Wednesday, March 6, 2013

Governor Presents Budget Address Wednesday, March 6, today, the Governor will present his Budget Address at Noon. Governor Quinn will most likely talk about "reining in the state's $96.8 billion unfunded pension liability . . ." while further slashing appropriations for education. There will be no request for taxpayers to pay more in taxes. More revenue will be sought through the gaming bill, tax tied to "fracking" legislation, and fees on satellite TV companies. The total revenue available for FY 2014 is approximately $35 billion. For more information on Revenue read: House Resolution 83 Amendment 003. The revenue numbers were taken from testimony provided by the Commission on Government Forecasting and Accountability better known as COGFA. The Budget Address is streamed live at http://www.Illinois.Gov.

On Saturday an email was sent to inform the SUAA membership and friends about the tentative AFSCME contract which included health insurance premiums for those retired from universities (SURS) and those retired from the State (SERS).

Many of our members responded with comments - some favorable, some unknowing, and one menacing. Therefore, it seems imperative that more information be provided for those who are possibly unfamiliar with what the process has been and continues to be.

During former Governor Edgar's administration he gave all negotiating rights for health insurance to AFSCME because this union had more State employee members than the other unions. In addition, to keep from further complications (meaning reducing time spent with other State entities/departments) AFSCME health insurance negotiations would include everyone who worked for the State, including management, all other non-union employees, and in addition all State and university retirees.

Up until now, or maybe more recently the dental insurance fiasco, the negotiations have not presented a problem due to the fact that there has been no health insurance premiums for retirees if their service had been with the State. Unfortunately, due to the 97th General Assembly's passage of Senate Bill 1313 (Public Act 097-0695) all State retirees would be faced with a premium for their health insurance regardless of previous understandings of "free" health insurance.

While SUAA wanted to be at the negotiating table while the health insurance premiums were being discussed, previous decisions as explained prevented this. There were two other groups representing only State (SERS) retirees that would have also liked to have been at the table, but were prevented from doing so.

However, while many of you thought that SUAA was missing in action or was not involved in any way did not understand that the organization was working as best it could with Central Management Services to make sure that our concerns were heard. The ISEA Retirees and Retired State Employees Association were also involved along with SUAA as the AFSCME negotiations were in progress.

All three organizations agreed that the State retirees were not being represented. It was our contention and it continues to be that the retirees should no longer be expected to ride on the coattails of the negotiations for those who are actively working, those who are members of AFSCME. The number one reason is the inability for the retirees to vote on what has been negotiated for them. As it stands, those who vote on the retiree health insurance premium will be the working members of AFSCME. While this directive from Governor Edgar has been enforced since his administration, it is no longer reasonable for retirees to take a backseat or no seat during negotiations which compromise or make changes to their livelihood.

In 2009,the arbitrator involved in the lawsuit over the dental insurance "ruled that because retirees are not employees and therefore are not members of a bargaining unit, the grievance arbitration process is foreclosed to them and instead retirees and their survivors must consider other appropriate venues if they wish to challenge the Employer's actions in regard to theirnegotiated benefits contained in the Collective Bargaining Agreement." Even then SUAA took the initiative to explain the statues as stated to those affected by the change. We began working on being able to represent the retirees even if there was little to no change to the health insurance other than co-pays, deductibles and plans. SUAA, ISEA Retirees and RSEA formed a coalition and have been working for a number of years now to resolve this injustice of lack of representation. Borrowing from an email that was received from a member in reference to the AFSCME negotiated new health insurance premiums - "although in a different form, in essence retirees are being subjected to "taxation without representation."

The three organizations have continued to write letters to leadership, have had face-to-face meetings with leadership, the Governor's office, along with other influential policymakers and as stated previously met with Central Management Services on many occasions. What has always been disconcerting and continues to be is the inability for legislators to understand the unfairness of retirees not being represented at the negotiating table regardless of their utilization of "free" health insurance.

As it stands, currently working union members will be voting on their negotiated contract over the next several weeks.

Unfortunately, the retirees will not have the same opportunity to vote on their negotiated health insurance premiums.

At this time, there continues to be a lawsuit pending over the legality/constitutionality of eliminating the guarantee of affordable health care for retirees. The judge has given the parties "three weeks to submit statements setting forth the separate legal issues in the case to streamline possible appeals." So as the health insurance situation continues to heat up it is not apparent as to what decision will be handed down. There are a number of conflicting thoughts. And regardless of how the judge rules in the Sangamon County Circuit Court, the plaintiffs have the right to appeal to the Appellate Court.  In the meantime, the questions and answers that have been exchanged over the last few days through email should be shared with others. These are in no certain order.

1. Will the proposed changes affect those SURS retirees never covered by an AFSCME contract, i.e., management employees? Yes

2. Will those of us who made an IRREVOCABLE election be affected, taken a reduced annuity in order to receive health insurance? No, your election still stands. This irrevocable election was included in or carved out of SB1313. SUAA was the sole organization responsible for the irrevocable election being included in SB 1313.

3. Where were the other unions such as SEIU, or those individuals who were never in a union? As stated above, the other unions and other representative organizations have been excluded over the years due to a decision made by former Governor Edgar. The decision has never been revisited even though there has been many attempts to do so.

4. I worked over 30 years and was told that my health insurance would be free. This will be determined by the court(s).

5. Do you have a figure for 2 or more Non-Medicare Retiree Dependents on Managed Care? A non-Medicare Individual Premium is 2% of pension annuity, effective 7.1.2013; an additional 2% of pension annuity effective 7.1.2014. Non-Medicare Retiree Dependent Premium for Managed Care (blended rate)/One Dependent is $113 per month (effective 7.1.2013). Quality Care Premium/One Dependent is $249 per month (effective 7.1.2013).
In addition, if a non-Medicare retiree wishes to opt out of the State plan and join another health care   plan (e.g. a spouse's plan), the State will provide that individual with a subsidy of $500 each month.

6. What can be done about the retirees under CIP; those premiums are even worse than what the State/university retirees will be paying? There continues to be a push to make sure that the Community College health insurance program is funded. While it is mandated that the State make its appropriate contribution to this fund, the State did not allocate any money towards the CIP this year. Therefore, the Comptroller cannot make a payment to the CIP. More attempts will be made to stabilize the College Insurance Program as "cost shifting" becomes a more prevalent solution for the State to embrace. You are correct, the premiums are much higher even though the same insurance plans are used.

7. Do you know what the additional premium, if any, will be for the second dependent? Not at this time

8. I just wanted to know if there will be a maximum amount charged or if it is unlimited? The contract is for three years but health insurance costs continues to rise. There is no indication that there is a maximum amount. The Affordable Care Act will be implemented as of January 1, 2014. This is an Act that should not be ignored even though you are currently covered by the State health insurance plans.

9. Will the Senate and House take into consideration the 1% or 2% that will be deducted for health insurance when they want to eliminate or reduce our annuity COLA? At this time, no pension reform has been passed. Therefore, it is not certain what will be taken into consideration. However, this definitely should be a consideration especially since there is an election to make a choice between COLA and access to State health insurance.

10. What is the monthly premium for retirees with an annual pension income of $75,000 without Medicare? A non-Medicare Individual Premium is 2% on pension annuity effective 7.1.13 and an additional 2% of pension annuity effective 7.1.2014. There does not seem to be a difference between a non-Medicare Individual Premium and a non-eligible Medicare Individual Premium. Therefore, $1,500 ($125 per month) for the first year and $3,000 ($250 per month) for the second year.

11. In the health insurance premium information provided, AFSCME negotiated a $500 subsidy for non-Medicare retirees. Why did they not also negotiate a subsidy for Medicare retirees who opt out? We will be provided a briefing soon. The question will be asked and reported.

12. It is taking 9 months to pay the bills that Medicare does not pay. Can this be used as a consideration? Only 9 months? Many claims are much older. However, money has been appropriated to pay down a significant amount of the claims by the end of March.

There will be many more questions as the health insurance issue evolves. At this time, the negotiated health insurance premiums must go before the Joint Committee of Administrative Rules. The lawsuits will continue to be heard.

As stated previously, the implementation of the Affordable Care Act, along with additional health insurance exchanges cannot be ignored. SUAA will continue to advocate for retirees right to negotiate their health insurance plans and possibly the premiums if it is determined by the court that the premiums are to be paid.

Last Thursday there was to be an open debate on the House floor in reference to Pension Reform. Four amendments sponsored by Speaker Madigan were to prompt the debate. However, it was all over within a half hour. The Republicans went into caucus for an hour not long after the House convened. Upon return the four amendments were brought forward for voting purposes. All failed miserably as the Republicans refused to vote on each amendment. Speaker Madigan was the only vote to raise the retirement age to 67. There were 3 votes to raise the contribution rate to 5% for those currently working. Five voted yes to eliminating the COLA for everyone. Another amendment failed which would have eliminated the COLA until the pension system (this included all pension systems individually) could reach 80% funding.

Due to this exercise it seems that there has been a determination of what will not be included in pension reform. However, all is subject to change. However, before dismissing the pension discussions, Rep. Frank suggested that there be a Committee of the Whole to hear testimony about possible solutions to pension reform. (A Committee of the Whole is a device in which a legislative body or other deliberative assembly is considered one large committee. All members of the legislative body are members of such a committee. This is usually done for the purposes of discussion and debate of the details of bills and other main motions. Quoted from Wikipedia.) The Committee of the Whole could begin yet this week, possibly Thursday.

Source: State Universities Annuitants Association
Date: March 6, 2013

Sunday, March 3, 2013

And The Focus Changes...
Rumblings began yesterday on HB3411after it became apparent that House Republican Leader Tom Cross and Democrat Representative Elaine Nekritz introduced a "comprehensive pension reform" bill that predicts a savings of $30 billion and the health of the pension systems along with new protections including the guarantee that the State will have to meet its funding obligations. It also contains the cost shifting

By late evening it became even more convincing that HB 3411 could be the legislation to move forward as Senate President Cullerton is willing to take a serious look at this legislation as he determines the constitutionality of this proposal.

Other bi-partisan sponsors are: David Harris - Sara Feigenholtz - Darlene J. Senger, Michael J. Zalewski, Carol A. Sente, Robyn Gabel, William Davis, Greg Harris, Luis Arroyo, Elizabeth Hernandez, Kelly Burke, Deborah Mell, David McSweeney, Timothy L. Schmitz, Ed Sullivan, Jr., Ron Sandack, Sandra M. Pihos, Kay Hatcher, Joe Sosnowski, Thomas Morrison, Barbara Wheeler, JoAnn D. Osmond, Patricia R. Bellock, Jim Durkin, Renée Kosel, Jil Tracy, Pam Roth, David R. Leitch and Dwight Kay

The contents of HB 3411 are:
  • Tier 1 Participant and Tier 1 Retiree Benefit Reform
  • State and Employer Funding Reform
  • A newly created Tier 3 Retirement Plan

The bill applies to the General Assembly Retirement System, the State Employees Retirement System, the State Universities Retirement System, and the Teachers’ Retirement System. The following analysis is specific to the State Universities Retirement System.

The bill has an immediate effective date.

Tier 1 Participant and Tier 1 Retiree Benefit Reforms

Pensionable Earnings Limitations

HB 3411 caps the pensionable earnings of a Tier 1 participant at the applicable Social Security Wage Base. The limitation does not apply to a participant’s earnings that are determined under an employment contract or collective bargaining agreement in effect on the effective date.

Participants currently receiving salary in excess of the Social Security Wage Base, shall have their pensionable earnings limited to their salary received 365 days prior to the effective date.

Normal Retirement Age

HB 3411reforms Tier 1 participants’ normal retirement age. The following adjustments apply to Tier 1 participants retiring after July 1, 2013:
  • Members age 45 or older on the effective date shall not be subject to any delay in retirement eligibility;
  • Members age 40-45 on the effective date shall be subject to a 1 year delay in retirement eligibility;
  • Members age 35-40 on the effective date shall be subject to a 3 year delay in retirement eligibility; and
  • Members younger than age 35 on the effective date shall be subject to a 5 year delay in retirement eligibility.

Automatic Annual Increases

HB 3411 reforms automatic annual increases provided to Tier 1 participants and Tier 1 retirees. Members receiving an annuity of less than $25,000 a year shall receive a 3% compounded automatic annual increase, members receiving an annuity of $25,000 or more shall receive an automatic annual increase of $750.

Members shall not be eligible for an automatic annual increase until the January 1st following attainment of age 67 or the January 1st following the 5th anniversary of the annuity start date.
Automatic annual increase received prior to the effective date are protected and not diminished.

Employee Contributions

HB 3411 requires employees to contribute an additional 1% of payroll in FY 14, plus an additional 1% in FY 15. The total contribution increase is 2% of payroll.

The employee contribution increases are exempt from Money Purchase Plan calculations.

Reciprocal Act

The Reciprocal Systems Act is amended to account for Tier 3 participants that are eligible for reciprocal benefits.

HB 3411 provides that Tier 3 annuities and Tier 3 survivor’s annuities shall not be eligible for proportional adjustments, however service earned under other reciprocal systems shall count towards vesting requirements.

Tier 3 Retirement Plan

A Tier 3 retirement plan is created for employees who first become participants on or after January 1, 2014. Tier 2 participants are allowed to opt into the plan by making an irrevocable election to participate on or before June 1, 2014.

The Tier 3 plan is a stacked hybrid plan, meaning that participants concurrently participate in a defined benefit plan and a defined contribution plan.

Defined Benefit

The defined benefit component of the Tier 3 plan is identical to the Tier 2 benefit with a reduced multiplier of 1.1%. Participants would be eligible for full retirement at age 67, or reduced retirement at age 62. Participants receive automatic annual increase equal to 3% or ½ CPI, whichever less.

Defined Contribution

The System shall establish a defined contribution plan for Tier 3 participants to be managed by the System and invested in the portfolio. Each participant receives an individual account to be credited with employee contributions, employer contributions, and the actual investment return net of fees and administrative costs.

Active participants are allowed to use their defined contribution plan for expenses other than retirement. Participants are permitted to receive lump sum disbursements of plan assets at any time during active service. In addition, participants may
elect to roll over plan assets into another qualified plan, or purchase an annuity or other insurance product to the extent allowable under federal law.

Employee Contributions

Employees shall contribute 4% of earnings to fund the defined benefit plan, and 5% of earnings to fund the defined contribution plan.

Employees may make additional contributions to the defined contribution plan.

Employer Contributions

Employers shall contribute an amount equal to the employer normal cost of the defined benefit plan, plus an amount not less than 3% and not more than 10% to the defined contribution plan.

In addition, employers must contribute an amount sufficient to finance any unfunded liability of that employer over a period not to exceed 10 years.
State and Employer Funding Reform

State Funding Reform

HB 3411 enhances statutory funding requirements. Beginning FY 14, the State shall be responsible for i) the state’s portion of projected normal cost for that fiscal year, plus ii) an amount sufficient to amortize 100% of liabilities by FY 2043.

Additionally, the State is required to employer contributions for its employees participating in the Tier 3 retirement plan.

Employer Funding

Employers are responsible for funding the benefits of all employees who participate in the Tier 3 retirement plan. This means employers are responsible for funding for all Tier 3 participants, including Tier 2 participants that elect to participate in Tier 3.

Employers shall contribute an amount equal to the employer normal cost of the Tier 3 defined benefit plan, plus an amount not less than 3% and not more than 10% to the Tier 3 defined contribution plan.

In addition, employers must contribute an amount sufficient to finance any unfunded liability of that employer over a periodnot to exceed 10 years.

State Funding Enforcement

Beginning July 1, 2013, the State shall be contractually obligated to contribute to the System in each State fiscal year an amount not less than the sum of the State's certified contribution. The obligations are contractual obligations protected and enforceable under Article I, Section 16 and Article XIII, Section 5 of the Illinois Constitution.

Notwithstanding any other provision of law, if the State fails to pay in a State fiscal year the amount guaranteed under this subsection, the System may bring a mandamus action in the circuit court of Champaign or Sangamon County to compel the State to make that payment, irrespective of other remedies that may be available to the System. In ordering the State to make the required payment, the court may order a reasonable payment schedule to enable the State to make the required payment without significantly imperiling the public health, safety, or welfare.

Any payments required to be made by the State pursuant to this guarantee are expressly subordinated to the payment of the principal, interest, and premium, if any, on any bonded debt obligation of the State or any other State-created entity, either currently outstanding or to be issued, for which the source of repayment or security thereon is derived directly or indirectly
from tax revenues collected by the State or any other State-created entity.

Employer Funding Enforcement

Any employer, other than the State, that fails to transmit to the System contributions required of it or contributions required of employees, for more than 90 days after such contributions are due, is subject to the following: after giving notice to the employer, the System may certify to the State Comptroller or the Illinois Community College Board, whichever is applicable, the amounts of such delinquent payments and the State Comptroller or the Illinois Community College Board, whichever is applicable, shall deduct the amounts so certified or any part thereof from any State funds to be remitted to the employer and shall pay the amount so deducted to the System. If State funds from which such deductions may be made are not available, the System may proceed against the employer to recover the amounts of such delinquent payments in the appropriate circuit court.

The System may provide for an audit of the records of an employer, other than the State, as may be required to establish the amounts of required contributions. The employer shall make its records available to the System for the purpose of such audit. The cost of such audit shall be added to the amount of the delinquent payments.

Pensionable Stabilization Fund

HB 3411 revitalizes the Pension Stabilization Fund. The now unused fund begins receiving $1 billion annually in FY 2020. GRF transfers into the Fund will continue until each of the state retirement systems are funded at their targeted funding ratio. Contributions from the fund to the systems are in addition to required contributions, however the systems to not have to include contributions from the fund for the purposes of projecting current and future contributions until the systems receive payment from the fund.

Status: Assigned to House Rules Committee

The current status of HB 3411 could change yet today as there is a House Personnel and Pensions Committee meeting today at 3:00 p.m.

It shouldbe noted that the pension debate on the House Floor is still scheduled today. House is scheduled to come it at 11:30 a.m.

Source: SUAA Mini Briefing
Date: February 28, 2013