Fresno Unified trustees commit $20m to retiree benefits

The Fresno BeeSeptember 25, 2013 

In an effort to make good on its promise to pay certain retiree benefits and protect its credit rating, Fresno Unified School District is committing about $20 million in reserves to help fund retired employee health plans.

Fresno Unified trustees voted Wednesday to put the dollars into an irrevocable trust to pay for free premiums and other medical benefits pledged to certain district employees hired before July 1, 2005.

The plan does a few things: the dollars — which are currently invested in the Fresno County Office of Education's investment pool — would be moved into a trust earning 8% interest.

Putting the money into the trust has the added benefit of boosting the district's credit, chief financial officer Ruth Quinto said.

The trustees voted unanimously to support the proposal.

"Frankly, I don't see any downsides to this," said trustee Carol Mills.

Some retirees are required to pay monthly premiums, co-pays and deductibles, but monthly premiums for certain retirees who were hired before July 1,2005 are paid by the district

The decision is part of a multi-year plan aimed at covering ongoing health care costs for certain retired employees.

In 2005, the district ended a long-time practice guaranteeing free lifetime health benefits to new employees. It was a first step toward shrinking ballooning medical costs that nearly bankrupted the district. Since that time, it has created a Joint Health Management Board and required employees to contribute to the cost of health plans.

The district also started setting aside $2.5 million on average per year into a retirees' reserve fund that now totals $20.2 million.

But that pot of cash is just a fraction of the district's estimated $981 million in actuarial liability, or the amount owed to retirees promised benefits under the pre-2005 structure.

The new trust, Quinto said, is part of a 50-year plan geared at raising enough reserves to meet the nearly $1 billion target.

Quinto said the board's decision comes just in time, because credit-rating agencies are considering placing more emphasis on long-term debts when they determine a business or government agency's credit rating.

The reporter can be reached at (559) 441-6412, hfurfaro@fresnobee.com or @hannahfurfaro on Twitter.

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