For Immediate Release: Wednesday, July 31, 2019
Report by the Office of Legislative Oversight assesses
current and projected retiree health benefits costs
and offers recommendations for sustainability
ROCKVILLE, Md., July 30, 2019—The Montgomery County Council voted unanimously today to release a report by its Office of Legislative Oversight (OLO) on retiree health benefits, known officially as other post-employment benefits (OPEB). OLO Report 2019-11: Cost of Retiree Health Benefits (OPEB) responds to the Council’s request for a comprehensive review of current and projected OPEB costs and the identification of possible strategies to control the growth of these expenses. The Government Operations and Fiscal Policy (GO) Committee will begin reviewing this report on September 12.
OPEB are non-pension benefits offered by an employer to qualified retirees, such as retiree health insurance. Each County agency sets OPEB benefit levels, eligibility criteria and cost share structure for their own retirees. These benefits can be divided into two components: pay-as-you-go funding, which refers to the annual cost of group insurance benefits for current retirees; and pre-funding, which sets aside assets at the time employees earn a benefit to cover cost obligations that will be paid in the future.
“The Council continues to work proactively to develop structural changes that will enable the County to meet its fiscal goals,” said Council President Nancy Navarro, who serves as chair of the GO Committee. “Under my leadership, the Council approved full OPEB funding for the fiscal year 2020 budget in the amount of $127.2 million and engaged OLO and Council staff to provide a detailed study on OPEB funding. The Council specifically directed staff to provide recommendations on structural safeguards that the County can implement to assure that we are continuously funding OPEB at appropriate levels through the fiscal year on a consistent schedule. The GO Committee will begin evaluating recommendations in OLO Report 2019-11 in September, and we thank Council and OLO staff for their outstanding work on this important issue.”
The report makes four major recommendations for addressing OPEB funding going forward:
1. The County should align the cost of retiree health benefits with the County’s ability pay these costs.
2. The Council should review and update fiscal policies related to OPEB to ensure appropriate planning and funding. It should consider whether to establish pre-funding policy goals and milestones, create requirements for depositing appropriated OPEB pre-funding into the Consolidated Trust, and review other fiscal practices that could provide additional pre-funding.
3. The Council should request an actuarial assessment of a variety of changes to the County Government’s retiree health benefit package to determine how such changes would affect both retirees and County finances.
4. The County should examine the feasibility of adopting a Retiree Healthcare Account/Private Exchange approach for Medicare-eligible retirees.
OLO’s mission is to provide accurate information, analysis and independent findings and recommendations that help the Council fulfill its legislative oversight function which includes monitoring the performance of publicly-funded activities, establishing public policy, approving budgets and raising revenues.
OLO Report 2019-11 can be viewed here.
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Release ID: 19-270