Traverse City Record-Eagle

April 7, 2013

Leelanau's public health costs in the spotlight

Traverse City Record-Eagle

---- — SUTTONS BAY — Leelanau County officials are considering cutting health care payments to non-union employees upon retirement as the county stares down the barrel of an estimated $5.8 million bill for unfunded retirement liabilities.

Addressing unfunded debt obligations is important to the county’s long-term health, said Tom Van Pelt, chairman of the county Board of Commissioners.

“It’s a considerable sum of money,” Van Pelt said. “We have a considerable liability, like other counties do, in terms of what has been given to employees. We are looking to see what we can do to lessen our liabilities.”

County commissioners on Monday will hear a proposal to cease one current practice: $100 per-month payments toward health insurance premiums for non-union employees who piled up 10 years or more of service upon retirement. Instead, the county may put a one-time, lump sum amount of money into individual health savings accounts for non-union employees.

The amount deposited in the health savings account would depend on years of service the employee has with the county and is tax-free. The money would go into investment funds and the account balance would grow tax-free. The old system of paying $100 a month for life is estimated to cost $33,576 for an employee with 30 years of service. The proposed new system, for the same employee, would involve a $15,000, one-time expenditure deposited into the account. The amount would be capped at $15,000 for all eligible employees.

Nineteen current county employees would be affected if commissioners adopt the plan. They include department heads, elected officials, and deputy department heads. The long-term liability for those employees under the old system is estimated at $550,632. The new system could cut that number to $183,500, and, because it would involve a one-time expenditure, the expense would no longer be on the books as an unfunded liability.

County Clerk Michelle Crocker has worked for the county for three decades and would be eligible for the health savings account deposit. She thinks the proposal is a good idea, in part because it will allow employees to immediately access a pot of money for health bills upon retirement rather than waiting for $100 a month to pay a portion of a premium.

“It’s a good way to go,” Crocker said. “It would give you a little bit more to work with for your medical needs.”

Calls to several other current non-union county employees were not returned.

Efforts by Leelanau County and other local governments to address unfunded retirement obligations come amid growing concerns statewide about the problem. A new, comprehensive report by Michigan State University Extension Economist Eric Scorsone and researcher Nicolette Bateson estimates Michigan’s retired municipal workers are owed $13 billion over the next 30 years. That debt plays a significant role in fiscal crises in Flint, Detroit and Lansing.

Leelanau County Administrator Chet Janik is presenting the proposed changes to commissioners. He said the current unfunded liability for retirement health care expenses for all of the county’s 106 employees is $1.8 million.

Janik said the county also plans to address the issue with its union employees. The county’s union labor contracts expire at the end of the year.

“It will be a topic of discussion,” Janik said. “This is a big issue for every form of government.”