Pardon me, Columbus Dispatch....'retirees will have to shoulder more of their health-care burden'?

From John Curry, June 22, 2010

Eight Ohio newspapers recently gave ample press coverage to Ohio's public retirement systems and their operations. Many man (and woman) hours were devoted to ferreting out the facts, collating them and presenting these facts to the public in a well orchestrated coverage of these systems' benefits. I will have to agree with many of your findings but, one statement in particular in your June 22, 2010 editorial, Pension Peril (copied below), demonstrates that you really didn't do your homework on one area of your investigation: teacher retirees having to "shoulder" more of their health-care burden.

If you would have run a comparison of the health care premiums charged to retirees of OPERS vs. STRS you would have found a vast difference. As a retired public school educator (with 30 years of teaching service) my cost for a Medical Mutual 80/20 monthly health premium is currently $1,151 per month for my spouse and myself. Had I spent that same 30 year service in an OPERS classified job, my current health premium (for both my spouse and myself) for the same 80/20 policy through OPERS would be a mere $80 per month or less that 7% of what STRS charges for the same coverage. A significant reason behind this is the lack of planning that STRS did back in 2000 when they graciously (and carelessly) enacted the 88% payout for teachers who taught for 35 years. That same 35 year non-teaching county/state/local government employee can only collect 77% of his (her) final average salary for 35 years of service.

This difference can also be found, if one takes the time to investigate, in the amount of moneys that go into the respective health care funds of each of these state retirement systems. No moneys from either public educators nor non-teaching (OPERS) public servants go toward their respective healthcare funds. Their employer contributions are a different story, a full *7% of the OPERS related employer contributions gets directed into the OPERS health care fund for retirees. And the (STRS) public school employers' contributions toward health care for their retirees? Well, would you believe only a very meager 1% goes toward educators' health care.....that's only 1/7 the amount that OPERS contributes! Why? Well, let's go back to the STRS' 88% payout for 35 years vs. the 77% payout for OPERS. OPERS planned ahead and STRS didn't. STRS retirees are now paying the price for the lack of a former board's and administration's planning and ...they are paying dearly. Mr. Nash, STRS retirees are "shouldering" far more than their fair share of the "burden."

John Curry
A retired public school educator
A member of CORE (Concerned Ohio Retired Educators)

* http://www.orsc.org/uploadpdf/2008_ORSC_Annual_Report_127th_GA.pdf

Ohio Retirement System Percentage of Employer Contribution Allocated to Health Care in 2009

PERS 7.00%*

STRS 1.00%

SERS 4.16%**

OP&F 6.75%

HPRS 5.50%

*This amount will be reviewed by the board and may be revised during the first quarter of
2009.
**Does not include employer health care surcharge of up to 1.5% of total active member payroll.

Editorial: Pension peril
Double-dipping, rising health-care costs add up to unsustainable system

Columbus Dispatch, June 22, 2010

Public employees who retire to begin collecting their public pension, then are rehired in their old position and collect a public salary on top of their pension, argue that they're not costing the taxpayers anything extra, even when these arrangements result in million-dollar payouts.

But, as Ohio's public pensions slide toward insolvency and the state's budget deficit grows more alarming, the public will be less and less tolerant of this so-called double-dipping.

Defenders of double-dipping argue that if the public employer weren't paying the retiree to do the job, it would be paying somebody else, also at taxpayers' expense, so there's no real difference. This argument has merit, though it should be pointed out that if the retiree is rehired at or above his ending salary, then he probably is being paid much more than a replacement would have received - meaning that taxpayers are, indeed, spending more than they need to.

But the most important aspect of double-dipping is what makes it possible in the first place: the generous early retirement ages afforded by public-employee pensions. Some public employees can retire with full benefits at age 48, while in the private sector, where fewer and fewer employees have pensions, full benefits often are not available until at least age 65.

Not only do these early retirement ages encourage double-dipping and allow most public retirees to draw pensions for many more years than their private-sector counterparts, retiring well before 65 means the retirees need health-care coverage until Medicare kicks in. Although state law doesn't require it, Ohio's public pension plans began offering health-care coverage in the 1970s. Retirees now demand coverage, and its soaring cost is one of several reasons the pension plans are less and less financially sound.

An investigation by Ohio's eight largest newspapers into double-dipping, published Sunday, highlighted some of the most extreme outcomes, involving school-district superintendents. Their relatively high salaries, combined with the perverse incentives of the State Teachers Retirement System, lead many to "retire" early, because it can mean a seven-figure paycheck when they finally stop working.

A superintendent earning $100,000 who retires at age 52 would receive about $64,000 from his pension the first year. He can be rehired in the same job at his last salary and continue to receive raises each year.

No wonder a fourth of Ohio superintendents are collecting pensions along with their paychecks. They're joined by half of the superintendents of educational service centers. Double-dipping instantly increases their incomes by as much as 80 percent.

Teachers, police officers, firefighters and bureaucrats might not rack up numbers quite as high, but the same double-dipping incentives apply.

Taxpayers, many of whom face pay cuts or freezes and diminished retirement prospects in their private-sector jobs, can't be expected to support the current system without change. Managers of the public pension funds should make the necessary changes, however difficult and unpopular, to bring them in line with private-sector plans. Change is needed, not only to ensure continued taxpayer support but to address the growing funding imbalances.

The teachers' system currently has $40 billion in unfunded liabilities and will be looking to taxpayers for at least a partial bailout.

Already, local governments, including school systems, spend $4.1 billion per year to pay for pensions. The Ohio Retirement Study Council would like to see "employer contributions" - taxpayer contributions - raised to the point that they would total $5 billion annually.

That's an unrealistic expectation to have of taxpayers.

Instead, pension managers should require employees to pay more into their retirement, raise the retirement age and, ultimately, shift newly hired public employees to a 401(k)-style retirement system. Retirees also will have to shoulder more of their health-care burden.

The status quo isn't sustainable.

http://www.dispatchpolitics.com/live/content/editorials/stories/2010/06/22/pension-peril.html?sid=101