Legislative cuts reduce unfunded obligations to state employees

Gov. Brian Sandoval said Tuesday that changes in the state benefits program proposed by his office and approved by lawmakers have reduced the unfunded liability of the Public Employee Benefits Program by $874 million.

"There is no question we had to make difficult decisions during the session, but those tough choices have produced results for the state of Nevada today," he said.

Those savings came primarily at the expense of state workers, who must now pay a significantly larger portion of their own health care costs.

At the end of fiscal year 2010, the present value of all expected future benefits for employees and retirees was $3.26 billion - the number most often used by critics who see the state plan as far too generous. According to PEBP executive director Jim Wells, that number is the total cost if all existing employees were to work their full 30 years. Changes in plan design and benefits, he said, brought that number down to $1.77 billion - a decrease of about $1.4 billion.

At the same time, the actuarial accrued liability - a smaller number because it represents a snapshot of what those employees have earned to date rather than their total potential benefits - dropped from $1.874 billion at the end of FY2010 to $977 million.

But the unfunded liability - the accrued liability minus the assets available to pay the tab - went down from $1.85 billion to $976 million.

That is the $874 million reduction referred to by the governor's office.

The big reasons for the improvement in the plan's financial status are the switch to a high-deductible health plan and the transfer of Medicare eligible retirees to the private market. The deductible for individual employees rose from $800 to $1,900 and for families from $1,600 to $3,800. But Wells said a big piece of the reduction can be attributed to shifting the Medicare employees to private insurers.

Finally, Wells said, elimination of future retiree health care subsidies for new employees will save the program $235

million over the next 30 years.e