Working Paper: NBER ID: w16450
Authors: Robert Clark; Melinda S. Morrill
Abstract: While no longer common in the private sector, most public sector employers offer retiree health insurance (RHI) as a retirement benefit to their employees. While these plans are thought to be an important tool for employers to attract, retain, motivate, and ultimately retire workers, they represent a large and growing cost. This paper reviews what is currently known about RHI in the public sector, while highlighting many important unanswered research questions. The analysis is informed by detailed data from states on their liabilities associated with RHI, which were produced in accordance with the 2004 Government Accounting Standards Board Rule 45 (GASB 45). We consider the extent of the unfunded liabilities states face and explore what factors may explain the variation in liabilities across states. The importance and sustainability of RHI plans in the public sector ultimately depends on how workers view and value this post-retirement benefit, yet little is known about how RHI directly impacts the public sector labor market. We conclude with a discussion of the future of RHI plans in the public sector.
Keywords: Retiree Health Insurance; Public Sector; Unfunded Liabilities
JEL Codes: H72; J26; J45
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic assumptions (P19) | UAAL (R29) |
| medical cost inflation (E31) | UAAL (R29) |
| discount rates (E43) | UAAL (R29) |
| RHI generosity (D64) | UAAL (R29) |
| inclusion of teachers in RHI plans (I20) | UAAL (R29) |
| lack of prefunding (H69) | UAAL (R29) |