Report: N.J.'s Unfunded OPEB Liability Down $7.4B From Last Year

New Jersey received $7.4 billion of good news this week as an outside actuarial report now pegs the state's unfunded other post-employment benefit liability at $50.65 billion, down from the previous years' shortfall of $58.59 billion.

The liability reflects the state's total obligation through fiscal 2007. Aon Consulting calculated the state's OPEB figures, which include health care and other non-pension benefits for retired state employees. Health care obligations also decreased at the municipal level, with local governments now showing a total OPEB liability of $9.09 billion as of July 1, 2007, down from the previous year's unfunded shortfall of $10.87 billion, a difference of $1.78 billion, according to the Department of Treasury.

State Treasurer David Rousseau attributes the change to higher employee co-payments and deductibles, switching from the traditional health care plan to a preferred-provider organization plan, and trends toward fewer medical and prescription claims among retirees, especially early retirees.

"The reduction in the health care liability is attributable to a number of factors, particularly the heath plan design changes [Gov. Jon Corzine's administration] negotiated and put into place last year," Rousseau said in a press release.

Whether the state will experience future decreases in its OPEB liability remains to be seen. Treasury spokesman Tom Vincz said the number of claims and trends in patient care vary, making it difficult to pin point future valuations.

"There are a number of different factors that all contribute to the trend experience as well as the cost factors that are part of the overall valuation," Vincz said. "We certainly hope these trends and factors do continue, but only time will tell."

At the state level, New Jersey continues to meet its OPEB requirements on a pay-as-you-go basis, allocating roughly $2.1 billion each year for health care obligations. Changes in benefits will generate roughly $2.5 billion of total savings through fiscal 2022 in health care costs for the state, but boosting its annual contribution beyond its most immediate needs remains a goal. The state's annual required contribution for fiscal 2008 is $4.99 billion, according to the Aon report. The ARC calculation takes into account current health care obligations as well as future contributions.

"We have a long way to go to address these long-term costs, but we're mindful of the real and responsible progress we've made in a short period of time," Rousseau said.

New Jersey's total state employee health care program has 469,029 participants, including 368,664 current employees and 100,365 retirees. Participants at the local level total 59,386, including 44,170 active hires and 15,216 retirees.

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