Retirement & Health Benefit Report for April 26, 2019

Fred Yancey | The Nexus Group
Apr 26, 2019


“Never insult an alligator until after you have crossed the river.” – Cordell Hull

The great mystery is the upcoming release of the agreed upon 2019–21 budget. It is to be released Saturday, the 27th. While budget negotiations were occurring behind closed doors, both chambers passed a number of bills. A few pertain to this report.

Retirement/ Pension Related Proposals

SB 5360 changes the present retirement plan default for new hires from Plan 3 to Plan 2, effective July 1, 2020. This bill is on the Senate calendar where it is awaiting a pull to the floor for concurrence. This is agency request legislation, (SCPP) and should be an easy vote. However, time is running out for action.

SB 5999 appropriates $183,749,000 from the Budget Stabilization Account (BSA) to be used to reduce the Teachers’ Retirement System Plan 1 underfunded actuarially accrued liability which is estimated to be $3 billion dollars. It was passed by Executive Session in the Senate Ways and Means Committee and sent to Rules where it currently languishes.

Substitute Options for early Retirees

E2SHB 1139 expands the current and future educator workforce supply. This bill has a section allowing Plan 2 retirees (classified and certificated) to return to work for up to 867 hours/year. It has passed both chambers and after signatures will be sent to the Governor for further action.

HB 1390 requires beneficiaries who are receiving a monthly benefit from the PERS or TRS plans 1 to receive a one-time 3% cost of living adjustment. It is contained in ESHB 1109 which is the budget adopted by the Senate. The soon to be released conference budget will reveal if this proposal is funded to any degree. SB 5350 authorizes an individual at the time of retirement, to purchase an optional actuarially equivalent life annuity benefit. This bill has passed both chambers and has been sent to the Governor for his action.

School Employee Benefit Board (SEEB)Health Related Proposals

SB 6011 concerns health care benefits for public school employees. Sponsors: Mullet (D), Braun (R). This bill was introduced late, (April 13), and has not been scheduled for a hearing. It is a direct outgrowth of proposed budget amendments that failed. Both Senators are concerned with the high cost of SEBB. This bill would help to correct that and according to staff save an estimated $150 million dollars. Among other provisions it would raise the qualifying bar to 1,040 hours and allow for the prorating of benefits.

SB 6020 is a variation on SB 6011 above. WASA and its companion allies have been very clear in letting legislators know that this proposal, although in need of some tweaks, is the preferred route to deal with the unfunded costs associated with the present SEBB model.

The issue of SEBB and funding is an ‘endgame’ budget player. It is important to note that the launch of SEBB enrollment is only 113 days away, so any changes will create some degree of havoc. Also, remember the original bill implementing SEBB was introduced June 30th, 2017 and passed that same day. The soon to see the light of day budget will tell the story. Stay tuned.

Earlier in the week, the Public Employees’ Benefit Board (PEBB) held a meeting. At this point in time, their actions are either in parallel to those of the SEB Board, or portend the direction that SEBB will go. View the materials.

The board is looking at potential changes to the Long-term Disability insurance program. These include increasing the maximum amount paid from the current $240/month. This program is coordinated with the Paid Family and Medical Leave program paid through a 0.4% rate of a worker’s wage, (63% paid buy worker; 37% paid by employer.) If the board wants to increase the maximum paid, costs will rise unless trade offs are done with other benefits. For example, lowering the Basic Life benefit from $35,000 to $25,000 would allow an increase of the benefit to $400/month without adding additional costs. This discussion will continue.

The PEB Board adopted a resolution, which is in tandem with the direction of the SEBB board to institute a value formulary regarding the use of prescription drugs. Simply put, generic or lower cost alternative drugs are to be used instead of single-source brand name drugs. This will lower the costs paid for Rx drugs. (The high cost of Rx drugs has been the largest driver of expenses for PEBB insurance and the main reason for increased premium costs.) The briefing materials point out the exception process, but barring one using that avenue, he/she must try all alternatives before qualifying for the single-source brand name drug.

Other Bills That May Have Fiscal/Hr Impacts For Districts

ESHB 1813 | This bill provides that school districts could only enter into pupil transportation service contracts with nongovernmental entities that provide health and retirement benefit contributions to their employees that are equivalent to those received by school employees. Although, it appeared to be ‘dead’, it is on the Senate floor calendar and could be brought to a vote at any time. The strong pro-labor focus of this legislature keeps this alive.

2SHB 1087 concerns long-term services and support passed both houses and has been sent to the Governor.

Beginning January 1, 2022, employers will collect from employees in Washington who are working an assessed premium of 0.58 percent of their wages for deposit into a state dedicated fund. Once qualified due to work history, an individual could claim up to $36,500 in lifetime benefits toward meeting the costs of aging and ailing.

SHB 1399 | Modifies and reorganizes certain statutes in the family and medical leave program. This bill makes revisions to definitions, voluntary plans, waiting periods, and other matters. Authorizes the employer to waive several statutory provisions and to offer supplemental benefits. Adds provisions concerning privacy and access to confidential records. Broadens the employee’s appeal rights to cover any adverse decision in a voluntary plan. This bill has been signed by the Governor and becomes effective 7/28/2019.

Fred Yancey
The Nexus Group

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  • Retirement
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