Governor’s Commission Focuses on Post-Retirement Health Care Funding
by Dana Dillon, Teachers’ Retirement Board Chair
Almost every day — in the lunch room, on the playground and in the board room — I hear your questions and concerns about the future of public pensions.
And why shouldn’t you have questions? Much of what you see in the news is that public pensions are in need of fixing. While we are rock solid and don’t need "fixing," there have been issues with other pension systems that have drawn a great deal of public attention.
The latest news on California public pensions is the final report of the Governor’s Public Employee Post-Employment Benefits Commission, released in January. The Governor convened a 12-member panel in 2007 to study and then propose a plan to address California’s unfunded retirement health care and pension obligations. You can see the full report at www.pebc.ca.gov.
The report was prepared after a year of testimony, careful study, and analysis. It primarily focuses on the total liability for retiree health care—an issue that matters to the Teachers’ Retirement Board, but one that doesn’t directly affect the health of the CalSTRS pension fund itself.
More important, the report confirms what we’ve known all along: CalSTRS is in good shape and your pension fund is secure and well managed.
Three of the commission’s recommendations could affect CalSTRS:
- Recommendation 1 requests that all public agencies pre-fund Other Post Employment Benefits (OPEB). The CalSTRS Medicare Premium Payment Program is considered an OPEB, but isn’t pre-funded within the trust. Funds are set aside and held to cover the cost of the CalSTRS Medicare program. Contributions are used to pay the premiums, administrative costs and provide a reserve. However, CalSTRS could design this program to be consistent with the commission’s recommendations.
- Recommendation 22 calls for the creation of an actuarial advisory panel to provide impartial independent advice and to determine standards and best practices for the funding of pensions and health benefits. This recommendation could assist smaller pension plans, but CalSTRS already employs a full-time internal actuary and external actuaries to perform these duties.
- Recommendation 23 states that all public pension plans should have periodic performance audits by an independent auditor. Again, this could benefit smaller pension plans that don’t have our level of resources. CalSTRS has an internal audit staff and already contracts with independent firms to conduct performance audits.
Legislation has been introduced to address some of the recommendations within the report. We will follow the progress of those bills as they make their way through the lawmaking process.
In closing, I want to tell you what I say to my concerned colleagues, "CalSTRS is the second largest public pension fund in the United States. We are healthy and expertly managed. You can count on receiving your benefit payment now and in the future."
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