Rutherford County is looking at new proposal offering a health savings account to new hires for retirement health care.
County Insurance Director Lois Miller said the Insurance Committee will receive more information about health savings accounts at its Thursday afternoon meeting.
Called a defined contributions plan, the county would set aside a certain amount of money each month for each employee that can be used upon retirement to purchase health insurance.
“This is only for those hired after a certain date and only for retirement healthcare,” Miller said, adding those hired after Jan. 1, 2009 are the new hires to be affected, not anyone currently retired or working for the county.
The proposal includes payments for each year of service after a new employee attains seven years of service either through actual years with the County or through service recognized at the time of hire.
The present value of all of those payments for a single new hire over a career with the county is $24,790. Comparatively, the present value of future benefits for that same new hire is $110,157, using the pay-as-you system the county currently using to fund retirement healthcare.
Currently, the county provides a 50 percent contribution to retirees for healthcare benefits. By switching to a defined contribution plan the county could save around $14.1 million through 2018.
Much like the pension fund, a define benefit plan requires a trust to manage the funds set aside for this purpose, and once the money is deposited on behalf of the employee it becomes their property.
The changes came about as a result of new account policies mandated by the Governmental Accounting Standards Board, which sets accounting policies for state and local governments.
In 2004, GASB issued statement No. 45 that requires governments to record the future cost of “other postemployment benefits” such as healthcare. For Rutherford County the change goes into effect July 1, 2009.
The new accounting standard forced the county to reassess the current structure of its retiree health benefits.
Michelle Willard can be contacted at 615-869-0816 or mwillard@murfreesboropost.com.
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