The federal Early Retiree Reinsurance Program provides $5 billion for employers nationwide to help cover the health care costs of retirees who are still too young for Medicare.
Locally organizations including SDG&E, the San Diego Unified Port District and county retirement system have applied for funds. The Cities of Escondido, Sacramento and Santa Barbara are among those taking part. So far, California has received a total of about $112 million from the federal program.
But San Diego doesn’t plan to apply for any money.
The city’s firefighters union wanted to know why. In a written response, San Diego’s Risk Management Department said committing to the program for the next three years would conflict with the city’s goal of reducing retiree health care costs. San Diego has a retiree health deficit of about $1.3 billion.
Here’s an excerpt of the letter:
As you know from the ensuing negotiations, one of the City's objectives is to address the serious threat the unfunded liability poses to the on-going viability of the current Retiree Medical Benefit as well as other employment benefits. For this reason the City could not commit at the time when applications for the program opened, and still can't commit, to maintaining a certain level of retiree health benefits under the maintenance of effort requirement of ERRP.
The federal program requires employers to maintain the level of financial support for retiree health they have when they join the program. But critics say other organizations aren’t letting that hold them back.
Dawna Gray is the Benefits Consultant for Local 145, the firefighters union. She said many other cities are facing the same situation as San Diego.
“They generally all have collective bargaining situations. Many of them are engaged in collective bargaining situations where they’re trying or attempting to reduce the amount of retiree health care liability,” she said. “And yet they all took the step of making applications.”
Gray said she believes San Diego could receive at least $2 million a year from the program if it applied and were accepted. But time is running out for the city to change its mind. The application period closes at the end of the month. The program will end in 2014. That’s when health care exchanges are expected to be available to provide more coverage options.
