Howard considering trust fund for retiree benefits obligation

BALTIMORE (Map, News) - Taking a page from Baltimore City’s investment strategy, Howard County officials are considering a trust fund to tackle the looming burden of funding future retiree benefits.

Establishing a trust fund would provide officials more flexibility to invest the money and ensure it couldn’t be spent when budget times are tight.

“Any money we put in there has to be used for health care for retirees,” said Howard Finance Director Sharon Greisz.

“It also makes it clear we are committing that money to this liability.”

A measure before the Howard County Council would create this trust fund and a board of trustees to administer the fund.

Several surrounding counties are considering trust funds, and Baltimore City seeded a fund last year with $15 million toward its $2.9 billion liability.

A trust fund allows for long-term investment of the money, so the county can get a higher rate of return, Greisz said.

Beginning in fiscal 2008, state and local jurisdictions must show they can afford to fund retiree health benefits.

Howard’s obligation is roughly $477 million, and based on the benefit program, Howard must set aside about $53 million each year to pay down this debt, officials said.

This year, Howard set aside $14 million, which would go into the trust fund, Greisz said.

“We think it’s financially responsible to start setting money aside not too slow and not too fast,” she said.

Michael Sanderson, legislative director for the Maryland Association of Counties, said a trust fund managed by a board of trustees “makes a good deal of sense.”

Particularly for larger counties that have similar pension trust funds, officials can invest this money the same way or even in the same pot of money, he said.

If reforms are made to the health care system and the money is no longer needed, the trust can be dissolved and the money given back to the county to use, he said.

However, Christopher Summers, president of the conservative Maryland Public Policy Institute, said jurisdictions should consider cutting or renegotiating the benefit programs rather than just putting more money aside.

smichael@baltimoreexaminer.com

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