County starts fund for retirees
Los Angeles County officials established a trust fund Tuesday to prepare for a $20-billion healthcare tab expected when thousands of county employees retire over the next 30 years.
The trust -- which will set aside money periodically -- is intended to supplement the county’s current pay-as-you-go health benefit system. The county is expected to spend $400 million on retiree health benefits this fiscal year. Without trust fund savings, that could jump to $1 billion within a decade, according to an independent actuarial report released last summer.
The Los Angeles County Employees Retirement Assn., which administers benefits to about 40,000 former county employees and their families, will manage the tax-exempt trust.
“This is a real, real good step; this is something that has to be done,” said county Chief Executive Officer William T Fujioka. “Over time . . . it should have a big impact” on the billions in healthcare costs facing the county.
County officials have yet to work out all the details, including the amount and frequency of county payments into the fund, with Service Employees International Union Local 721, which represents more than 50,000 county employees. Los Angeles County is one of California’s largest employers, with 100,000 workers.
“We’re doing the fiscally responsible thing . . . developing a way to tackle” future healthcare costs, said Ramon Rubalcava, the local’s director of research and policy. Retired County Administrator David E. Janssen had proposed putting $400 million into such a fund.
After decades of investment, the county’s pension obligation for retirees -- separate from healthcare costs -- is more than 90% funded.
County officials hope the trust will establish the same cushion for health benefits.
In general, the county pays 40% of the healthcare premiums of retired employees who have worked at least a decade, plus an extra 4% for each additional year worked.
Los Angeles County covers all healthcare premiums for retirees who have worked at least 25 years.
The county also plans to discuss ways to cut benefit costs with the union.
“The alternative is to do nothing, and that’s not acceptable,” Fujioka said.
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