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New data shows legislative changes to bolster state retiree healthcare funds are working

Delaware has historically neglected setting aside funds for state retiree healthcare benefits, but that’s beginning to turn around.

Other Post-Employment Benefits (OPEB) refers to state retiree benefits other than pensions, largely dealing with health care benefits.

In February, the estimated liability for retiree health care benefits was $8.9 billion with $8.4 billion unfunded.

State lawmakers recently passed a bill increasing OPEB pre-funding from .36% of payroll to .5%, followed by incremental annual increases until it reaches 10%.

And in July 2023, Gov. John Carney signed Senate Bill 175, requiring that every year, at least 1% of the grand total of the General Fund operating budget appropriations for the prior fiscal year is appropriated to the OPEB trust fund to begin addressing the unfunded liability.

Beth Mercer from Cheiron — the company that conducts annual actuarial valuations for the OPEB trust fund — says those legislative changes are making an impact.

“That's what's driving the increase in market value of assets and the funding ratio. So as additional changes are happening to the funding policy, this is just going to keep continuing to improve the funded status of the plan," she explained.

The OPEB trust fund currently sits at $11.1 billion, but now, 8.6% of that total is funded, compared to only 7.2% last year.

It's a massive improvement from a decade ago where the funded ratio sat at 4.9%.

Mercer notes the valuation was conducted before the 1% General Fund contribution — $56 million — and an additional $199 million deposit.

“If they were included, the market value of assets would be more than $1.2 billion, and it would increase the funded ratio to more than 11%. So it would just keep going in the right direction," Mercer

Mercer says while Delaware is succeeding in increasing its funding, prescription drug costs also continue to rise, which has been driving short-term liability growth.

Before residing in Dover, Delaware, Sarah Petrowich moved around the country with her family, spending eight years in Fairbanks, Alaska, 10 years in Carbondale, Illinois and four years in Indianapolis, Indiana. She graduated from the University of Missouri in 2023 with a dual degree in Journalism and Political Science.
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