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Roeder Financial
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La Mesa, CA 91941-6433

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Recent Benefit Developments

Rick Roeder, FSA       November 2011

In this month’s elections, Governor John Kasich and the Republican-controlled legislature were given a strong repudiation by Ohio voters. Issue 2 was a measure which repealed the new requirement that employees to pay for 15% of their health care costs and restored some of the collective bargaining rights that had been taken away by Ohio’s Republican-controlled Legislature in Senate Bill 5 (“SB5”). SB5 curtailed the ability to resolve union negotiations with safety groups by binding arbitration and ended the ability to strike for non-safety public workers. The fierce tug-of-war with the public sector unions echoed the acrimony that occurred in Wisconsin early this year. After Issue 2 resoundingly passed with 61% of the vote, Kasich lamented, “It might have been too much too soon.” Kasich may have fallen into the “George W. Bush” syndrome – where a narrow election win gives the victor the mistaken impression that he has a clear mandate. Last year, Kasich unseated Governor Ted Strickland by a mere 2%. Kasich did warn that there was no money in Columbus to bail out bankrupt municipalities (it would be rude for you to think that they were broke in Ohio because they were paying the Buckeye football players so handsomely): a warning that has been repeated, implicitly or explicitly, in other states. The inability of many states to bail out municipalities raises the question that exists in California and elsewhere: if the state is not in a position to provide significant help to municipalities, does this mean a curtailment or end of state- mandated of services that are required to be provided at the local level?

Recently, Jerry Brown proposed a measure for a hybrid plan which would raise the normal retirement age from 60 to 67 for new Califonia hires. The Brown administration indicated that annual savings with the proposal would be $900 million per year. His proposal did not address the funding woes of CalSTRS. CalSTRS does not receive actuarially determined rates but rates set by the legislature as it does not have the power to set rates as does CalPERS. At current funding levels, STRS is scheduled to go broke in 2045 even if they make their long-term actuarial return of 7.75%. The Brown proposal will provide financial help in the long-term but does nothing to resolve the near-term impact of skyrocketing pension contributions on Sacramento’s current financial crisis. It does limited good to get rid of a patient’s cancer if there is a lively possibility that they will die next week of a heart attack.

On the national scene, the Obama Administration announced that it was not going to implement the long-term care elements of ObamaCare. While this will save money, it comes at a time when some states are considering limiting Medicaid hospital reimbursements to no more than ten consecutive days.

Good news for seniors is that 2012 part B Medicare monthly premiums will only rise to $99.60. This is significantly lower than the 2011 Medicare part B premium of $115.40 paid by new enrollees and higher income beneficiaries. Most enrollees had been paying $96.40 per month since 2008 since there is a provision that Part B premiums for existing enrollees will not increase in years in which a Social Security COLA increase is not granted. Initially, Medicare Trustees had projected that the 2012 premium would be much higher -- $106.60. The 2012 Medicare Part B deductible will be $140 – a $22 decrease from 2011.

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