Press Release

New Report: Most States Failing to Address Underfunded Health Benefits for Retired Public Employees

Alexis Jarrett

New Report: Most States Failing to Address Underfunded Health Benefits for Retired Public Employees

Unfunded retiree benefits are a growing problem for state finances and taxpayers

ARLINGTON, VA – (JUNE 10, 2021) Today, the American Legislative Exchange Council (ALEC) released Other Post-Employment Benefit Liabilities, 2020: The Continuing Need for OPEB Reform. This report is the newest publication in an annual series from the ALEC Center for State Fiscal Reform, which highlights the dangers of unfunded liabilities to retired public employees and offers policy ideas for state policymakers to reduce these liabilities.

Beyond public pensions, state governments offer retired public employees other post-employment benefits (OPEB), which include health insurance, life insurance, Medicare Supplemental Insurance and more. This publication evaluates how each state funds these benefits and holds governments accountable to ensure government keeps its promises.

Most states do not adequately fund OPEB plans, and unlike pensions, many do not pre-fund OPEB at all. Currently, total state unfunded OPEB liabilities exceed $968 billion.

“Unless states enact policy reforms, unfunded OPEB liabilities could cause future tax increases or cuts to core public services in many states,” said ALEC Chief Economist and Executive Vice President of Policy, Jonathan Williams. “This report is a guidebook for state policymakers as they consider how to address these massive unfunded liabilities, while keeping the promise to retired public employees and also protecting hardworking taxpayers.”

The report found the following states have the highest total unfunded OPEB liabilities per capita in the country:

  • New Jersey: over $16,500 per person
  • Hawaii: nearly $14,500 per person
  • Alaska: nearly $14,400 per person

The states with the lowest unfunded liabilities per capita include the following:

  • Nebraska: $0 per person
  • South Dakota: $0 per person
  • Kansas: $0.05 per person

Follow this link to read the report.

Recent reform in Indiana helped unfunded liabilities shrink by 11% – from $620 million to $552 million.

“Indiana has made a move in the right direction by implementing a defined-contribution OPEB plan that reimburses our retirees and their dependents for insurance and medical costs,” said Indiana Senator Jim Buck. “This type of reform, one of many outlined in this report, helps allows us to help retired public employees while protecting taxpayers.”

The ALEC Center for State Fiscal Reform strives to educate decision makers and the general public on the principles of sound fiscal policy and the evidence that supports those principles. This is done by personalized research, policy briefings in the states and by releasing nonpartisan policy publications for distribution.


The American Legislative Exchange Council is the largest nonpartisan, voluntary membership organization of state legislators in the United States. The Council is governed by state legislators who comprise the Board of Directors and is advised by the Private Enterprise Advisory Council, a group of private, foundation and think tank members. For more information about the American Legislative Exchange Council, please visit:

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