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Mass. To Revamp Retiree Health Care

Gov. Deval Patrick plans to propose legislation calling for sweeping changes in future retiree health care benefits for state and municipal employees that officials estimate will save up to $20 billion over the next 30 years.

The changes would include raising the number of years an employee needs to be vested in the retiree health care system, cut the state's contribution to health care premiums for many workers, and raise the eligibility age for health benefits from 55 to 60 for most employees, according to an administration official knowledgeable about the report. The official spoke on condition of anonymity because the report had not yet been made public.

The recommendations are to be included in a report due for release Friday by a special commission studying what many in government view as unsustainable costs for retiree health care.

The proposed changes would not affect any of the current 75,000 retired state employees, spouses or survivors who receive health care benefits, or about twice that number of retired municipal workers.

But current state and municipal employees would be affected with some exceptions, such as a worker who currently has completed at least 20 years of service and is within five years of retirement.

According to the commission, Massachusetts faces an unfunded liability for retiree health care and other non-pension benefits totaling more than $46 billion - approximately $16.7 billion for the state and $30 billion for cities and towns. The liability exceeds the state's unfunded pension obligations, and according to the report the state and most cities and towns have not set aside adequate resources to cover health care liabilities.

Among the key recommendations that will be included in the legislation, according to the administration official, is raising the minimum years of service an employee must have before being vested in the retiree health care system from the current 10 years to 20 years.

The state currently contributes 80 percent of the health care premium for all vested retirees, but that too would change for many workers in the future. Retirees with 20 years of service would be eligible for a 50 percent premium contribution from the state, rising on a prorated basis for each year of service up to 30 years, when a retiree would become eligible for the full state contribution.

The same proposed changes would apply for municipalities, though some currently pay a lower share of the premiums for retirees.

The minimum age for eligibility to receive retiree health care benefits would also rise from 55 to 60, though it would be lower for some workers, such as police and firefighters, who can retire at younger ages.

According to data from the Boston College Center for Retirement Research cited in the report, Massachusetts has among the highest retiree health care costs of the 50 states. The changes are projected to save between $15 billion and $20 billion over the next 30 years, including $9 to $12 billion for municipalities. Most of the savings, however, would likely not kick in for about 10 years.

The 12-member commission that adopted the report included lawmakers, state and municipal officials, and representatives of the Massachusetts AFL-CIO and a group that represents retired public employees. The administration is banking on union support for the bill to head off any contentious debate over it in the Legislature.

The effort is the latest by the Democratic governor to control employee costs. The Democratic-controlled Legislature approved a measure in the last session aimed at saving $5 billion over the next 30 years by overhauling the state's pension system.

This article was originally published on January 10, 2013.

This program aired on January 10, 2013. The audio for this program is not available.


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