Major Health-Care Cuts Looming For Ohio Public Employee Retirees

Jan. 15--COLUMBUS -- Ohio's largest public employee pension system could decide to dramatically reduce health-care benefits for its retirees.

The Ohio Public Employees Retirement System, which holds pension fund assets of $91 billion, says its priority by law must be the pensions of its 1.1 million members, mostly current and former state and local government workers, including countless workers and retirees in northwest Ohio. But while not mandated by law to do so, the system has provided health-care coverage for its members for nearly 50 years.

The pension system is funded through contributions from employees -- generally 10 percent of salary -- and from government employers -- generally 14 percent -- as well as investment earnings. The system had planned to earmark 4 percent of the employer contributions to health care, but that never materialized as the fund lowered its investment earnings projections.

With no new dollars going into what is now a $13 billion health-care fund, it is believed that it will become insolvent in about 10 years. It could be about 14 years before OPERS might be able to resume contributions into the health-care fund.

"The reason for this goes back to the pension fund," OPERS spokesman Michael Pramik said. "We have a $24 billion underfunded [pension] liability that we need to deal with. Health care is very valuable to retirees, but it's second in priority to the pension."

The OPERS board of trustees includes members representing state, county, and municipal employees; retirees; non-teaching university employees; state government; and investment experts.

It has been discussing various options for more than a year. It met again Tuesday and could reconvene on Wednesday for a final vote if its health-care committee approves this proposal during a committee meeting Wednesday. If approved by the full board, the proposal would go into effect as of Jan. 1, 2022. It would generally:

-- End OPERS-paid health coverage for retirees under 65 through. It now pays between 51 percent and 90 percent of health-care costs. Instead, it would give members allowances to apply toward premiums and deductibles as members purchase insurance on the private market. Staff has recommended an initial deposit of $1,200 per retiree for each of the first three years.

-- Reduce the monthly fund allowance by between $51 and $90, depending on a variety of factors, for retirees over 65 to supplement what is covered by Medicare.

While those over 65 could still retire into the Medicare population with 20 years of service, others may have to work 30 to 32 years before becoming eligible. The board is also looking at making changes to its disability benefits.

Aristotle Hutras, former director of the legislative Ohio Retirement Study Council, said the problem is facing all pension funds. He compared it to the Greek myth of Sisyphus stubbornly trying to roll a rock up a hill.

"They are constantly dealing with this health-care issue," he said. "It's a national issue. The pension funds can't solve this thing themselves."

If the proposal is approved, the actual impacts of the changes on individuals would depend on a variety of factors, including the plan that they choose. OPERS Members still on the job would continue to get health-care coverage through their government employers.

Unlike proposed changes affecting pensions, changes in optional health-care coverage would not require legislative approval.

As of the end of 2018, the system had 212,937 retirees.. That included 6,921 in Lucas County, 2,921 in Wood, 1,100 in Ottawa, 720 in Fulton, and 657 in Henry.

Several years ago, with varying success, lawmakers set out to force the state's five public pension funds to adjust pension benefits and eligibility to ensure they had enough assets to cover their long-term liabilities. Lawmakers at the time had no appetite for increasing employer contributions.

Gov. Mike DeWine offered no opinion Tuesday when asked whether that should change.

"That's something that I've asked our team to take a look at, so I don't have any additional comments today," he said.

Mr. Hutras said he doesn't believe an increase in employer contributions is necessarily a non-starter.

"I believe they are non-committal," he said. "It's not just OPERS. It's all of the pension funds. The only contribution that can be used is the employer contribution. That's in statute. It's never going to be easy, but I think if you're getting a non-committal [from the governor], I think that's a more fair assessment than dead in the water."

Public unions are watching what is happening with OPERS as a potential sign of what could happen at Ohio's four other pension funds that represent teachers, other school employers, police, firefighters, and highway patrol officers.

Chris Mabe is president and executive director of the Ohio Civil Service Employees Association and a voting member of the OPERS board. The union's goal is to maintain a defined benefit pension fund.

"Legally, we have to maintain a pension system," he said. "Health care is not a legislative guarantee. Obviously, we're going back and forth over an increase in the employer share of retirement, but there's no political will for that. We're looking for a way for OPERS to maintain some level of health care for retirees."

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