Beginning Jan. 1, all new North Carolina state employees and teachers will no longer receive the retiree health coverage benefits offered to current employees.
This is due to a state budget change in 2017.
State Treasurer Dale Folwell said the 2017 budget change was enacted by the state legislature to control rising expenditures. For the past several years, medical assistance and supplemental hospital payments have been among the top three expenditures for the state, making up more than $16 billion combined of the state’s total $54 billion in expenditures last year.
Though the state will continue to provide health insurance for active employees, lawmakers hope this change will help to mitigate the rising costs of insurance that the state is responsible for providing.
“Our total focus at the treasurer’s office is making money and saving money,” Folwell said. “Every time we make it or save it, it goes back into these plans so that they are around for the next generation of public service workers.”
Folwell said the state’s current unfunded healthcare liability for retirees is $28 billion, which is larger than the state’s current debt, over $14.5 billion dollars in 2020.
He said while the treasurer’s office did not decide on the budget change, he believes it will help the state to continue funding other benefits for current employees and retirees, including the state’s health and pension plans.
Suzanne Beasley, director of government relations at the State Employee Association of North Carolina, said she worries this change could have a major effect on recruitment this year, as she believes retiree benefits were one of the major draws to employment in the state.
“That’s a recruitment tool that it could make or break a compensation package that would lure in good quality candidates for state government work,” she said.
Folwell said he believes the state still offers attractive retirement benefits for employees, including the state’s pension plan, which was the sixth best-funded program in the United States in 2017, according to the Pew Charitable Trusts.
Erika Newkirk, senior executive director of human resources for Chapel Hill-Carrboro City Schools, said in an email she believes the change could make employment less attractive in comparison to other states.
“The change in retirement benefits should not hinder our ability to compete against other North Carolina school districts,” Newkirk said. “However, it may play a significant role in attracting teachers from other states and nations, and it may also make it more difficult to keep our wonderful teachers in North Carolina.”
Beasley said she believes part of the solution to the funding problem could be the Clear Pricing Project, a strategy introduced by the treasurer’s office in 2019 that seeks to reduce the cost of healthcare for both the state and its employees. The project involves the state working directly with providers to produce services for employees, rather than having the state merely reimburse employees’ medical expenses, providing transparent costs for the employee and state.
Beasley said she believes a further commitment to this program could allow the state to continue to provide retiree benefits.
“There may be room for change if we come back and readdress it at some point in the future,” Beasley said.
Despite this withdrawal of retiree benefits for new employees, Folwell said the treasurer’s office is committed to balancing the budget so that the General Assembly can continue to fully fund the pension retirement plan, and the current employee health care plan in the future. Folwell said during the pandemic, he believes it’s critical that these programs continue to be funded.
“The General Assembly’s gonna have to watch their pennies and paperclips, like everyone else is having to,” he said.