Retirement & Health Benefits: 2018 Session Review

Fred Yancey
Apr 06, 2018

“The future depends on what we do with the present.”

Mahatma Gandhi

Review of 2018 Legislative Session

Pensions, Health Care, SEBB, PEBB, Other……

At the risk of repetition, the legislative session and Governor’s actions have concluded. This was a session that was akin to a sprint to the finish line with the Democrat majorities in both houses pushing many pieces of legislation that had stalled in previous sessions. There were 1,425 new bills introduced and 310 passed during this 60-day session. In 2017, for comparison, for the 193 days of regular and special sessions, 377 bills passed.

So, what happened regarding pensions, health care, financials and other issues?

 

Pension Related Proposals

Cost of Living Adjustments:

The original SSB 6340would have provided a 2% cost of living adjustment (COLA) to TRS1 and PERS1 members. As part of the final budget, ESSB 6032, the COLA was reduced to 1.5%. This passedboth houses and has been signed by the Governor. It provides certain retirees of Plan 1 of the Public Employees’ Retirement System (PERS) and Plan 1 of the Teachers’ Retirement System (TRS) who are receiving a monthly benefit on July 1, 2017, a one-time benefit adjustment of 1.5% multiplied by their monthly benefit, not to exceed $62.50, effective July 2018. (By request of the Select Committee on Pension Policy.)

In a separate part of the budget, the Medicare health insurance benefit subsidy was increased from the current $150/month to $168/month in 2019. This was done to insure the state Health Care Authority (HCA) continues to receive federal funds in excess of $20 million dollars for paying this subsidy/benefit.

SB6210B waspassedby both houses and signed by the Governor. It would allow tribal compact schools the option of participating in Plans 2 or 3 of the Teachers’ Retirement System (TRS) and Plans 2 or 3 the School Employees’ Retirement System (SERS).(By request of the Select Committee on Pension Policy.)

Retirement Plan Default:

HB 1560would have allowed Public Employees’ Retirement System (PERS), School Employees’ Retirement System (SERS) and Teachers’ Retirement System (TRS) members who don’t choose between Plan 2 and Plan 3 within 90 days of initial employment would default into Plan 2. Currently, such members default into Plan 3.  

This bill died. The Chair of the Senate Ways and Means Committee indicated she was uncomfortable dealing with this issue until the Select Committee on Pension Policy (SCPP) made a recommendation. 

Substitute Options for early Retirees

There were a number of bills that dealt with expanding opportunities for early retirees to return to work in various substitute capacities. They were consolidated into E4SHB 1827. Thiswas a large bill whereexpanding the current and future educator workforce supply was just one part of the proposal. Although it passed the House, it failed to pass the Senate. Last session(s), the law was changed to allow early retirees to return to school as substitutes under certain conditions. This proposal would have removed both the August 1, 2020 sunset date for that allowance and the directive regarding substitute pay. It would have allowed retirees to return to work in any non-administrative capacity including classified employees such as bus drivers, OT’s, PT’s, etc. 

SB 5310 would have allowed a temporary return to work for early retirees to work as K-12 coaches up to 867 hours. Although it passed the Senate, it made no progress in the House.

School Employee Benefit Board (SEEB)Health Related Proposals

ESSB 6241 This bill was a ‘clean up’ bill requested by the Health Care Authority (HCA). It was amended and a number of changes lobbied by WEA and PSE and clarifications were made. 

A couple of interesting additions included permission to negotiate eligibility for benefits on behalf of employees who work less than 630 hours. (A reminder than any employee expected to work 630 or more hours is eligible.) Another one would allow districts to provide other employee benefits as long as they do not compete with PEBB/SEBB offerings. 

The bill passedboth chambers and has been signed by the Governor.  

It’s important to briefly review EHB 2242 whose title is “Funding fully the state's program of basic education by providing equitable education opportunities through reform of state and local education contributions”. Although it passed and was signed in 2017, it laid out the SEBB conversion requirements and plan. 

An important date approaching concerns bargaining. Section 817(3) reads in part: “…Employee bargaining shall be initiated after July 1, 2018,36 over the dollar amount to be contributed beginning January 1, 2020, on behalf of each employee for health care benefits. Bargaining must subsequently be conducted in even-numbered years between the governor or governor's designee and one coalition of all the exclusive bargaining representatives impacted by benefit purchasing with the school employees' benefits board established in section 801 of this act, consistent with RCW 28A.400.280 and 28A.400.350. The coalition bargaining must follow the model initially established for state employees in RCW 41.80.020. The governor shall submit a request for funds necessary to implement the collective bargaining agreement for the dollar amount to be expended for school employee health benefits, or for legislation necessary to implement the agreement….

The Governor vetoed Section 819 which ends the reporting requirements for school employee health insurance benefits to the Office of the Insurance Commissioner. However, reporting requirements for districts to supply requested information to the HCA in support of making the conversion to a SEBB model remain in effect.

The SEB Board was/is directed to also look at what to do with the aging non-Medicare and Medicare retirees. Section 804(4) reads in part: “ By December 15, 2018, the health care authority, in consultation with the public employees' benefits board and the school employees' benefits board, shall submit to the appropriate committees of the legislature a complete analysis of the most appropriate risk pool for the retired and disabled school employees, to include at a minimum an analysis of the size of the non-Medicare and Medicare retiree enrollment pools, the impacts on cost for state and school district retirees of moving retirees from one pool to another, the need for and the amount of an ongoing retiree subsidy allocation from the active school employees, and the timing and suggested approach for a transition from one risk pool to another…”

ESHB 2408 Relating to preserving access to individual market health care coverage throughout Washington state.For plan years beginning January 1, 2020, a health carrier must offer in the Washington Health Benefit Exchange (Exchange) at least on Silver and one Gold qualified health plans (QHP) in any county in which it offers a fully insured health plan that was approved, on or after the act's effective date, by the Public Employees' Benefits Board (PEBB) or the School Employees' Benefits Board (SEBB). The rates for a PEBB or SEBB-approved health plan may not include the administrative costs or actuarial risks associated with the QHP offered by the carrier. 

 

This bill has passedboth chambers. 

Post-Session re: Health CarePost-session is when the SEEB process begins in earnest. The Select Committee on Pension Policy will also restart.

Recent meetings have been held by the SEB Board and the PEB Boards. A summary of content with assorted links to the materials is below. Topics and issues discussed have significant consequences to districts. 

Family and Medical Leave

HB 2702 makes technical corrections requested by the Employment Security Department in the Family and Medical Leave Act passed last session. It passed both houses and is awaiting action from the Governor.  

ESHB 1434 Adding the use of shared leave for employees who are sick or temporarily disabled because of pregnancy disability or for the purposes of parental leave to bond with the employee’s newborn, adoptive or foster child. 

The purpose of the Shared Leave Program (Program) is modified to permit employees to help fellow employees who are sick or temporarily disabled due to pregnancy disability or for parental leave. Agency heads may permit employees to receive shared leave for parental leave, or for sickness or temporary disability due to pregnancy disability. Employees are not required to deplete all of their annual and sick leave and may maintain up to 40 hours of annual leave and 40 hours of sick leave in reserve.

For purposes of the Program, "parental leave" is defined as leave to bond and care for a

newborn child after birth or to bond and care for a child after placement for adoption or

foster care, for a period of up to 16 weeks after the birth or placement. "Pregnancy

disability" is defined as a pregnancy-related medical condition or miscarriage.

This bill passedboth houses and has been signed by the Governor. 

 

Bills that may have fiscal/HR impacts for districts

SHB 2703 Modifies the employment security act to clarify eligibility for education employee unemployment compensation claims for educational employees who have multiple employers. It also modifies the analysis of whether an educational employee has a contract or reasonable assurance of continued employment for purposes of unemployment benefits. This bill may have unintended costs for school districts. 

This bill passed both houses and has been signed by the Governor.

 

 

 

 

What will the future hold?

Many policy bills proposed during both the long and short sessions failed to advance. However, the key themes represented by them will likely be re-introduced through new legislation during the 2017 Session(s). See selected bill review for proposals that addressed many of these areas.

Moving into speculation on the future, some key activities may occur:

  1. Maintaining Democrat majorities in both houses. The Democrats currently hold slim majorities in both houses. The November election will be critical.
  2. Reshuffling committee assignments and leadership positions in both houses. Currently eleven (11) Representatives and two (2) Senators have announced retirements. These include some current leaders. The filing period (May 14-18) will be important to monitor.
  3. Allowing districts and cooperatives to opt out of the SEBB model and continue their present practices. Efforts during the 2018 session were unsuccessful. However, some districts and brokers will continue the argument.
  4. Seeking full funding of the SEBB benefits for districts. The law says that districts are to fund benefits on a per-head basis, rather than the standard pro-rata basis. This will add benefit costs to a district. For example, Wayne Leonard from Mead School District roughly estimated the additional costs to his district were $750,000.
  5. Maintaining the recent Medicare health subsidy increase at a minimum. Efforts will be made to get full restoration of the health care insurance benefit for school Medicare retirees back to a minimum of $183/month. It was reduced from that to $150/month in 2011.
  6. Working toward putting school retirees in the largest risk pool available which would reduce their current insurance costs.    
  1. Changing the current retirement plan default from 3 to 2. The SCPP will be asked to make this recommendation. This change would create savings to the state that range from $43 to $143 million over 25 years.
  1. Fundamentally changing the state’s current pension system into a defined contribution model (401-K). Senator Braun, the current ranking Republican on the Senate Ways and Means Committee, (WM) is a leading advocate of making these changes.
  2. Merging of the LEOFF 1 and TRS 1 pension funds. This proposal never surfaced during either of the sessions. However, this merger would decrease the unfunded liability in both Plans 1, an issue dear to the Republican leaders.
  3. 10)Increasing opportunities for members who retired under the 2008 Early Retirement Factors (ERF) to work in various capacities in a school district beyond the current allowance to substitute teach. 
  4. 11)Removing the sunset date allowing the use of ERF members as substitute teachers. 
  5. 12)Moving to a state-wide collective bargaining contract for all K-12 employees. (This is a real ‘pie-in-the-sky’ projection.) The statewide SEBB program and bargaining model can be adapted to the wider arena on salaries and other benefits. The current model allowing districts to develop their own salary schedules will lead to disparities and inequalities between districts and regions. 

 

 

Selected Financials

ESSB 6032 State Budget

 

Below are selected financial figures from the adopted supplemental 2018 budget:

 

                                                         2017- 2018                               2018-2019

 

Fringe benefit allocation     23.49%                                  23.65%/Allocated Certificated

                                                24.60%                                  24.67%/Allocated Classified 

 

Insurance Health

Benefit                                               $820                                     $843.97 

Medicare Insurance

Subsidy for Retirees                       $150                                       $168

 

Retirement Contributions                                       

TRS                                                                                                   13.13%

PERS                                                                                              11.18%

SERS                                                                                                11.58%

 

(Note: These rates are subject to change. The State Actuary and the Pension Funding Council set these rates yearly. They have yet to meet.)

 

Substitute Rate                    $151.86                                             $151.86

(4 subs/classroom teacher unit)

 

Health Care

Carve-out                              $64.07 Begin 9/2017              $71.08 Begin 9/2018

                                                 

 

If you have any questions, please feel free to make contact.

 

Fred Yancey

The Nexus Group LLC

 

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  1. parijatak ayurveda | Jun 15, 2018
    Thanks for sharing a nice information. I really like to read your blog.