PA Budget Secretary Says Future Retiree Health Care Costs Estimated at $8...(e each year. Eligible employees retiring...),Health

30, 2007 must contribute at the same percentage rate as active

employees, beginning at 1 percent of their final annual gross salary and

rising to 3 percent by October 2010.

-- Redesigning the Retired Employees Health Program. Changes announced in

September, which included adjustments to retiree medical and

prescription plans that are projected to reduce annual cost increases by

approximately $90 million.

-- Establishing a special account for payment of retiree health benefits.

Under an agreement with the state treasurer, the commonwealth will

establish a dedicated account to invest funds to pay for future retiree

health care costs. The earnings generated by these investments will help

reduce the commonwealth's current payments toward future retiree

health care costs.

The commonwealth also periodically rebids its health care and pharmacy contracts to receive better prices, and -- beginning July 1 -- it will extend from 15 years to 20 years the minimum length of time employees need to work for the state in order to qualify for state-paid retirement health benefits.

Even with these changes, the cost for state-paid retiree health care benefits is projected to increase to more than $970 million over the next five years, Masch said.

"We are taking every step we can to reduce health care costs while still preserving benefits for the workers who served the commonwealth for many years," he said.

Masch noted that state and local governments have long been required to develop and publicly release annual estimates of their accumulated pension liabilities. Now, under new public accounting rules, beginning this year state and local governments are also required to develop and make public an annual estimate of any non-pension benefits they have commi
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