Retirement & Health Benefits for March 29, 2019

Fred Yancey | The Nexus Group
Mar 29, 2019

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“Life is like the river, sometimes it sweeps you gently along and sometimes the rapids come out of nowhere.” ― Emma Smith
The big news this week was the release of the House budget. Released at noon, Tuesday, public hearing on same day at 3:30, passed out of committee the next day and to be voted out of the chamber Friday. Wham! Bam! Done deal.

That same Friday, (March 29th), the Senate will release its budget. The public hearing will be Monday, April Fools’ Day, so at least there is some time to review prior to that time.

Meanwhile, committees were holding hearings and moving some bills out through Executive Session. Following is a brief summary of bills that have had some action. If there was mention in the House budget, comments are noted in italics.

Retirement Related Proposals

SB 5360/ESHB 1308 | Revises provisions in the public employees’ retirement system, the teachers’ retirement system, and the school employees’ retirement system with regard to plan membership default. It would change the present retirement plan default for new hires from Plan 3 to Plan 2. SB 5360 passed the Senate, 39–9 and had a public hearing March 20th. ESHB 1308 passed the House 74–22 and had a public hearing on March 18th and is scheduled for Executive Session on April 1st.

Substitute Options for early Retirees

E2SHB 1139 | Educators that are members of Teachers’ Retirement System (TRS) Plans 2 or 3 that retired under the 2008 Early Retirement Factors are permitted to return to work before age 65 in any non-administrative position, not just in substitute teaching and instructional positions, and work for up to 867 hours per year without suspension of pension benefits. The ending date on the current provisions of August 1, 2020, as well as the separate section expiring the section of law, are removed, making the section effective indefinitely. A provision similar to the TRS provision is created for School Employees’ Retirement System, which is for classified school employees. It passed the House 93–2, had a public hearing on March 18th and has yet to be scheduled for executive action. WASA testified in support with the request that the exclusion of administrators be removed.

Sidenote: Now might be the time to mention the games that legislators often play. Allegedly, this House bill, awaiting Senate committee action, is being held hostage because the House is reluctant to move some of the Senate’s favored bills, like the ones dealing with Sex Ed and Bullying. So, it’s like a game where one side is waiting for other side to blink. Meanwhile the bills are stalled and the time is ticking away. Stay tuned for the outcome.

Moving on…

SB 5400/ HB 1390 | Requires beneficiaries who are receiving a monthly benefit from the public employees’ retirement system plan 1 or the teachers’ retirement system plan 1 on July 1, 2018, to receive, effective July 1, 2019, an increase to their monthly benefit of three percent multiplied by the beneficiaries’ monthly benefit, not to exceed sixty-two dollars and fifty cents. HB 1390 had a public hearing in February. These bills are NTIB.

The House budget did not include any COLA for Plans 1 members, although it did raise the Medicare health benefit from $168 to $183 which was the amount previously paid prior to 2011.

This proposal is being lobbied extensively by WSSRA, WEA-Retired and RPEC and includes advocacy on multiple fronts. Most notably, Representatives Mari Leavitt and Shelley Kloba circulated a letter to all House members following the release of the budget. This letter argues for a COLA for these retirees. Thirty-five house members signed on in support. The question becomes, “Will they (particularly the Democrats) still vote “Aye” on the budget if a COLA is not granted?” Certainly this is an issue that the R’s will debate through a proposed amendment as an opportunity to embarrass the D’s. (Note earlier remarks about game playing.)

SB 5350/HB 1413 | Authorizes the following, at the time of retirement, to purchase an optional actuarially equivalent life annuity benefit. SB 5350 passed the Senate 48–0 and has been scheduled for Executive Session on April 3rd before the House Appropriations Committee. HB 1413 passed the House 90–7, had a public hearing before the Senate Ways and Means Committee, was voted out and moved to Rules where it sits until moved to the floor calendar.

School Employee Benefit Board (SEEB)Health Related Proposals

HB 2096 | Concerning educational service district health benefits is a bill that asks for a 2-year delay in SEBB implementation for ESD’s. Although scheduled for Executive Session on Feb. 28th, no action has yet been taken. This bill is entwined with whole SEBB issue. It can be seen as NTIB.

The House budget funded SEBB. The Health Care Authority (HCA) projected SEBB costs at $750 million; the House Budgeted $650.7 million. HCA projected a funding rate of $1,114 for FY 20 and $1,127 for FY 21. The House projected $1,079 in FY 2020 and $1,106 for FY 21. Why the difference?

Simply put, this whole SEBB cost projection and process is all built on assumptions. There are few, if any, facts available and until the plan is up and running on January 1, 2020, the real effects and costs will not be known. So, a cynic might say, “One set of figures is as good as any other”. That is certainly the case here.

However, there was some thought to the House’s proposal. As mentioned in earlier reports,

  • the House lowered the assumed medical inflation rate to 5%. The HCA’s rate allegedly ran from 6.5%–9%.
  • Also, prior to January 1, 2020, districts will be paying benefits based on their existing labor contract(s) “They could conceivably gain some extra dollars during this period,” said one staff member since the state will be paying SEBB rates and it’s assumed district benefit costs are less than they will when SEBB requirements begin.
  • Delaying the payback of the loan to the HCA to set up SEBB and changing the speed in which to build up a cash reserve were some other machinations done to lower the figure. The Senate is likely to fund SEBB similarly.
  • Ultimately, as the staffer said, “The supplemental budget process during the next shorter session can be used to correct any errors in assumptions.”

Districts are left swimming with the unknowns.

The ‘good news’ is that Medicare remittance will decrease.

Other Bills That May Have Fiscal/Hr Impacts For Districts:

ESHB 1813 | Incorporating the costs of employee health benefits and pension contributions into school district contracts for pupil transportation.

This bill passed the House 56–39 and a public hearing was held on March 25th. Two districts and WASA testified in opposition because of the added costs that are likely to fall on districts as vendors pass their costs along to the users. It was pointed out as well that not only will districts be paying the employer and employee costs there was nothing in the proposal that compelled the owner/contractor to provide those benefits to his/her employees. The bill has not moved since.

2SSHB 1087 | Concerns long-term services and supports. Creates a long-term care insurance benefit paid through an employee payroll premium, (0.058%). It passed the House 63/33 and was scheduled executive action before the Senate Health and Long-term Care Committee on March 20th, and no action was taken. It has been rescheduled for March 29th. This bill is a major AARP want.

SHB 1399 makes technical corrections requested by the Employment Security Department in the Family and Medical Leave Act passed last session. This bill passed the House 71–23 and the Senate 40–6 and has been sent to the Governor for action.

The budget had a number of amendments that passed. One amendment set the implicit price deflator (IPD) as the future measure when looking at inflationary increases. The traditional consumer price index (CPI) generates a higher rate of inflation using a different set of assumptions. The IPD generates a lower rate which stretches dollars wider helping those that create budgets and allocate dollars. It potentially hurts those who are impacted by inflationary increases not measured by the IPD.

The currents continue keeps everyone moving. The struggle remains to stay above water.

Fred Yancey
The Nexus Group




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