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Sunday, May 31, 2009

Ind. Gov't. - $40 million spent since passage of 2007 law meant as a bridge to help retired legislators and state employees until they qualify for Medicare

The Indianapolis Star's Behind Closed Doors today has an eye-opening story on the costs of 2007's SEA 501:

A state health insurance plan meant as a bridge to help retired legislators and state employees until they qualify for Medicare may be on the ropes. And more state workers are opting to retire sooner rather than later because of that.

The plan was passed in Senate Enrolled Act 501 in 2007 by legislators who had scrapped a controversial and very generous health plan for themselves. In general, it pays retirees about $1,000 for every year they were employed by the state.

The budget proposal that Gov. Mitch Daniels made in January did not include funding to continue the plan, though the version the legislature put forth included $64.4 million to fund the program for 2010 and 2011.

That budget proposal is dead, however, and with a new revenue forecast showing the state likely taking in $1.1 billion less than expected in 2009, 2010 and 2011, the chances of the insurance plan being funded aren't good.

State Budget Director Chris Ruhl said there will be no money to fund the benefit for state employees in the budget proposal the governor will deliver to lawmakers Tuesday. There will, however, be proposed funding for retiring lawmakers, Ruhl said, as this was the deal made when they gave up those more generous health benefits.

Ruhl said about 1,500 people are in or will be in the plan this year. The average cost per participant has been about $26,000 -- or about $40 million in total so far.

"You can see the reason we're not so fond of this," Ruhl said. "It's expensive."

Expectations that the plan will be eliminated have prompted some state employees to retire now, while they can still get the benefit. * * *

Legislators, though, may have the last word on this -- and so far, at least, they have been advocates of keeping the plan.

Some background. See this April 24, 2007 ILB entry is headed "Governor announces he will sign legislative pay raise," and this April 29, 2007 entry headed "Budget threatened by new legislative pay provision."

Here is how Niki Kelly of the Fort Wayne Journal Gazette described the new health care benefit in an April 25th, 2007 story:

The governor also signed Senate Bill 501, a companion bill that establishes a retirement medical benefits account for state employees of all three branches of government as well as elected and appointed officers.

Legislators previously had authorized a special state-supported retirement health plan for only themselves. But it became a sensitive political issue, and they officially repealed it in the pay raise bill.

As a result, though, the General Assembly decided to set up a similar plan for all retiring state employees or elected officials who have served at least 10 years.

It requires the state to make annual contributions to the account based on the age of the employee, from $500 for employees younger than 30 to $1,400 for employees 50 or older.

In addition, there is a “catch-up” provision for any state employee retiring with at least 15 years of service or elected officer with at least 10 years of service. This supplemental contribution – meant to beef up the account in the first 10 years of existence – would be $1,000 for every year of service.

The catch-up would expire in 2018.

Money in the account can be used for health care costs of all kinds after retirement, including insurance premiums. If there is a balance in the account when the employee reaches 65, the money can be used to supplement Medicare coverage.

Senate President Pro Tem David Long, R-Fort Wayne, said although legislators would be eligible “this is really more for state employees” to bridge the gap between retirement and Medicare coverage.

One more thing -- in 2007 retiring state employees not old enough to qualify for Medicare would lose access to affordable group insurance coverage after the 18-months of Cobra access had terminated. The federal law relating to Cobra coverage has now been expanded. What is the impact here?

Posted by Marcia Oddi on May 31, 2009 09:04 AM
Posted to Indiana Government | Legislative Benefits