, which only pays the health insurance premiums each year, to pension-like “prefunding” that invests additional money to earn interest. State workers would contribute half of the normal cost of the plan, work longer to qualify for full retiree health care, receive a subsidy no higher than active workers, have the option of a lower-cost health plan, and face tighter dependent eligibility and Medicare switch reviews. The plan must be bargained with unions. An incentive for unions might be that agreeing to the plan would strengthen the “vested right” to retiree health care, which some think may not have the legal protection currently given to pensions...
The text, in short, seems to have semi-hidden meaning that is easy to miss:

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