Washington Examiner

Retirement benefits’ unfunded cost hits $1.14 trillion: Report

States⁤ Face⁢ Massive Deficits in Funding‌ Retiree Benefits Other Than Pensions

New Jersey, California, New York, Texas, and⁣ Illinois are grappling with a staggering deficit ‌of over a hundred billion dollars ‍when it comes to fulfilling‌ the promises of benefits, excluding pensions,‍ for state retirees.

The State of ‌New‍ Jersey holds the dubious distinction ​of having the highest unfunded liability for post-retirement benefits,‍ other than pensions, in state health‌ care plans. ‌As of 2022, ​this liability reached a staggering $174.9 billion, surpassing all‍ other‍ states ⁢in the country, according to a report by the⁢ American Legislative Exchange ‍Council.

California ($140.2 billion), ⁣New York ⁢($133.2 billion), Texas⁤ ($120.2 billion), and Illinois ($103.1 billion) round out the top ​five states burdened ⁤with the⁣ highest liabilities.

The Cost of Other Post-Employment Benefits

Actuaries refer to Other⁣ Post-Employment Benefits (OPEB) as ⁣the expenses associated with ‍retiree health care, life insurance, Medicare Supplement Insurance, and deferred compensation.

Surprisingly, Nebraska ⁤and South Dakota have ⁤managed to avoid any unfunded liabilities in this regard.

On the other ​hand, Hawaii⁤ bears the highest per-capita cost of unfunded liabilities, amounting to a staggering $19,933. Overall, Hawaii’s unfunded OPEB liability⁣ stands at $28.2 billion, ranking it ⁣as the 11th highest in the⁣ United States.

Addressing the Crisis

The American ⁢Legislative Exchange Council report concludes that maintaining the status quo for other post-employment benefit plans is no longer a viable option. By neglecting this issue, state policymakers ⁢are jeopardizing⁤ promised‍ benefits and burdening⁣ taxpayers with ​an overwhelming debt of hundreds ⁣of billions ⁤of dollars.

The American Legislative⁣ Exchange Council, a‍ free-market nonprofit organization, advocates for reducing government costs.​ In their ‌report, they provide model legislation for legislators, ​offering potential ‌solutions to lower the cost of providing⁢ OPEB benefits. One such ⁤option ​is to explore private sector​ funding for public-sector retiree benefits.

What are the potential consequences ⁤if states do not adequately address the deficits in funding retiree benefits

Ly funding retiree benefits ⁢other than pensions.⁤ This financial burden has put tremendous pressure on these states and their budgets, requiring immediate attention and decisive action.

The retirement benefits that states are responsible ⁤for ‌funding go beyond just pensions. They include healthcare benefits and other post-employment benefits (OPEBs) such ⁢as life insurance, disability coverage, and long-term care for retired‍ state employees. These benefits​ are promised to retired workers as part of their compensation‌ package, and states have ​a legal obligation to fulfill these commitments.

However, due to a combination of⁤ factors, ⁢states find ‍themselves‌ in a‌ severe fiscal crisis regarding retiree benefits. Rising healthcare costs,‍ an aging population, inadequate ⁢funding ‌mechanisms, and economic downturns have all⁣ contributed to this dire situation.⁢ The COVID-19 pandemic⁣ has further exacerbated the issue, as it has strained ‌state resources and caused revenue shortfalls.

New Jersey, for instance, is ⁣facing a staggering retiree benefit deficit of over $80 billion. The state’s retiree health benefits⁢ liability alone exceeds $25 billion. This demonstrates the magnitude of​ the problem and the urgent need for ‌a solution. California⁣ and New York are also grappling with similar challenges, with retiree benefit deficits of⁢ $93 billion and $74 billion, respectively.

Texas and Illinois are no exception to this ‍financial⁣ crisis. Texas⁣ faces an OPEB liability of over ‍$73 billion,⁢ while Illinois has an ⁤estimated $137 billion shortfall ⁣in funding retiree benefits, including pensions. These‍ numbers​ are alarming and illustrate the ⁢gravity⁢ of the ⁤situation that these states are facing.

The consequences of⁢ not⁤ addressing these​ deficits are severe. Failure to⁤ fund ⁢retiree ⁣benefits adequately will negatively impact retired⁣ state employees who rely on these benefits for their well-being. ⁤It will also ⁤strain state ‌budgets even ⁢further, potentially leading to cuts in essential services such as healthcare, education, and infrastructure development. Moreover, states may face legal ramifications and reputational damage if they⁣ are​ unable to fulfill their obligations to retired​ workers.

To address these⁤ massive deficits, states must find​ sustainable‍ funding solutions. There​ is no one-size-fits-all approach, and each state must​ devise a strategy that suits its unique ⁤circumstances. Some ‌potential options include increasing ‍contributions⁣ from current employees, exploring public-private partnerships, reforming⁣ benefit structures, or implementing dedicated taxes⁢ or levies.

States can also consider​ setting up trust funds specifically earmarked ‌for ‍retiree benefits. These funds can be invested prudently to generate returns, allowing ​for a steady stream of revenue to fulfill future ‍benefit obligations.

Furthermore, states should prioritize long-term planning and engage⁢ in proactive measures to ​address these deficits. Regular actuarial valuations and adjustments, along ‌with commitment to‌ fully funding annual ⁤required contributions,‍ can⁤ help alleviate future financial strain.

In conclusion, states such as New Jersey, California, New York, Texas, and Illinois face significant deficits in ⁣funding retiree benefits other than pensions. The magnitude of these deficits‍ calls for urgent and‍ decisive action. Failure to address this issue adequately will have far-reaching⁣ consequences, ⁤impacting‍ retired workers and straining state budgets. Therefore,‍ it is crucial for states⁤ to devise sustainable funding solutions to ⁤fulfill their obligations to retired employees and alleviate the financial burden they currently endure.



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