The New York Times recently examined how New York City -- which provides free health care to its retirees, their spouses and dependent children -- will determine retiree health care costs over time under new accounting rules. The new rules for retiree medical plans, issued in 2004 by the Governmental Accounting Standards Board, will require local governments to create a theoretical financing framework for future obligations and report on how they are addressing it. Local governments that form trust funds will collect financial rewards, while those that do not might receive lower credit ratings. Because the previous accounting method was a pay-as-you-go standard, there will be "newer, larger numbers" on the books in the next two or three years, according to the Times. A small group of New York City officials has been gathering data on all the city retiree health plans, but the process is not expected to be finished for months. A city official said that coming up with the correct amount will be "a tremendous undertaking." Because of rapid changes in the health care arena, including Medicaid and Medicare changes, it will be "extremely difficult to see what future costs will be," the Times reports. Labor officials said that establishing a number on the city's promises for future retiree health care could result in sticker shock and new calls to reduce benefits (Walsh/Freudenheim, New York Times, 12/26/05).

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