Additional Health Care Credit Unfeasible

2019 VGEA ForeSight Newsletter Article

Additional Health Care Credit Unfeasible

For years, support for a health insurance credit for retired state employees has been a staple of the VGEA legislative agenda.

No longer.

“After meeting with Virginia Retirement System representatives, we have decided to change our focus,” said Rick Fowler, the VGEA’s chief lobbyist. “That’s because we now realize that an increase in the health care credit would be prohibitively expensive for the state and has virtually no chance of surviving the rigors of the General Assembly’s money committees.”

The health insurance credit provides a reimbursement to assist with the cost of a retiree’s health insurance premiums. It is a dollar amount set by the General Assembly for each year of service and is added to the retiree’s monthly retirement benefit.

To qualify, the employee must retire on disability or with at least 15 years of service. The credit ends upon death and cannot exceed the amount of the health insurance premium.

Currently, the credit is set at $4 per year of service for state employees and teachers:

1. A retiree with 15 years of service receives a $60 per month credit.
2. A retiree with 30 years of service receives a $120 per month credit.
3. A retiree with 45 years of service receives a $180 per month credit.

If the Commonwealth were to raise the credit by just $1 per year of service, the state would accrue $211,835,000 in additional unfunded liability. This equates to $20,270,000 for the first year but would increase from year to year as the benefits begin to vest.

“Instead of concentrating our efforts on a health care credit that really has no chance of passage, we are focusing on policy changes that provide concrete benefits, such as across-the-board salary increases and recruitment and retention incentives,” Fowler said. “Because pensions are a function of the three highest years of employee compensation, this focus is a much better use of our time and resources.”

Unlike other states, the Commonwealth of Virginia also gives cost of living adjustment (COLA) increases to its pensioners. In 2019, for example, retirees received a 2.44 percent COLA. They have received increases every year but one since 1979.

Share your thoughts, comments, and ideas with the VGEA team at vgea.org/contact, at info@vgea.org, or on our members-only Facebook group: VGEA Member Cohort.