Retirement & Health Benefit Report for January 24, 2020

Fred Yancey | The Nexus Group
Jan 24, 2020

retirement-health_072315

AND THE BAND PLAYS ON…

Hearings and any resulting actions moving bills out of committees have begun as both houses move toward the first cut-off date.

This is only a summary of bills that have had some degree of action to date or have been recently introduced. Last week’s report covered all the bills that been introduced to date.

Retirement Related Proposals

SB 6165 | Providing a benefit increase to certain retirees of the public employees’ retirement system plan 1 and the teachers’ retirement system plan 1. It would provide a one-time, 1.5% percent increase to the retirement benefits of retirees in the Public Employees’ Retirement System and the Teachers’ Retirement System Plans 1, up to a maximum of $22 per month.

This bill was heard in the Senate Ways and Means Committee on 1/15. It was a courtesy hearing on the Governor’s budget proposal. Testimony acknowledged the Governor’s awareness of the need to address Plans 1 members, but the amount was too small to account for the inflation and loss of purchasing power that has occurred since their COLA was removed in 2011.

The issue of a COLA adjustment for Plans 1 members is still alive. Members have stated their commitment to do something this session. The questions are what and how much?

HB 1390/SB 5400 are the preferred alternatives. Either would provide a one-time 3 % percent increase to the retirement benefits of retirees in the Public Employees’ Retirement System and the Teachers’ Retirement System Plans 1, up to a maximum of $62.50.

This issue will remain alive until the very end of Session. School Employee Benefit Board (SEEB) and Other Health Related Proposals.

The Senate Ways and Means Committee held a public hearing (Jan. 23rd) on a number of SEBB related bills: SB 6479, SB 6189, SB 6290, SB 6296. They were all interrelated and testimony for one applied to the others as well. Representatives from WEA, PSE, WASA, numerous Superintendents and others spoke both ‘Pro’ and ‘Con’.

It is important to note that this was the first time the members of the whole committee had heard any mention of the costs of SEBB to the districts. (Although a number of individual members mentioned hearing from their districts.) The committee’s previous SEBB briefing at the start of session was all about enrollment numbers. The testimony from the school superintendents was telling. They pointed out that these added benefit costs, just for substitutes and coaches, and then the required waiver payments meant fewer dollars for hiring instructional staff or purchasing instructional materials. These excess dollars came out cash reserves and levy monies.

They all sought legislative action/relief. See testimony summaries below.

HB 2458/ SB 6479 | Concerning optional benefits offered by school districts. This bill allows for districts to continue offering some benefits that are not in competition with those offered by SEBB. If SEBB is not providing the benefit, then a jurisdiction should be able to provide it. It was pointed out that these benefits are employee paid. Examples would include VEBA, cancer insurance, auto insurance, etc. WSSDA pointed out that the bill could be amended to allow districts to charge a small administrative fee, and add a caveat that there was no contractual obligation on the district’s part connected to the benefit.

SSB 6189 | Clarifying eligibility for school employees’ benefits board coverage. A substitute bill was submitted earlier in the day that changed the original proposal. Here is a link to the changed bill report.

Briefly summarized, the substitute bill calls for an OSPI/Health Care Authority study of the issue of districts’ uses and costs of substitutes and extracurricular staffing and include recommendations for funding. A preliminary report summarizing the 2018–19 and 2019–20 data is due to the fiscal committees of the Legislature by December 15, 2020. The final report that includes data from the 2020–21 school year and recommendations from the workgroup is due to the fiscal committees of the Legislature by December 15, 2021. WASA testified that the scheduled was too elongated, and that at a minimum deadlines should be moved up a year.

Dual coverage would not be allowed in the future. Eligible retirees who are receiving Medicare benefits on the date that they return to work, are ineligible for benefits under the SEB Board. However, if these retired school employees would otherwise be eligible for SEB, the school district must provide the employee with a stipend in addition to all other regular compensation equal to the additional cost the employee would pay for premiums receiving insurance through PEBB.

Testimony was appreciative that this issue was evolving. WASA appreciated the fact that the conversation continues, but still had concerns. Eatonville School District pays $150,000 extra to cover benefit costs just for subs. Toledo School District pays $35,000/month in excess costs ($427,000 year). Their costs went from $71,736/month to $107,350/month for benefits. West Valley School District pointed out that the benefit cost for 5 subs would cover the costs for hiring one teacher. Their costs were $400,000 This district’s 55 waivers, cost an additional $667,000. Reardon School District excess benefit costs were $29,000/month. Medical Lake School District had 48 waivers (20% of staff) costing $570,000/monthly. Lake Washington School District has 600 subs and there is a $3.7 million dollar gap between what the state pays and what the district pays. Plus, it was pointed out and suggested that the SEBB program, through what ever bill moves, allows districts to drop coverage for any employee who has not paid his/her premium share for 60 days. Furthermore, what about summers, when an employee is not paid. Is a district to become a collection agency?

SEBB/HCA pointed out in testimony that the bill needs some refinement. It should be clear that retirees could choose coverage as proposed in the original bill and defer their PEBB enrollment until their SEBB coverage ended. This present process causes confusion. Also, there is no recognition in the bill that ESD’s and charter schools need are included in SEBB.

SB 6290 | Concerning contributions to and eligibility for school employee benefit plans. Eliminates the requirements that school employers make contributions for employee health care when the employee has waived coverage. Makes substitute employees and coaches ineligible for benefits under the School Employees’ Benefits Board.

The fiscal note is worth reading.

The current rates for coverage are socialized state-wide and waivers are calculated into the rate structure. If you spread the rate over a smaller number, the costs would increase. If waivers were not paid, projected rates would increase around $152/month. (It was suggested in an earlier panel, that a fairer way in lieu of paying for those that waive would be to raise the rate for all.) There are currently 19,000+ waivers.

Although WEA was opposed, it acknowledged that there is a need for proper funding. It was pointed out that if waivers were not paid by a district, those with low numbers of waivers would probably be paying the same. Those with high number of waivers would pay less and those with an average number would pay more.

Reardon School District pointed out that a coach earning $5,000 could easily qualify for $12,000 in benefits. One district pointed out that they have directed their coaches to keep time sheets and not exceed 630 hours.

SEBB/HCA expressed some frustration in that the issue of rates and waivers is very complex and not easily summed up in 2 minutes. But briefly stated; If ‘x’ plus ‘y’= $2 billion dollars (as an example), a change in ‘x’ (like waivers’) will means ‘y’ increases in order to still hit the $2 billion mark. Also, it was noted that waivers apply to medical, but many persons are still enrolled the vision, dental, life and long-term disability.

As an aside, and in response to a question; there are 148,000 employees covered, 350,000 covered lives, and 290,000 on medical.

SB 6296 | Concerning health care benefits for public school employees. Beginning September 1, 2020, a teacher employee in a job sharing position who is anticipated to work at least six hundred thirty hours is benefits eligible and will receive a prorated portion of the full-time employer contribution that is consistent with the district’s job sharing plan under RCW 28A.405.070 35.

WEA was opposed to this change as it opens the door to prorating other positions. It was also pointed out that other district jobs that met the 630-hour threshold would receive full benefits, so why single out teachers?

Other bills:

SB 6176 : Incorporating the costs of employee health benefits into school district contracts for pupil transportation. A school district may only enter into a pupil transportation services contract with a nongovernmental entity that provides the following to its employees:

  • (a) An employer health benefits contribution equal to the monthly school employer funding rate for the state health benefits program for school employees, less the retiree remittance for the public employees’ benefits board; and
  • (b) An amount equivalent to the plans 2 and 3 normal cost employer contribution rate of the school employees’ retirement system, multiplied by the estimated salaries of the employees of the private nongovernmental entity.

This bill is scheduled for a public hearing on 1/24 before the Senate Education Committee. WASA will be testifying “Con”. This bill is problematic for a number of reasons; added cost to districts for example. Furthermore, once this door is open, what about contracted food service workers?

Other Bills that may have fiscal/HR impacts for districts

HB 2171 | Concerning vested vacation or paid time off upon an employee’s termination. If an employer has an established policy, practice, or agreement to provide paid vacation or paid time off, and an employee is terminated from employment by death, reduction in force, resignation, dismissal, or retirement, any of the employee’s unused vested vacation time or paid time off must be paid to the employee as wages at the employee’s final rate in accordance with the employment policy, practice, or agreement with respect to eligibility and vesting requirements.

No action was taken in Executive Session on Jan 23rd.

HB 2304 | Concerning shared leave and industrial insurance benefits. The requirement that an employee diligently pursue and be found ineligible for industrial insurance wage replacement benefits is removed. An employee receiving wage replacement benefits may not receive more than their base salary as a result of receiving shared leave. This bill was passed out of committee on January 16th and has been scheduled for a public hearing before the House Appropriations Committee on 1/27.

HB 2614/ SB 6349 | Concerning paid family and medical leave. This bill is agency request legislation clearing up some areas with the family and medical leave act, laying out penalty process steps and clarifying certain issues.

HB 2614 passed out of committee on 1/23.

HB 2740 | Concerning the employment of individuals who lawfully consume marijuana. This may nor may not affect school districts since all are posted “Drug Free Zones”, but it may be worth a look.

Check out the bill report. This bill will have a public hearing on 1/28 and is scheduled for Executive Action on 1/30.

SB 6242 | Adjusting school directors’ compensation. For a district with a total student enrollment of twenty thousand or more students, the daily amount of the compensation must be established by the board, but the annual compensation may not exceed the annual salary for a legislator under RCW 43.03.013.

This bill is scheduled for a public hearing on 1/24 before the Senate Education Committee.

SB 6368/ HB 2685 | Concerning sick leave for K–12 employees. Leave provided in this proviso not taken shall accumulate from year to year. Such accumulated time may be taken at any time during the school year may be used for the purpose of payments for unused sick leave in accordance with RCW 28A.400.210.

SB 6368 has been scheduled for a public hearing before the Senate Education Committee on 1/29.

Fred Yancey/ Mike Moran
The Nexus Group


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