DELAWARE - Governor Carney signed a package of bills aimed at long-term sustainability of State retiree health care benefits.
Governor Carney's office says the bills were recommended by the Retiree Healthcare Benefits Advisory Subcommittee (RHBAS). Combined with legislation enacted earlier in the 152nd General Assembly, the package represents a commitment to prioritize funding the State’s Other Post Employment Benefits (OPEB) Trust Fund, which is the long-term vehicle for pre-funding retiree health care. Governor Carney also will allow House Bill 377 to go into law without his signature and addressed the concerns that he has regarding the constraints of the legislation.
According to the governor's office, in 2017, Delaware reported an $8.6 billion OPEB liability, the present value of actuarially-estimated future health care costs for current and future state retirees. As of Jan. 2017, only $347 million had been set aside (approximately 4%) to fund this liability. This year, the OPEB Trust Fund will approach $1.2 billion (approximately 10% of a rising liability). Governor Carney says this increased funding reflects the Delaware's commitment to sustaining retiree health care, shoring-up Delaware’s balance sheet, and securing the State’s long-term bond ratings.
“For decades, the State has been funding retiree health care on a ‘pay as you go’ basis, despite consensus that this is not a sustainable way to solve our OPEB challenge,” said Governor Carney. “The package of legislation I signed today lays out a path to a long-term solution. Until and unless a new approach to solving this challenge comes forward, future Governors and General Assemblies will need to stick with this roadmap and continue to step up the State’s annual contributions.”
In 2019, Governor Carney signed Executive Order #34, which created the Retirement Benefit Study Committee (RBSC). After a dozen public meetings, the RBSC recommended a balanced, three-prong approach to reduce the State’s multibillion dollar unfunded retiree health care liability as follows:
- Increase recurring funding for the OPEB Trust Fund,
- Make significant design changes to retiree health plans, and
- Implement meaningful benefit eligibility changes for future retirees and their spouses.
The RHBAS, created by Senate Bill 29 in early 2023, considered these ideas in its initial and year-end reports in May and December 2023. As a result, last year, the General Assembly enacted legislation (Senate Bill 175) requiring the State to set aside 1% of the prior year’s budget as an annual deposit to the OPEB Trust Fund. In June 2024, the Bond Bill (House Bill 475) codified legislation requiring any excess escheat revenue to be deposited to the OPEB Trust Fund. Legislation signed today further increases funding for the OPEB Trust Fund and makes changes to benefit eligibility as follows:
House Bill 330 requires the General Assembly to set aside 0.50% of annual payroll in the Fiscal Year 2026 budget for the OPEB Trust Fund and to increase this percentage incrementally by 0.25% of payroll every year until such time as all annual contributions to the OPEB Trust Fund reach the actuarially-determined Annual Required Contribution – similar to how the State’s pension fund is funded.
House Bill 375 alters the schedule that new hires will vest in state subsidization of retiree health care premiums.
House Bill 376 will require a pensioner coordination of benefits policy for eligible pensioners who were first employed by the State on or after January 1, 2015, and who are eligible for health coverage through a new employer.
In addition, Governor Carney will allow House Bill 377 to become law without his signature. This bill requires the State to continue offering eligible pensioners first employed by the State before Jan. 2025, a plan that is “comparable” to the current Special Medicfill Medicare Supplement plan. House Bill 281, previously enacted by the 152nd General Assembly without signature, provided comparable protections for State retirees by prohibiting the State Employee Benefits Committee from offering a Medicare Part C plan to current retirees.
“The most effective and fair way to address the State’s rising retiree health care liability while also ensuring that resources are available for other funding priorities – including educator pay raises, retiree pension increases, and state employee salary increases – is a combination of funding, design, and eligibility changes,” said Governor Carney. “I am encouraged that this legislative package accelerates my administration’s commitment to funding the OPEB Trust Fund and implementing eligibility reforms. House Bill 377, on the other hand, increases funding needs by placing limits on how future administrations can provide health care and implement plan design changes for retirees if better health care options and approaches emerge. While I will allow House Bill 377 to go into law without my signature, I strongly encourage members of the General Assembly to continue their work to enact plan design and eligibility changes that will ensure the long-term sustainability of retiree health care and secure the progress we’ve made toward improving the State’s finances.”
