The State Department of Commerce says Duluth's deeply under-funded insurance program for retiree health care has been out of compliance with state governance requirements. Now, Duluth will have to change how it manages and invests retiree benefits.
Duluth City Administrator Mark Winson said the State Commerce Department determined the city's retiree plan is actually a pool system, since it includes retirees from other agencies like the Duluth Airport Authority. Winson said the city will have to figure out the best way to resolve the problem.
"[We] either come into compliance with the Department of Commerce on regulations governing these pools, or end up dissolving the pool," Winson said. "But I really couldn't tell you which way it's going to go at this point."
Duluth will have to form a board of trustees, get a certified public accountant and invest funds only through a third party, according to Commerce spokesman Bill Walsh.
"It's not going to happen over night, you know, but we're getting them into compliance and they're cooperating just fine," Walsh said.
Walsh said the rules are intended to keep a fund solvent, but he wouldn't speculate whether they would have reduced the size of Duluth's unfunded liability for retiree health care.
Duluth's retiree health plan faces an estimated $300 million unfunded liability. Winson said there's no reason to think the lack of compliance with Commerce rules would have affected the size of the liability. A Department spokesman declined to speculate on any connection between state regulations and the liability.