Franklin College Statehouse Bureau
INDIANAPOLIS – The state has overpaid an employee benefit plan, budget agency directors told a House committee on Wednesday.
State Budget Agency Director Adam Horst and Deputy Budget Director Jon Vanator told the House Ways and Means Committee that, if things go as currently expected, the state retiree health benefits plan will a surplus of $49.8 million by the end of this fiscal year and $61 million by the end of fiscal year 2013.
The plan, started in state fiscal year 2008, is overfunded by 130 percent, according to the actuarial study. The government funded the plan 100 percent for every employee in order to prevent a liability, but the study showed that there may only be a 60 percent chance that any given employee will be eligible for the plan. Paying the full amount for every active employee has caused overfunding.
Part of the state’s recommendation is to pay the general fund part of the excess, by using the cigarette tax revenue that helps fund the plan, for fiscal years 2012 and 2013 only. The proposed percentage of the cigarette tax is 5.74 percent.
“Our method of recovering that excess would be to direct cigarette tax revenue, which is a portion of the funding that goes into the plan … to the general fund,” Vanator said.
State Budget Agency Director Adam Horst and Deputy Budget Director Jon Vanator told the House Ways and Means Committee that, if things go as currently expected, the state retiree health benefits plan will a surplus of $49.8 million by the end of this fiscal year and $61 million by the end of fiscal year 2013.
The plan, started in state fiscal year 2008, is overfunded by 130 percent, according to the actuarial study. The government funded the plan 100 percent for every employee in order to prevent a liability, but the study showed that there may only be a 60 percent chance that any given employee will be eligible for the plan. Paying the full amount for every active employee has caused overfunding.
Part of the state’s recommendation is to pay the general fund part of the excess, by using the cigarette tax revenue that helps fund the plan, for fiscal years 2012 and 2013 only. The proposed percentage of the cigarette tax is 5.74 percent.
“Our method of recovering that excess would be to direct cigarette tax revenue, which is a portion of the funding that goes into the plan … to the general fund,” Vanator said.
“Instead of transferring money from the fund balance and putting it in the general fund, we’re going to let $53.6 million of cigarette tax money go to the general fund instead of going into the plan. We’re turning off the faucet on the cigarette tax money, until we catch up.”
The Budget Agency’s proposal would fund the plan, actuarially, at 103 percent. Horst said that there still would be some cushion to the benefits plan.
The Budget Agency’s proposal would fund the plan, actuarially, at 103 percent. Horst said that there still would be some cushion to the benefits plan.
Originally published on www.thefranklinonline.com
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