New York City faces future health costs for its retired workers of $103.2 billion, an increase of $40 billion over a decade. It has about $5 billion set aside to pay the bill.
The so-called “other post-employment benefits” (OPEB) liability was disclosed in New York’s comprehensive annual financial report released by the city comptroller’s office Wednesday. The city’s $98 billion unfunded liability for retiree health care exceeds the city’s $93 billion of bond debt and $48 billion pension funding gap.
(Related: Detroit Retirees Blast City Plan)
New York, the most populous U.S. city, has almost 300,000 current employees and is responsible for more than 230,000 retirees and their beneficiaries.
The city’s post-employment benefits include health insurance, Medicare Part B reimbursements, and welfare fund contributions. Medicare Part B covers doctors’ services that are received from a federally approved facility or a medical practice. Welfare funds are administered by unions and provide supplemental benefits such as prescription drug, vision and dental coverage.
New York City should address its retiree health care costs by requiring beneficiaries to share the cost of premiums for health insurance, eliminating the reimbursement for Medicare Part B and reducing contributions to the welfare funds, according to the Citizens Budget Commission, a budget watchdog group funded by the business community.
“The city’s long-term liabilities are substantial, and paying the associated legacy costs is crowding out programmatic spending,” the CBC said in a September report. “The city needs to develop a strategy to reduce long-term liabilities and keep legacy costs a manageable portion of the annual operating budget.”
The $5 billion New York City has saved to retiree health payments is projected to last until 2026. After that, the city will fund benefits on a pay-as-you go basis. The city paid $2.6 billion in retiree health benefits last year.
— Read Postal Service Might Send Retirees to Medicare, on ThinkAdvisor.