According to the Center for State and Local Government Excellence (SLGE; http://slge.org), local governments have had to shift the proportion of employee compensation from wages to benefits over the past decade. In 2013, wages made up 65 percent of employee compensation compared with 68 percent in 2005.
The squeeze on wages has been driven by two key factors: 1) the increase in unfunded pension liabilities after the Great Recession, and 2) rising health care costs. The rising cost of benefits has prompted many changes to health and pension benefits, especially for new hires.
Human resources managers responding to a 2014 SLGE survey reported these changes in health benefits for new hires: eliminating dependent coverage (10 percent); increasing the years to vest (8 percent); and shifting from a defined benefit to a defined contribution plan for retirees (7 percent).
The December 2014 SLGE study Local Government Strategies to Address Rising Health Care Costs (www.icma.org/LGHealthCareCostStrategies) also reported that local governments had increased premiums (57 percent); established wellness programs (53 percent), and increased deductibles for employees and retirees in order to contain costs.
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