Ohio Pension System Slashes Health-Care Benefits to Stave off Insolvency
The comments below are an edited and abridged synopsis of an article by Tyler Durden
For the first time in years, a major public pension system has slashed benefits for retirees. The Ohio Public Employees’ Retirement System voted recently to cut health care benefits provided to the pension’s current and future retirees beginning in 2022 in an effort to prevent the fund from plunging into insolvency.
If these changes had not been enacted, the fund would run out of money in about 11 years, executive director Karen Carraher said during a board meeting. The measure passed by a 9-2 vote.
The vote, which was taken after polls showed members would be open to the changes to preserve their retirement benefits, eliminated the system’s group health-care plan and replaced it with stipends that will defray costs for members who purchase plans on the state ObamaCare exchange.
Late last year, CalPERS, the largest pension system in the US, confirmed that it’s still only about 70% funded, and released a letter to stakeholders explaining the steps it needed to take to get to a more stable place.
It’s a reminder that it’s irresponsible management to bequeath state employees with ever-more-lavish benefits when the tech boom left the fund (temporarily) at 128% funded.
But during market downturns, the state is left on the hook as employers and employees see their contributions cut.
This continues to this day. Despite the state’s new Democratic governor and his promises to fix the pension crisis, Illinois’ public pension systems’ aggregate unfunded liabilities for the year was $137 billion.
And with the coronavirus outbreak threatening to cool global growth, the failures of CalPERS, and pension systems in Illinois and New Jersey, among others, leave all of these funds vulnerable. They’re just one major investment loss away from their funding ratios dropping below 50%.