November 14, 2008
Paterson's retirement incentive
Instead of the traditional pension sweetener, Governor David Paterson is effectively offering a different kind of incentive to many state workers eligible for retirement: Leave the payroll by December 31, or pay more for post-retirement health insurance if you retire later.
Currently, employees who retire directly from state government are eligible to remain in the state employee health insurance plan. Retirees' contribute 10 percent of premium costs for individual coverage and 25 percent for family coverage. Unlike pension benefits, which are based on length of service, the full health insurance benefit is available to all retirees who worked for the state at least 10 years.
The governor's proposed change would base retiree contributions on a sliding scale based to the years of service. According to the Division of the Budget (here):
The State would pay a minimum of 50 percent of premiums for individual coverage and 35 percent for dependent coverage for employees who retire with 10 years of service. The State's contribution would increase by 2 percent of premium for each additional year of service up to a maximum contribution of 90 percent for individual coverage and 75 percent for dependent coverage for employees who retire with 30 or more years of service.
The Division of Budget estimates the change would save $3 million in the current fiscal year and $15 million next year.
Unlike state workers, most private sector employees are not eligible for employer-paid health insurance when they retire.
As reported here, Rhode Island offered a similar incentive earlier this year. Workers retiring by September 30 will pay 10 percent of the cost of health premiums. Those retiring after that date will pay at least 20 percent toward lifetime benefits.
As shown in this national assessment of state government retiree health plans (here), Ohio recently moved to a sliding scale similar to what Paterson has proposed.
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