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HomeMy WebLinkAbout(5) AUGUST 3, 20093 tl~ New retiree e as cities: Ini addition to a sharp pencil, Port Arthur city otlidala a crystal ball and rear-view miirror might be oC use to wmpiy with new aorounting standards going into effeca for the first time this year. Ciities Dke~ Port Arthur are required to follow a new role known as GASB 45. The rule regulates the way governments report casts for retiiree benefits, including future health care ezpenditures and thou from previous years. Cities not complying would risk losing a favorable bond rating. In. Port Arthur's cox, some $7.6 million will have to lx put on sty books by the end of the year in an effort to disclose the future liability. 'T'his is allf brand new, and it's really dif- ficult. Wa are being forced ko look at med- ical costa just like' we do pensions,' Becky Underhill, Port Arthur w-assistant city manager, said. Ttu Government Accounting Standards $oai~d initially issued the new rule in 20041, but delayed the implementation by two .years because of the difficulties cities face in determining the coat of promised benefits. Gcrverncnenb with annual revenues of S10CI million or more were the first required to adjust their financial state- ments to reflect future payments far retiree health care coverage. At the lama time, rities must look backwanis to deter- mine: peat costs that were not projected in previio Rule Continued from At coverage- For the employee alone, vest of funding the retiree health Dare for what could be 40 to 50 years into the future is staggering. Thats the preface behind the dixlosure, with vests increasing at an alarming rate, cities need to show these future mall on their In addition to disclosurt:, Part Arthur would benefit firm setting aside this years projected payment ct =T.6 million, which includes previous years amortizsr Lion and projected future retirer health care costa. The money would be put into an irrevocable trusli. Underhill said right now, crunching By tiherry 6oence TM Hews stall irrder us years es.a future liability. See'RWIe,' page Ab ,.;<:` Y'~`iq;?_ ,;. -_-~. .~ -..,.ws~~rl the city has no funding to set aside the fT.6 million projected payment If the city is able to Find money to set aside for future payments, a smaller deficit is required to be reported. according to the GASBE Web site. AI; the same time, Port Artfcur will continue its pay-as-you-go method far current health care premi- ums for active and retired employees. This year e health care budget is i7 million for aD'employees and the portion the dry pays for their families- ' Right now the city is in'a holding pattern while all eyes'. are looking toward Washington W sce if there will be a medical coverage plan. Depending on the out- wme, the dry Likely will havr. to look at its benefit numbers _- . . structure and make some changes, Underhill said. "It's not something was went to do. One of the advantages of working in muaidpal government has always been the benefit packages otiered,' Underhill said. Underhill said Port Arthur is not alone, cities all across Lhe country are having to take a close loelr at their benefit structures while determining the proms jetted vests of offerityg retiree health benefits. Though the city of Nederland only pays a por- tion of a retired employs health care premium, and none of their family's, calcU- latiag the wets of what the city does pay is not easy, Cheryl Dowden, director cf finance, said, 'What we are doing 'is trying to rapture e~liabilit;Y ~: diet has Rot been recorded. It is a hardship ~ because there is a tat of data -we ' have to gather and try to "- present in a way that, is `. meaningful,"-she laid Nederland's. health care. vests are not nearly as high.: . as Port Arthur a, she said..' The city pays 10 peccerit for an employee who retires - . at the age of 6l). That figure . gets up LO Percent Pea' year `. until the re4im reaches the- '- age of 85, at which time cite wverege ceases.-~: Like Part ' 'Arthn7, . Nederland has: hired sit" . actuarial company to deter- .__ mine the projected health care noel. The initial study will cost Nederland :4,680. Snob , year the proceu ~wi'll haiCe W be repeated. though tl(e '. vest wfEl not be as high.- "; skoonoefri¢ianerua.com '. To get an idea of liow much money Port Arthur will pay for futt+r_e~retiree health care benefits, city officials hired-an aetuar- ielcompany. Among data used fo figure the - unknown cost, the company will take into account an estimated 10 to 15 perroent fir. year iicIIatfon rate for employee health care, an employee's declining health as they get older and vrhether an employee's family veil[ be covered. In addition to tl~e projected 'oust,. the. cities sad other gmrernment entities are required to put previous year's ~ retiree . ~~ health care mats on their books. Those years not disclosed previously will .be . -. amortired far future documentation. - "It is definitely a real rnmplicated - issue," Underhill said. - Ontop ofthat, the projected Debility hen '_- to lx calculated every year, and is expect-' ed to grow dramaticadly if health care costa continue to skyrocket. - Wi.th al] the unknown variables,' _ Underhill said funding future health wets `' is much like funding futurer pension pay- meets, only harder to define. - - _ Especially in Port Arthur a case.. The . - dty oRers an attractive retirement plan; .'- Employees with 20 years urvice can retire with a pension and health care. At this"', time, the city pays retired employees' ,~. health care premicuns, and a por'tioa of :',: their family's. Usom,eone goes to work for'::. the city of Port Arthur at the age of 20; .'. they can retire by 90, atilt have a spouse; ~_ and possibly children at home youaget..; than 25 who one eligible for health eare'':~-