Funding police and fire retiree health: ways to pay for the promise
Once the retiree promise is priced, the question becomes how to pay for it. The options move cost and risk in different ways.
Six Parts of the Funding Choice.
Retiree Health Accounts for Public Employers
The retiree health account option.
Retiree Health and Labor Contracts
What the contract requires.
Public Act 152 Explained
The cap and covered plans.
Michigan Benefit Law at a Glance
Michigan rules that touch funding.
A County Example
A large county’s planning example.
Michigan Public Employer Benefits
Our complete public employer resource.
Comparing the funding paths in practice.
Pay-as-you-go keeps cash in the budget now and pushes the growth in cost to future budgets. Setting funds aside builds a reserve but ties up money and needs investment oversight. A retiree health account fixes the employer’s contribution, which limits open-ended cost but shifts risk to the retiree.
Each path should be tested against a projection: the current retiree census, expected additions from retirements, medical cost growth and the contract language. The board should see all three side by side before deciding, with the effect on the annual budget over a ten-year horizon.
Questions About Funding Retiree Health.
Straightforward replies for HR, finance and purchasing teams.
What Are the Ways to Fund Retiree Health?
Options include paying each year out of the operating budget, building a reserve in advance, or funding a retiree health account with defined contributions.
What Does Pay As You Go Risk?
Cost rises as the retiree population and medical cost grow, so the budget absorbs the full increase each year.
How Does a Retiree Health Account Work?
The employer contributes a set amount to an account that retirees use for coverage, which limits open-ended cost.
Who Should Decide the Funding Approach?
The governing body decides, with advice from finance, labor counsel and a benefits advisor, because the choice is a budget commitment.
Does ERISA Apply to These Plans?
Usually not. Governmental plans fall outside Title I of ERISA, although other federal rules and Michigan requirements may still reach you, so verify with your attorney.
Does the Affordable Care Act Apply?
It may apply to a governmental employer that crosses the large-employer line, which makes tracking hours, offers and reporting important.
Do You Work With Public Safety Retiree Funding?
Yes. Michigan public employers rely on us for work on benefit design, renewals, caps on contributions and coverage for retirees.
Can You Review Our Current Plan?
Yes. Share the plan documents and the renewal, and we will explain the plan’s current position along with the alternatives.
What Should We Send You First?
A copy of the plan summary now in force, the renewal, and any contract provisions or board resolutions that bear on benefits.
How Do We Start?
Forward the renewal and let us know when the decision is due. We will study it and set out your choices.
Does the funding choice change what retirees receive?
It can. A defined contribution account gives retirees a fixed amount, while other approaches may preserve a defined benefit. Contract language and law decide what can change.
Who prepares the projection?
Prepared by a benefits advisor from the retiree census and plan cost data, then checked by finance and counsel ahead of the board presentation.
Ready? Upload your renewal, or speak with someone first. Either path is free and commits you to nothing.
This discussion of funding public safety retiree health is for general education and is not legal or tax advice. For questions about your own plan, your attorney and tax advisor are the right people, and we will work with them.
The Law Behind This Topic.
Each law named above links to the statute or regulation it comes from. Consider this background reading rather than legal advice; because rules get amended, review the current wording with your attorney.
Publicly Funded Health Insurance Contribution Act (MCL 15.561)
Public Act 152 of 2011, Michigan’s limit on how much a public employer may pay toward medical plan costs.
Coverage of ERISA (29 U.S.C. 1003)
Why a plan that counts as a governmental plan is not subject to ERISA Title I.
Related Public Safety Reading.
Police and Fire Benefits
The main hub for this topic.
Employer Benefits Guides
The full section.
Public Administration Benefits
More on public administration benefits for public employers.
Choosing a Funding Approach? Send Us the Numbers.
Once we have seen it, we will tell you if the pricing looks competitive, where we see room to improve, and which five questions we would take to your carrier. It costs nothing and you owe us no move.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
We need four documents, or six when the group has 50 or more people. More than that only creates reasons to wait.
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