Pension and Health Care Challenges Post-Enron

Local 1 MN President Gary Goblirsch responds to questions about his Local’s retiree health plan.

The challenge facing health and welfare, and pension funds in the wake of corporate scandals, and double-digit increases in health care and prescription drug costs has been described as a “perfect storm.” As health care costs rise, trustees of funds are faced with the challenge of providing good benefits at reasonable costs. To make up for losses caused by the stock market’s volatility, many pension funds need to increase contributions to meet government funding requirements. BAC fund trustees addressed the potential for competing demands for contributions, along with other important issues such as retiree health care at the 2002 Trowel Trades Trust Fund Educational Conference.

Health Care Funding — Today and Tomorrow

Double-digit increases in the cost of health care and prescription drugs are creating another level of challenges for BAC fund trustees. Gary Whitted, a Vice President with United Health Care, told attendees that the reasons for the sharp increase are “complex, interrelated, and multi-dimensional,” and there are no immediate remedies. “Consumers will have to play a larger, more vocal role to push for change,” said Whitted. One way to do this is by creating larger pools of workers under one plan to increase purchasing power. Another is to educate all plan participants on the cost of health care and how to get the most out of their plan.

BAC fund trustees and other attendees listen to remarks by Professor Teresa Ghilarducci at the 2002 Trowel Trades Trust Fund Educational Conference.

On a related topic, Gary Goblirsch, Local 1 Minnesota President, and Peter Rosene, an attorney for the Local’s health and welfare fund, reported on a successful approach undertaken by the Local to fund retiree health care. The reality, Rosene told attendees, is that the number of retirees will grow faster than the population as a whole between now and 2011. “It’s important for Locals to take charge of the future and protect the needs of their members,” said Rosene. “One way to do this is by providing retiree health care.”

“This was an issue for members of Local 1,” said Goblirsch. “Members wanted to retire before age 65 because they were physically wearing out, but I had to tell them that if we don’t figure out how to fund retiree health care, then they would have to work to cover their health care costs after they retire. When we introduced our plan to prefund retiree health care, our active members were skeptical, but members voted in favor of the plan because it allows them to retire early.”

The Minnesota retiree health plan is affordable, and offers lifetime care, spousal protection, and broad coverage. Set up as a 501(c)(9) Trust, which offers a defined benefit approach to funding health care, it has several advantages:

Developing a workable system for funding retiree health care takes planning and member involvement. “It requires a commitment to educating the members,” said Goblirsch. “We routinely use our quarterly newsletter to update members on the status of the plan.”