An Illinois Senate pension reform plan would reduce state indebtedness to current and future retirees by more than a rival House proposal if health insurance costs are counted, a new analysis by a league of union groups shows.
A study by the We Are One Illinois shows that if half of employees and retirees choose to forgo post-career health insurance as part of Senate President John Cullerton’s proposal, the state’s debt to two health insurance programs would be cut in half, by $26 billion. […]
In an analysis released last week, Nekritz pointed out that if roughly half of employees and retirees choose to forgo health care in favor of compounded cost-of-living increases in annual pension payouts, the Cullerton idea would only drop the pension liability by $6 billion.
The review acknowledged that it didn’t count savings in retiree health care - a bill of $52 billion in addition to the $97 billion pension shortfall.
* From the We Are One Coalition…
SB 2404: Health Care Savings Estimate
In contrast, evidence continues to mount that SB 2404 saves more than previously recognized. Leaders of We Are One Illinois have produced a new, preliminary estimate of $26 billion in health care savings in the coalition-supported legislation, Senate Bill 2404, based on the choice outcome suggested by SB 1 supporters. This brings the total immediate savings on the health care and pension unfunded liabilities to $31 billion – more than SB 1.
SB 1 supporters have wrongly argued that SB 2404 does not save enough. They estimate that because 50% will choose to opt out of retiree health care, that SB 2404 will save approximately $6 billion immediately off the pension unfunded liability.
But this calculation fails to include the significant health care savings that would accrue from a 50% health care opt out. If 50% of employees and retirees choose the health care opt out, approximately $26 billion in accrued health care liability would be saved, for a total combined liability savings of around $32 billion. If fewer opt out of health care, the pension savings would be greater. These are preliminary estimates calculated from the FY 2011 year ending actuarial valuation of Other Post-Employment Benefits (OPEB) for the State Employees Group Insurance Program and Teachers Retirement Insurance Program.
“This is all the more reason the House should pass SB 2404 without change or delay,” Michael T. Carrigan, president of the Illinois AFL-CIO.
Remember, this is only about the teachers’ pension fund. . Oops. Health savings are estimated for both State Employees Group Insurance Plan (SEGIP, covering SERS, SURS, GRS, JARS) and Teachers Retirement Insurance Plan (TRIP).
The TRS actuarial analysis is here.