County Retiree Health Benefit Faces Cuts

The Stanislaus County Employee's Retirement Association is considering cutting health care benefits for retired county workers because returns on county retirement funds have not met expectations over the past several years, the Modesto Bee reports.

The benefit, which is not guaranteed to retired county workers, is paid out of excess interest earnings on the county's $1.26 billion pension fund. The pension fund is expected to earn 8.16% interest annually on investments and excess earnings are used to fund other retirement programs, such as the health care stipend.

However, returns between 2000 and 2003 were lower than the 8.16% target return and excess interest is not keeping pace with the rising costs of the health benefit, according to StanCERA Retirement Administrator Tom Watson. The health benefit costs $6 million to $7 million annually and has been increasing by about 7% each year as more county workers retire.

A report by the StanCERA retirement benefit committee found that the health benefit fund will run out of money by 2014 unless changes in the program are made. Watson said the retirement board will review payments annually and make adjustments if necessary.

The committee has recommended increasing the amount of time an employee must work to receive the full stipend of $370 per month to 30 years beginning Jan. 1, 2008. The committee also has recommended increasing the minimum amount of time an employee must work to receive the benefit to 10 years beginning Jan. 1, 2010.

In addition, the committee has recommended that employers participating in the system and employees develop a retiree medical trust to which employees could contribute. Watson said the board recommended that the benefit be tax exempt.

The board will consider the changes at its Sept. 13 meeting (Moran, Modesto Bee, 9/4).