When seeking savings from retirement benefits and pensions, it can often be easier to trim the former than the latter. Even as San Jose’s Measure B works its way through the legal system, the city is already saving by trimming the other perks offered to pensioners. So far, the City is saving about $12.5 million per year by changing retiree health benefits, a change more easily realized than pension overhaul.

In total, the changing the health benefits is estimated to save the city $400 million from the $3 billion it will owe to its retirees, and the general fund is already benefitting from the switch. From the annual savings, about $6.5 million goes into the general fund to pay for various city services.

The City began offering health coverage to retirees in 1986, under a program that promised to provide to retirees the cheapest health plan that is available to employees. At the time, that was an HMO with a $25 copay. The city then adopted a new plan that had a $1,500 deductible and $40 copay, but with 24 percent lower premiums. That meant that if retirees wanted to continue in their HMO, they had to pay the difference, otherwise they could move into the new plan.

In San Jose, health benefits are only 11 to 19 percent funded.

Read the full story at the San Jose Mercury News.