Once you know what the acronym OPEB stands for, Other Post-Employment Benefits, the rest of it isn’t too complicated. Most of retirees’ health care is paid for by the state under SHBP, and Pre-Medicare eligible retirees pay the same premiums other members of State Health Retirement Plan pay. Because the state self-insures, the costs of health care one year become the premiums the next, so to speak. The rest of the story is how the state goes about charging agency employers for the premiums.
The state of Georgia funds the state OPEB fund, school OPEB fund, and BOR retiree plan mainly on a pay-as-you-go basis. That is, the state does not set aside advance funding for future retiree benefits. Instead, the annual costs of providing benefits are funded in the same year as the costs are incurred, around $543 million in 2015.
For the state employee OPEB fund, employer contributions are funded as a percent of state agency payroll. The contributions are comprised of a mix of state appropriations, federal revenue, fee income, and other income available to various state agencies. In fiscal year 2015, $118 million, or 70.4 percent of the total budgeted employer share of $168 million, was budgeted from state appropriations.
For the school OPEB fund, employer contributions are funded from state appropriations to local school districts and other educational entities, as well as from direct contributions from local school districts. In FY15, the state appropriated about $235 million to the school OPEB fund, making up about 60 percent of the total budgeted employer contribution of $391 million.
For the BOR retiree plan, the Board of Regents contributed over $120.9 million to the plan to cover benefit costs and expenses for FY14.
State OPEB liability
While Georgia utilizes a pay-as-you-go system, the state is being required by the Governmental Accounting Standards Board to annually report the total costs, or liability, for providing post-employment benefits to current and future retirees. An actuarial-based valuation, which includes estimates for retirement rates for active employees, health plan options, health care inflation, mandated government benefits and other factors, is conducted each year on the OPEB plans to determine the total state liability.
For the state employee OPEB fund, the total liability, referred to as the actuarial accrued liability (AAL), was $2,871,842,791 as of June 30, 2014. This total includes $1,348,443,300 for 47,260 active employees based on length of service at the valuation date, and $1,523,399,491 for 35,368 retirees and their 12,156 eligible spouses.
The total AAL for the school employee OPEB fund was $8,514,320,187 as of June 30, 2014. This total includes $5,179,974,745 for 168,741 active employees, and $3,334,345,442 for 76,086 retirees and their 26,168 eligible spouses.
For the BOR retiree plan, the total AAL was $4,095,304,000 as of June 30, 2013 — the most recent data available. Participants in the BOR plan include 38,092 active plan members and 20,583 retirees and beneficiaries as of June 30, 2014.
All three of these liabilities total about $15.5 billion.
In FY15, under Georgia’s pay-as-you-go system, the State budgeted more than $340 million in appropriations for the required annual employer contribution. The total liability for the state employee and school OPEB funds was $11.4 billion as of June 30, 2014, with the BOR retiree plan adding an additional $4.1 billion in liability (as of June 30, 2013).
The costs for providing retiree health and other post-employment benefits represent a substantial short and long-term financial liability for the state. Looking beyond the financial implications to the State, responsibility for managing and administering these benefits is an important function. Current and future retirees rely on these benefits after completing their years of service. In addition, responsibly managing the state’s liabilities is also important to preserving the state’s strong credit ratings and ensuring strong financial standing. Other AAA-rated states are addressing this liability, and Georgia must as well.
I may be reached at
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E-mail at Jack.Hill@senate.ga.gov
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