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Health Care Benefits

Overview

Other Postemployment Benefits (OPEB) is an umbrella term that characterizes retirement benefits, other than pensions, that are offered to employees of state agencies and participating political subdivisions who meet designated age and/or service-related eligibility criteria. The most significant costs associated with OPEB benefits are for employer-subsidized health care for retired employees.

The brief discusses how different plan designs, coverage levels, and financing arrangements are associated with varying costs for sponsoring state governments. Among the findings:

  • Most states provide retiree health benefits to retired state employees, and benefits vary in design and delivery;

  • More than three-fourths of the cumulative $585 billion in unfunded state OPEB liabilities are held by ten states;

  • State spending on retiree health benefits was equal to 1.4 percent of the total FY 15 state fund expenditures.

As state and local governments seek to reduce their liabilities, many public employers continue to accumulate assets to pre-fund future retiree health benefits and to reduce OPEB through program and policy changes. 

Date published

May 2017

Contact

Alex Brown, Research Manager

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Become A Member

Becoming a member of NASRA offers a unique opportunity to join a community committed to the sound, efficient, and innovative stewardship of public retirement systems. Membership connects you with a network of professionals and experts, providing valuable insights into managing public retirement systems with a focus on sustainability and risk-averse strategies.

By joining NASRA, you gain the tools and resources to enhance the management of public retirement systems, ensuring their long-term success and reliability for generations to come.

What's New at NASRA:
Hybrid Plans and Risk Sharing in Public Retirement Systems

Public defined benefit (DB) retirement plans have long incorporated hybrid features that share costs and risks between employers and employees. Under federal law, defined benefit plans that account for employee contributions are considered hybrid plans, meaning most state and local public pension plans meet this definition. Beyond shared contributions, many public plans incorporate additional risk-sharing provisions, including variable employee contribution rates and benefit adjustments tied to plan experience. These features demonstrate how public pension plans continue to evolve while preserving the core elements of retirement security.

NASRA's 2026 updated issue brief, State Hybrid Retirement Plans, examines two specific types of plans commonly identified as hybrids: combination DB-DC plans and cash balance plans. The brief explores how these designs distribute investment, longevity, and inflation risks between employers and employees. It also places these approaches within the broader continuum of risk-sharing arrangements already embedded in public retirement systems, highlighting the flexibility of public pension plan design in balancing retirement security with long-term financial sustainability.