Public-sector retiree health-care liability exceeds more than $1 trillion under GASB 45, according to a report issued today by Goldman Sachs. GASB 45, an accounting rule taking effect this year that requires such benefits be quantified, encourages, but does not dictate, funding, according to the report by Michael A. Moran, vice president at Goldman Sachs. Despite current focus on corporate pension funding levels, the real retirement liability problems in the United States are retiree health care rather than pensions, and in the public sector rather than the private sector.
At the end of 2006, the aggregate underfunded amount of retiree health care obligations for companies in the S&P 500 was almost $300 billion, with 25% of that amount alone from General Motors and Ford, Mr. Moran said in the report.
New York and California have the largest public-employee retiree health-care liabilities; New York has a liability estimated to be $47 billion while Californias liability is estimated between $31.3 billion and $47.9 billion. Those figures dont include retiree health-care liabilities of local governments and other non-state public authorities, the report said.
We believe that many (public-sector) jurisdictions will view prefunding part of the obligation through the issuance of bonds or monetization of infrastructure assets as very attractive, the report said.