Generational inequity has been and will continue to be an issue tied to public retirement benefit plans (as it is with Social Security, Medicare, and other tax funded programs). It’s not fair for one generation of workers to promise themselves generous benefits in retirement, and then leave the funding of those benefits to the next generation.
Presumably, that’s one of the issues that legislators had in mind when drafting Oregon HB 3605. The bill, if passed into law, would require public employers to create a separate account for funding certain retiree benefits, and make annual contributions to that account in amounts necessary to amortize the liability within 25 years.
The issue of generational inequity has already been partly addressed with the introduction of GASB Statements 27 and 45, which require public employers to recognize liabilities for these future payments on their financial statements. The accounting statements have significant built-in incentives for public employers to pre-fund retiree benefits, and many employers do so if they have available cash on hand. To require employers to set aside cash now for these future benefits, particularly in this economic environment, is myopic in two respects:
- Most employers are already phasing out (“sunsetting”) these types of benefits. Passage of this bill would simply hasten the process, robbing employers of a useful incentive for long-tenured, expensive employees to retire.
- Those employers who are unable to curtail the benefits (due to collective bargaining or other factors) would need to look to other sources for the cash to pre-fund these benefits. This could mean layoffs, cutbacks in school programs, etc.
I’m interested in hearing other people’s thoughts on this bill. Please share them here by commenting on this post, and on the public forum at OregonLive.com.