Many R.I. workers may retire

Administrators across state government are starting to plan for a mass exodus of longtime workers who might decide to retire this year because of looming changes to the health insurance coverage for retirees.

At the R.I. Department of Transportation, for instance, officials are examining each division to determine who is eligible to retire by September to get a handle on how operations could be effected.

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About 160 of the DOT’s 700 employees are eligible – 23 percent of the department’s work force – according to spokesman Charles St. Martin.

While many of those people will not choose to leave, it’s unknown how many actually will. St. Martin said the retirement-eligible workers range from managers to field workers. “It’s pretty much across the board,” St. Martin said. “We’re starting to develop some action plans now.”

Overall, officials at the R.I. Department of Administration say up to 3,000 of the state’s 15,000 workers are eligible for retirement, but it’s still not clear who will go.

A larger-than-normal number of retirements are likely because of legislation passed by the House and expected to be approved by the Senate that would require workers who retire after Sept. 30 to pay more for health coverage in retirement. They will also have to wait to a later age – 59 – to be eligible for coverage.

It’s a key part of Gov. Donald L. Carcieri’s supplemental budget designed for the most part to close a $168 million shortfall for fiscal 2008. There’s also a projected budget deficit for next fiscal year of at least $384 million.

While the health insurance change will have no effect on this year’s budget, the governor’s office says it will save $6.1 million in fiscal 2009.

Currently, retiring state workers pay up to 50 percent of their health care premium – which is about $8,000 – depending on the number of years they have worked. For example, a 60-year-old who retires after 10 to 15 years on the job has a 50-percent copay; someone who leaves after more than 35 years – at any age – pays nothing.

The new requirements would mandate that workers who retire after Sept. 30 must have worked at least 20 years for the state and be at least 59 to be eligible for retiree health coverage. In those cases, they will have to contribute 20 percent to their premium.

“The most important effect is [in] the long-term and the savings that this change is going to generate over time,” Jeff Neal, the governor’s spokesman, said last week. “This is one of those fundamental changes that is going to save money and help us reduce the long-term structural deficit.”

But in the short term, it has raised anxiety levels in some quarters.

Staff members of the Employees Retirement System have been inundated with requests from state employees to meet with counselors since it became likely that the General Assembly would approve Carcieri’s proposal.

Some workers have been told they cannot get an appointment until July.

“This has put the fear into all the workers,” said J. Michael Downey, president of Council 94, American Federation of State, County & Municipal Employees, which represents 5,000 state employees.

Administrators are concerned, too.

Last month, the R.I. Department of Environmental Management said 65 people in its natural resources division are eligible to leave, some of them top managers at the DEM’s recreational sites.

At the R.I. Department of Health, a third of the 420 workers are eligible for retiree health coverage now but may not be after September. Many of them are highly trained experts in divisions such as the medical examiner’s office and the state laboratories, according to spokeswoman Andrea Bagnall Degos.

“We’re just beginning to look at it now, but we just don’t know who is going to leave,” she said.

This comes as the Carcieri administration has embarked on an effort to save $100 million by cutting 1,000 state jobs through layoffs and the elimination of some vacant positions.

Is the governor concerned that services might be affected following a large number of retirements?

“We expect that we will be able to continue providing services with the remaining work force,” Neal said, “and that we will be able to implement a hiring process if it becomes necessary to replace critical positions,” jobs he said the Carcieri administration could not yet identify.

“We were aware that this may cause some employees to choose to retire earlier than they would have,” Neal added. “But it’s important to keep in mind that people who are eligible for retirement and chose to retire this year as a result of this provision were likely to retire in the near future in any case.”

And state workers aren’t the only ones affected by the changes to retiree benefits.

Retiring public school teachers who are not eligible for Medicare coverage – about half the teachers in Rhode Island – are allowed to buy health insurance from the state plan, at full price. About 1,800 former teachers and spouses do that now, according to James Parisi, field representative for the Rhode Island Federation of Teachers and Health Professionals.

But the governor’s proposal would place the retirees into a separate pool, and increase the premium that new retirees pay from $5,436 to $8,500, according to Parisi. “People have options, but there’s no doubt in my mind that some future retirees will be paying $3,000 more for their medical insurance because of this,” he said.

Downey said another element of uncertainty among state workers is the possibility that state leaders may overhaul the costly employee pension system. Downey is a member of the commission studying the issue, and he said the group is expected to develop some recommendations later this month.

The commission has examined changing the system from a defined-benefit plan, which promises the participant a specific monthly benefit at retirement, to a defined-contribution plan, such as a 401(k) plan.

Such talk has some state workers worried.

“Not only are they finding out that after all these years of service they are losing their health coverage,” Downey said, “they may be also losing their pensions.” •