Measure trims medical costs for public employers

Plan does not reduce $5.7 billion gap in retirement system

Posted: Friday, April 29, 2005

Lawmakers on Thursday presented another draft of the public employee and teachers retirement system that addresses rising medical costs but does not pay down the $5.7 billion hole in the system.

All new employees would pay premiums on their health care when they retire, as opposed to paying nothing, as most retirees do now.

Having the employees share some of the costs eventually would shrink the cost of the entire system, which is estimated at $16 billion. Medical fees are more than 60 percent of that amount.

"I'm still confused on how we can build up a multibillion-dollar savings account, have a debt, and not have any way to cancel them out," asked Rep. Eric Croft, D-Anchorage.

"We can't throw hundreds of millions of dollars at it," said Sen. Bert Stedman, R-Sitka, who presented the bill's changes to the House Finance Committee.

"We need to get our structural fix first, plug the leak in the barrel and then go after the $5.7 billion," he added.

Under the plan, a new tier of employees with a clean slate will not increase the costs of the program. Dealing with the deficit could be an issue for next year's session, Stedman said.

Due to a long list of amendments and only a short time to hear them, the finance committee gave the draft to a group of lawmakers who will iron out the details and report back on Saturday.

The retirement overhaul that converts the system from a "defined-benefit" to a "defined-contribution" plan would set up individual accounts for new employees similar to 401(k) plans offered by private companies.

Since the bill was introduced in March, the 110-page draft has gone through numerous changes. The Senate's final version asked employees to contribute 0.5 percent more of their paychecks. The clause was taken out last week in the House State Affairs Committee.

"The unfunded liability is the responsibility of the employer and not the employee," said Rep. Paul Seaton, R-Homer, who chairs the State Affairs Committee.

Under the proposed plan, new employees will pay premiums according to their length of service. People who work for 30 years will pay 10 percent while those hired for 10 to 15 years will pay 30 percent.

A separate account, called the Health Reimbursement Arrangement, will be created for employees to pay medical costs, such as the premiums. Only employers will contribute to this fund.

Citizens testified on the bill for seven hours last weekend and protests were held in Anchorage against police and firefighters possibly losing death and disability benefits.

House Finance Committee Chairman Kevin Meyer, R-Anchorage, said one amendment would reinstate those benefits for new employees, and he expects it to pass.

• Andrew Petty can be reached at andrew.petty@juneauempire.com.



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