San Diego County Weighs Retiree Health Care Trust
San Diego County officials and union leaders are debating how to build a tax-free trust to pay for retiree health care benefits for current employees, the San Diego Union-Tribune reports.
Union leaders favor a pooled account in which all retirees use the same investment pool, while county officials support individual accounts, similar to a 401(k) account.
Union officials argue that individual accounts would create disparities for low-wage workers or employees near retirement who would have difficulty contributing money.
Meanwhile, Carlos Arauz, the county's human resources director, said pooled accounts being backed by union leaders would create a guarantee that health benefits are covered, a move that could force the county to report hundreds of millions of dollars in long-term debt.
County supervisors and the retirement board reached an agreement last month to pay current employees a $400 monthly check once they retire instead of health benefits. The move is intended to reduce costs and eliminate a deficit that counties would have to disclose.
Brian White, chief executive of the retirement board, supports a trust, saying that using the county's reserves to fund the checks is unpredictable. A downturn in investment returns over a few years could leave the reserve with little or no money, according to White.
County and union officials say the debate over the trust could go unresolved until 2009, when the union contracts expire (Gustafson, San Diego Union-Tribune, 7/2).