The Next Retirement Time Bomb

SINCE 1983, the city of Duluth, Minn., has been promising free lifetime health care to all of its retired workers, their spouses and their children up to age 26. No one really knew how much it would cost. Three years ago, the city decided to find out.

Mayor Herb Bergson said that Duluth, Minn., "isn’t going to function" if it has to keep its promise of providing lifetime health care to its retirees.

It took an actuary about three months to identify all the past and current city workers who qualified for the benefits. She tallied their data by age, sex, previous insurance claims and other factors. Then she estimated how much it would cost to provide free lifetime care to such a group.

The total came to about $178 million, or more than double the city’s operating budget. And the bill was growing.

"Then we knew we were looking down the barrel of a pretty high-caliber weapon," said Gary Meier, Duluth’s human resources manager, who attended the meeting where the actuary presented her findings.

Mayor Herb Bergson was more direct. "We can’t pay for it," he said in a recent interview. "The city isn’t going to function because it’s just going to be in the health care business."

By MILT FREUDENHEIM
and MARY WILLIAMS WALSH

Full Story: http://www.nytimes.com/2005/12/11/business/yourmoney/11retire.html