More than three thousand California public employees have retired since 2010 with six-figure tax-paid pensions, even as the U.S. Department of Health and Human Services (HHS) provided the pension system up to $200 million in health insurance subsidies.
As of July 2011, 12,199 retired California employees draw six-figure pensions, according to the watchdog group, California Foundation for Fiscal Reform (CFFR), up from 9,111 in March of last year. Three of the new six-figure pensions provide the retired recipients with more than $260,000 annually, with the most generous of the three worth $271,157 per year, according to CFFR.
Estimates vary on the California Public Employees Retirement System’s (CalPERS) unfunded liability, ranging from $56 billion to as high as $175 billion in a Stanford University study last year. Pension benefits for California public employees will reportedly cost $1.8 billion this year.
Federal officials stepped into the gap last year, when CalPERS officials applied for funding through the Early Retirement Reinsurance Program (ERRP), which was created under Obamacare and administered by HHS’s Center for Consumer Information and Insurance Oversight (CCIIO).
California officials said the ERRP subsidies were “intended to cover a portion of the cost of providing health benefits to early retirees — individuals 55 and older who are not eligible for Medicare,” according to a new report on the program by the Government Accountability Office (GAO).
The Washington Examiner‘s Byron York reported in March that CalPERS had received at least $57 million in funding from ERRP. At the time they announced the funding, however, CalPERS officials said they expected approximately $200 million from the federal government.
Information provided by HHS for the GAO report seems consistent with the California officials’ more optimistic expectations. “In anticipation of ERRP reimbursement,” wrote Jim Esquea, HHS Assistant Secretary for Legislation, “CalPERS worked with its benefits carriers to mitigate 2011 premium increases by three percent — a savings of up to $200 million.”
Esquea also noted that ERRP gave CalPERS the funding “on behalf of 5,302 early retirees, spouses, surviving spouses, and dependents in 2010.”
Marcia Fritz, president of CFFR, told The Washington Examiner that the ERRP funding will increase costs rather than provide savings. “They’re encouraging people to retire earlier than they normally would have, and we’re paying retirement benefits for them for a longer period of time than we normally would have without this incentive to leave,” she explained.
Fritz called the early retirements a “nightmare” for the pension fund because “the people below [early retirees] move up into their slots and get a higher rate of pay earlier, which then increases the unfunded liability.”
Esquea said that “the ERRP funding will directly benefit 1.1 million public employees, retirees, and their dependents” — including, presumably, the 12,000 retirees drawing six-figure pensions. HHS only implemented “quality assurance reviews of the detailed claim lists” provided by applicants in April of 2011.
CalPERS announced the approval of their application prior to that point, when the federal agency only required applicants to “submit aggregate cost data for all eligible health care costs as well as lists of eligible retirees who incurred such costs,” according to the GAO report.
