Budget Year / Version:

Program Description

  Retiree Health Benefits Trust

Beginning in FY08, the County implemented a plan to set aside funds for retiree health benefits, similar to the County's 50-year-old practice of pre-funding for retiree pension benefits. Due to exponential growth in expected retiree health costs, the County had determined the cost of funding these benefits, which were being paid out as the bills came due, would become unaffordable. Setting aside money now and investing it in a Trust Fund, which is invested in a similar manner as the pension fund, is a prudent and responsible approach that will result in significant savings over the long-term.

The County's approach to address retiree health benefits funding has been to determine an amount which, if set aside on an annual basis and actively invested through a trust vehicle, will build up over time and provide sufficient funds to pay future retiree health benefits and any accrued interest on unfunded liability. This amount, known as an Actuarially Determined Contribution or "ADC", is estimated at $65.9 million. This amount normally consists of two pieces - the annual amount the County would usually pay out for health benefits for current retirees (the pay as you go amount), plus the additional amount estimated to fund retirees' future health benefits (the pre-funding portion). The pay as you go amount can be reasonably projected based on known facts about current retirees, and the pre-funding portion is estimated on an actuarial basis.

The County's policy has been to pay the full amount of ADC each year. In FY11, the County Council enacted Bill 17-11 which established the Consolidated Retiree Health Benefits Trust. The Bill amended existing law and provided a funding mechanism to pay for other post employment benefits (OPEB) for employees of MCPS and MC. In FY15, the County and all other agencies implemented the Medicare Part D Employer Group Waiver Program for Medicare eligible retirees/survivors effective January 1, 2015. This has reduced retiree drug insurance costs and the County's OPEB liability. The County achieved full pre-funding in FY15, consistent with Council resolution No. 16-555. In FY22, these contributions were budgeted at $10.8 million (County General Fund), $73.0 million (MCPS Consolidated Trust), and $5.6 million (MC Consolidated Trust).

In planning for FY23, actuarial analysis assumed a utilization of Trust assets due to the funded status of plan, and the pay-as-you-go amount was determined to be higher than the ADC. The County Executive has determined that the magnitude of the assets in the OPEB Trust requires a shift from the policy of paying the full amount of the ADC each year, to a policy that utilizes the Trust to pay a portion of the retiree health benefits while maintaining the assets necessary to support consistent and continued utilization through sustained investment growth and contributions as required.

Program Contacts

Contact Kathleen Hynes of the Office of Management and Budget at 240.777.2767 for more information regarding the operating budget for the Non-Departmental Accounts.


Program Budget Changes

FY23 Approved ChangesExpendituresFTEs
FY22 Approved108299800.00
Decrease Cost: County Contribution Based on Actuarial Valuation-108299800.00
FY23 Approved00.00