Hawaii retiree health care severely underfunded

Across the 50 states retiree health care is only 7% funded

News Release from Truth in Accounting, Sep 19, 2019

In fiscal year (FY) 2018, the most recent fiscal year, state and local governments that use Generally Accepted Accounting Principles were required to report their unfunded liabilities related to other post-employment benefits (OPEB). OPEB comprises mainly retiree health care benefits. State and local governments have long hid retirement benefit obligations, including pensions and OPEB, off their balance sheets.

Since 2009, Truth in Accounting (TIA) has been reporting the amount of state unfunded retirement liabilities, despite the fact that those numbers were not counted on state government balance sheets. In TIA's most recent report, it found that the 50 states have less than seven cents set aside to pay every dollar of promised OPEB.

Several states have not set any money aside to pay for OPEB, including Mississippi, Nevada, New Jersey, Arkansas, Iowa, Kansas, Louisiana, Minnesota, Montana, Nebraska, Tennessee, Washington, Wyoming, Illinois, and Vermont. The average funding ratio for the 50 states in FY 2018 was 18.5 percent, which is up from less than seven percent in 2009.

Hawaii's OPEB plans are only 12.7 percent funded. Hawaii, like many others, treats OPEB on a pay-as-you-go basis, whereby benefits are paid when retirees receive the health care. This leaves future taxpayers stuck paying for OPEB benefits earned by current employees, although those future taxpayers will receive no government services or benefits for the taxes that go to pay these benefits. Even worse, state retirees are counting on these promised benefits that have not been funded.

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Related: Act 268 Hawaii Unfunded Liabilities Plan: Pot of Gold for Corrupt Union Leaders