Insurance funds for retired Oklahoma City government employees face multimillion-dollar shortfalls. For instance, the city firefighter insurance trust has $133 million in liabilities tied to providing retiree insurance, but only $8 million to do so, records show. That’s a $125 million shortfall. "Anybody that is looking at that, if they’re not worried, I think they’re a fool,” said Phil Sipe, president of International Association of Firefighters Local 157. The fund for retiree insurance for all other city employees has an even bigger gap — about $350 million — between cash-on-hand and retiree insurance liabilities, city Finance Director Laura Johnson said. Liabilities are long-term costs of insuring current retirees and their dependents throughout retirement. "It’s what you’ve committed to today that you have to fund in the future,” city Budget Director Craig Freeman said. Unfunded liabilities faced by Oklahoma City and its fire union aren’t unique. Other government employee retirement plans nationwide have similar shortfalls, according to a labor watchdog and Oklahoma City officials. "This nation has a retirement crisis for unions and public sector employees,” said Brian M. Johnson, executive director of Alliance for Worker Freedom. Freeman said Oklahoma City’s unfunded long-term liabilities won’t cost retirees their health insurance because the city has enough money to pay for the insurance on a yearly basis. This past fiscal year, for example, the city paid about $18.6 million to meet its insurance requirements for about 5,400 retirees even though the city’s long-term liabilities to insure them exceed $630 million, records show. Freeman also said expensive or frequent insurance claims, such as major illness costs, wouldn’t bankrupt the fund because the city budgets for such costs with insurers. Not all governments and labor unions provide health insurance for retirees. "For example, the city of Tulsa doesn’t pay anything toward their retirees’ health, so they have no post-employment liability,” Laura Johnson said.
Fire union has its own insuranceAbout 950 active firefighters and 180 retirees get health, dental and life insurance from the seven-year-old firefighter insurance trust, city records show. Many of their spouses and family members also are covered. Fire union officials expect the trust will insure about 500 retirees by 2020. Half of those likely will have retired on disability due to job-related health problems that could lead to high health care costs, Sipe said. Additionally, many firefighters retire in their late 40s or early 50s, meaning they are about 15 years away from qualifying for Medicaid. "Until then, they’re ours,” Sipe said. Anticipating more expenses for retiree insurance in the future, trustees have added a $20 monthly fee to the insurance premiums paid by members and made "prudent” investments to raise the $8 million set aside so far for retiree insurance, Sipe said. The goal is to eventually earn enough money to cover retiree liabilities. "Right now, our trust is difficult in that it covers both actives and retireds. That’s the problem with it,” Sipe said. Fire union members are the only city employees not on the city’s insurance plan. The union requested the arrangement, and in 2003 its members began receiving insurance through the trust. Six of the seven trustees are current or former union members, according to the trust agreement. The city funds the trust, and trustees buy and administer insurance for covered members. City payments to the trust this past fiscal year were $9,500 each for active or retired firefighters under age 65 and $3,500 for retirees over 65. Fire department retirees over 65 typically use Medicare as their primary health insurance coverage, although they get the same insurance through the trust as other retirees, Sipe said. The payment amount is based on the average amount the city pays for insurance for other employees, said Colin Fonda, benefits manager for Oklahoma City. The money can only be used for insurance. Fonda, the trust’s only nonunion member, said the trust is run well, but that there are "too many variables” involved to determine whether it has been a good deal.
Other unions not interestedSipe said the firefighters’ insurance arrangement has worked well because it puts firefighters in charge of their own insurance and takes administrative work and liabilities away from the city. Other union leaders called it risky and cited the liability shortfall as one reason why. "It’s probably not economically sound,” said Gil Hensley, president of Fraternal Order of Police Lodge 123. Another union president said the city benefits from its large employee base when buying insurance. "The more people that are covered, the better rate you receive,” said William Bryles, president of American Federation of State, County and Municipal Employees Local 2406. The Oklahoman’s Watchdog Team: Looking out for you. Visit NewsOK.com/watchdog.