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The Nexus Group: Retirement & Benefits for April 17


Retirement and Health Benefits

This week’s report is particularly difficult. There are major pieces of legislation that have only recently been introduced and have very complex elements. They all deal with the McCleary decision and meeting the directives of the Supreme Court. The Governor, the House Democrats, the Senate Democrats, the Senate Republicans, and the Superintendent of Public Instruction all have introduced ‘plans’ to meet and ‘fund’ the Constitutional demands to provide a general and uniform system of public schools by making ample provision for the education of all children. The air in Olympia is filled with the sounds of dueling banjos and everyone is waiting for deliverance and waiting and waiting.

The most detailed proposal dealing with teacher compensation, collective bargaining, and levies is SB 6109 sponsored by Senators Dammeier, Litzow, Hill, Schoesler, Braun, and others.

This bill has three major sections: Compensation, School District Excess Levies and Levy Equalization, and State Property Tax Offset. In the section on compensation, it lays out a consolidated health model for all school districts and ESD’s to replace the current fragmented system of insurance offerings among the 295 local school districts and the nine ESD’s. It incorporates an earlier Senate bill (SB 5976) that dealt solely with insurance consolidation. The Senate Republicans, some key Democrats, and State Superintendent Dorn believe that consolidating health insurance will be more efficient and more affordable, so it is likely that such a reform may pass this session within or outside of this bill.

The health care sections (114–135) of the bill are very complex. This report will just hit some highlights. This is not a detailed breakdown and analysis of the bill. This report will be long enough. For a more detailed look, see the links provided below.

The link to the bill as proposed is: http://apps.leg.wa.gov/billinfo/summary.aspx?bill=6109&year=2015.

The link to the narrative bill report is: http://lawfilesext.leg.wa.gov/biennium/2015–16/Pdf/Bill%20Reports/Senate/6109%20SBA%20WM%2015.pdf.

A little history is in order. In 2012, ESSB 5940 regarding school employee benefits passed. It directed the Office of the Insurance Commissioner (OIC) and the Health Care Authority (HCA) to gather and analyze data and to:

  1. determine if districts are making progress toward employee premiums for full family coverage that are not more than three times the premiums for employees purchasing single coverage, and
  2. review the advantages and disadvantages to the state, school districts, and school employees of various approaches to consolidated purchasing of school employee health benefits.

That final report is due June 1, 2015.

The Legislature and Senate Republicans obviously can’t wait, so this session they proposed SB 5976 and then incorporated it into this recent SB 6109. Beginning January 1, 2017, all school districts must participate in the SEBB (School Employee Benefit Board) program including districts and employees currently participating in the Public Employees Benefit Board (PEBB) program, and health benefits for all school district and educational service district employees are merged into a single, community-rated risk pool with separate rates apart from the risk pool for PEBB health benefits. Prior to that time, school districts and ESD’s will pay a PEBB composite rate for insurance offerings.

School retirees and state retirees continue to participate in PEBB health plans. By December 15, 2015, the Health Care Authority (HCA), in consultation with the PEBB and SEBB, must complete an analysis of the most appropriate risk pool for retired school employees.

Currently, state employees, many school retirees, and a few schools purchase their insurance through PEBB which is chaired by director of the state Health Care Authority (HCA). This bill proposes to establish a similar model under HCA and create a nine-member School Employees’ Benefits Board (SEBB) which must be in place by October 1, 2015. By September 30, 2015, the Governor must appoint eight members to the board: two members from associations representing certificated employees, two members from associations representing classified employees, and four members with expertise in employee health benefits policy and administration. The HCA director or designee is chair of the SEBB.

The SEBB has multiple responsibilities, including:

  1. developing school employee benefit plans that include comprehensive, evidence based health care benefits, and
  2. authorizing and determining premium contributions, including employee contributions for family coverage for full-time employees that do not exceed three times the required employee contribution for employee-only coverage and pro-rated employer contributions for part-time employees.

There are many more details in the proposals. For example, all collective bargaining agreements entered into between school districts and organizations representing certificated or classified school district employees must be consistent with the changes made by the bill. Contracts will run from July 1 through June 30th.

Annuity Plans: School districts that offer tax deferred annuity plans to their employees may not make employer contributions to the plans beginning as of September 1, 2017.

Pooling: The present practice of pooling of benefits is eliminated. (Section 131)

Accounting: School districts must provide separate accounting of state, federal, and local revenues and expenditures, and basic education and non-basic education expenditures.

Local School District Fund Accounts: School districts must establish a local revenue fund for the purpose of accounting for the financial operations of a school district that are paid for from local revenue.

Reporting: Districts and benefit providers are to report data beginning on 12/1/15 to HCA and 12/31/2015 to OIC. Further data is also due to HCA/SEBB 4/1/16.

Collective Bargaining: The scope of the medical, dental, vision, and other basic insurance benefits provided for school employees is removed from local bargaining. Current provisions dealing with school district pooling arrangements established by bargaining units are abolished. Beginning January 1, 2017, school district contributions to employee insurance purchased through the HCA must conform to requirements established by HCA statutes and the SEBB. All collective bargaining agreements entered into between school districts and organizations representing certificated or classified school district employees must be consistent with the changes made by the bill. After April 1, 2016, bargaining over the dollar amount expended for school employee health care benefits beginning July 1, 2017, must be conducted between the Governor or the Governor’s designee and one coalition (the definition of said ‘coalition’ is not detailed in the bill) of all the exclusive bargaining representatives impacted by benefits purchasing with the SEBB. The agreement is subject to acceptance or rejection by the Legislature.

There is much more to this bill than this brief overview. Even the bill report is a broad report. But this gives a flavor. It truly represents a real shift in past practices. It is scheduled for a hearing Friday, April 17 at 8:00 AM before the Senate Ways and Means Committee.

Fred Yancey
fyancey@comcast.net
The Nexus Group