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Multnomah County's gap in funding for retirement benefits isn't as ominous as it seems [The Oregonian, Portland, Ore. :: ](Oregonian (Portland, OR) Via Acquire Media NewsEdge) April 22--Multnomah County only has enough cash on-hand to cover about a quarter of the total cost of its employees' post-retirement health care, but that's less of an shortcoming than the accounting ledger would lead you to believe. On paper, the county only has about $34 million dedicated to the total $135 million needed to fully fund post-retirement health insurance and benefits for all current employees and retirees. Followers of the statewide PERS controversy, in which lawmakers took action to reign in pension costs as government employers struggled with how to pay future pensions due to a statewide "unfunded liability" of anticipated costs, might recoil at the county's much more poorly-funded commitment to provide health insurance for retirees. However, the 25 percent funding actually exceeds the county's goal of funding 20 percent of retirement benefits by the current fiscal year. Plus, that 25 percent could be converted into a much healthier figure if county leaders chose to invest the funds differently, according to an actuary hired to conduct bi-yearly valuations of the county's retirement benefits obligations, known as Other Post-Employment Benefits. "It really doesn't change the promises you've made to your employees and existing retirees, it just changes the way the accounting works, so it looks much prettier on your balance sheets," said Michael Schionning, an actuary for Cheiron, the firm the county hires to conduct the valuations. Schionning appeared Tuesday before the Multnomah County Board of Commissioners to outline the county's options for funding retiree benefits. A little background on the fund: Under state statute, the county must make insurance available to retirees until age 65, when they become eligible for Medicare. The county has bargained with its employees unions to chip in about 50 percent of premiums, as well. With the average county employee retiring at age 59, that leaves the county on the hook to help pay for employees' health insurance for six years after they stop working. Currently, the county's risk management fund includes $34 million toward the total expected cost of providing retirement benefits for all current employees and retirees under 65. It's estimated that the county would need $135 million to pay that cost up front. Instead, the county pays the premiums on a yearly basis, with department leaders factoring their share of the cost into annual payroll budgets. Although the $34 million is meant to offset the total $135 million liability, state statute prohibits it from showing up that way on accounting sheets because county leaders could choose to use it for other expenses in a pinch. Statute requires that money can only count toward the unfunded liability if it is placed in a trust dedicated solely to funding post-retirement benefits. By doing so, Schionning said, the county could greatly reduce its "unfunded liability," -- a term used to describe anticipated costs that are not backed up with cash on hand. Placing the money in a trust would reduce the existing liability from $135 million to $101 million. Such a trust would also likely yield annual investment returns of 7 percent or more, allowing the county to gradually work toward fully pre-funding employees' retirement benefits. Schionning warned, though, that funding future retirement costs with investments doesn't come without risk--a fact that was driven home in 2008, when PERS, the statewide fund to pay for government employees' pensions, lost $17 billion in invested money. "If you have another 2008 here all over again, things change and you've got to make up that investment lost," he said. County chief financial officer Mark Campbell said transferring the $34 million to an irrevocable trust has benefits, but he isn't sure whether doing so is the right move for the county. "It's pretty well-managed right now," Campbell told the commissioners. He said the decision of whether to place the money in a trust could come up next year, when Schionning's firm completes its next appraisal of the county's efforts to pay for retiree benefits. He reminded commissioners that recent legislative action to bump the retirement age for Oregon's government employees up to 65 years old should eventually eliminate the county's obligation to provide insurance for retirees. By the time they retire, all employees will already qualify for Medicare. --Kelly House ___ (c)2014 The Oregonian (Portland, Ore.) Visit The Oregonian (Portland, Ore.) at www.oregonian.com Distributed by MCT Information Services |