AL Sets Up Trust to Fund OPEB Obligations

August 16, 2007 ( - Alabama's State Employees' Insurance Board (SEIB) voted Wednesday to put $50 million into a trust designed to help the state pay future health care costs for retired public employees.

The Birmingham News reports that in March Alabama lawmakers passed a law directing the SEIB and the board for the Public Education Employees’ Health Insurance Plan (PEHIP) to create and run their own trusts. The PEEHIP board has already put $200 million in its trust.

According to recent estimates, the state faces about $20 billion in future health insurance obligations for current and future retirees of public schools, colleges and non-education state agencies, the news report said. About $5 billion of that liability belongs to the SEIB and $15 billion to the PEEHIP board.

State Finance Director Jim Main, Governor Bob Riley’s top budget adviser and a member of both insurance boards, said he thinks both trusts need a source of regular funding and that he would talk with Riley about setting up a committee to study ways that might be done.

A recent study from Aon Consulting cited Voluntary Employee Benefits Associations, Health Reimbursement Accounts, and/or a Section 115 Trusts as the funding vehicles of choice for government employers considering funding strategies after a new Government Accounting Standards Board (GASB) rule requiring them to account for other post-employment benefits (OPEB) liabilities on their financial statements (See Public Employers Not Considering All GASB 45 Implications ).

The new rule, GASB 45, has forced states to undergo analyses of their OPEB obligations, uncovering staggering liabilities (See NJ Faces $58B Retiree Health Care Tab with no Fund Pool ).