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reform PEIA now! How did we get here? How did we get here? Where we are! Where we are! Where do we go from here? Where do we go from here?

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Presentation on theme: "reform PEIA now! How did we get here? How did we get here? Where we are! Where we are! Where do we go from here? Where do we go from here?"— Presentation transcript:

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2 reform PEIA now! How did we get here? How did we get here? Where we are! Where we are! Where do we go from here? Where do we go from here?

3 How did we get here? Health Care costs are skyrocketing Health Care costs are skyrocketing GASB Statement 45 GASB Statement 45 OPEB OPEB PEIA Finance Board decision PEIA Finance Board decision AFT-WV/WVSSPA response AFT-WV/WVSSPA response

4 What is OPEB? Other Post Employment Benefits (Health Care) Other Post Employment Benefits (Health Care) Promised benefit Promised benefit All enrolled active participants assessed All enrolled active participants assessed Assumptions are used to predict a liability Assumptions are used to predict a liability How much money will be needed to keep promise? How much money will be needed to keep promise? $8 billion? $8 billion?

5 What is the impact of OPEB? BOEs can’t afford to make the payment BOEs can’t afford to make the payment Programs are cut and jobs are lost Programs are cut and jobs are lost BOEs threaten to file lawsuit BOEs threaten to file lawsuit Governor panics, lobbies PEIA Board Governor panics, lobbies PEIA Board PEIA Board eliminates retiree subsidy for new hires PEIA Board eliminates retiree subsidy for new hires

6 AFT-WV/WVSSPA response Board votes to eliminate subsidy Board votes to eliminate subsidy AFT-WV/WVSSPA challenge AFT-WV/WVSSPA challenge Board amends previous motion to eliminate subsidy again Board amends previous motion to eliminate subsidy again AFT-WV/WVSSPA file lawsuit AFT-WV/WVSSPA file lawsuit Open meetings law Open meetings law PEIA Board acted outside Scope of Authority PEIA Board acted outside Scope of Authority 2 year provision 2 year provision AFT-WV/WVSSPA and AFL-CIO hire actuary (Aon) AFT-WV/WVSSPA and AFL-CIO hire actuary (Aon) Participated in task force Participated in task force

7 Where do we go from here?? reform PEIA now! Retiree Subsidy for new hires Retiree Subsidy for new hires Annual Experience Increment Annual Experience Increment The 80/20 Rule The 80/20 Rule Revenue stream for retiree subsidy Revenue stream for retiree subsidy Make-up of Finance Board Make-up of Finance Board

8 Reinstatement of Retiree Subsidy WV has tradition of providing benefits to offset lower salaries of education employees WV has tradition of providing benefits to offset lower salaries of education employees Retiree subsidy is portion of retiree PEIA premium paid by the state and active employees Retiree subsidy is portion of retiree PEIA premium paid by the state and active employees Retiree subsidy granted in lieu COLAs time and time again Retiree subsidy granted in lieu COLAs time and time again Today, there is a 70/30 premium split (30% is retiree share, so 70% of premium is subsidy) Today, there is a 70/30 premium split (30% is retiree share, so 70% of premium is subsidy) New hires after June 30, 2010 will NOT qualify for subsidy New hires after June 30, 2010 will NOT qualify for subsidy

9 Retiree Subsidy in Today’s Dollars Lets say average premium today for pre-65 retiree is $1,000 per month Lets say average premium today for pre-65 retiree is $1,000 per month That means the retiree share is $300 (because of the 70/30 split) per month That means the retiree share is $300 (because of the 70/30 split) per month If teacher or service personnel is hired after June 30, 2010, retiree share is $1,000 (not counting medical inflation) per month If teacher or service personnel is hired after June 30, 2010, retiree share is $1,000 (not counting medical inflation) per month If medical inflation is included (9%), monthly premium is over $13,000 (in 30 years) If medical inflation is included (9%), monthly premium is over $13,000 (in 30 years)

10 What can we do about it? Pass legislation that guarantees new public employees will receive health care assistance (subsidy) upon retirement Pass legislation that guarantees new public employees will receive health care assistance (subsidy) upon retirement

11 Increase the Annual Exp. Increment Teachers have a salary schedule that provides an AEI for each year up to year 35 Teachers have a salary schedule that provides an AEI for each year up to year 35 Service Personnel have a salary schedule that provides an AEI for each year up to year 40 Service Personnel have a salary schedule that provides an AEI for each year up to year 40 Higher Ed get AEI as long as they work Higher Ed get AEI as long as they work Average age of retirement in TRS is 61 Average age of retirement in TRS is 61 Medicare kicks in at age 65 Medicare kicks in at age 65 If the average retirement age moves up, OPEB goes down If the average retirement age moves up, OPEB goes down Incentives, not penalties, should be embraced to encourage employees to work longer Incentives, not penalties, should be embraced to encourage employees to work longer

12 What can we do about it? Pass legislation that extends the AEI from years 36 to 40 for teachers and increases the increments from 36 to 40 for service personnel and higher education employees Pass legislation that extends the AEI from years 36 to 40 for teachers and increases the increments from 36 to 40 for service personnel and higher education employees

13 Real 80/20 cost-sharing In 2001, law changed to make the cost-sharing split between the state and actives at 80/20 by 2007 In 2001, law changed to make the cost-sharing split between the state and actives at 80/20 by /20 is not co-insurance, but premium cost-sharing 80/20 is not co-insurance, but premium cost-sharing PEIA interprets law to apply to premiums only, not counting co-pays and deductibles (out-of-pockets) PEIA interprets law to apply to premiums only, not counting co-pays and deductibles (out-of-pockets) If all costs are included, ratio is closer to 70/30 If all costs are included, ratio is closer to 70/30 Instead of covering 20%, employees cover 30% Instead of covering 20%, employees cover 30% Employees are paying 50% more Employees are paying 50% more

14 What can we do about it? Pass legislation mandating premiums and all out- of-pocket costs (primarily co-pays and deductibles) be included in the 80/20 calculation Pass legislation mandating premiums and all out- of-pocket costs (primarily co-pays and deductibles) be included in the 80/20 calculation

15 Permanent Revenue Stream for Retiree Subsidy There has never been a dedicated source of revenue to pay for retiree benefits There has never been a dedicated source of revenue to pay for retiree benefits Retiree care is paid from legislative appropriations and active employee premiums Retiree care is paid from legislative appropriations and active employee premiums Without dedicated revenue stream, no ability generate additional dollars Without dedicated revenue stream, no ability generate additional dollars Best case scenario is maintain what we have from year to year Best case scenario is maintain what we have from year to year

16 What can we do about it? Pass legislation that creates a permanent, dedicated revenue stream for the retiree share of health care Pass legislation that creates a permanent, dedicated revenue stream for the retiree share of health care

17 Parity on the Finance Board Responsible for setting benefit levels for both active and retired public employees Responsible for setting benefit levels for both active and retired public employees Established by legislature years ago Established by legislature years ago There are 9 seats on Board There are 9 seats on Board All 9 individuals are appointed by the Governor with the consent of the Senate All 9 individuals are appointed by the Governor with the consent of the Senate Of the 9 seats, two are designated to represent public employees and there is 1 seat for a retiree Of the 9 seats, two are designated to represent public employees and there is 1 seat for a retiree Clearly, plan participants are under-represented Clearly, plan participants are under-represented

18 What can we do about it? Pass legislation that changes the make-up of the PEIA Finance Board that gives public employees equal representation Pass legislation that changes the make-up of the PEIA Finance Board that gives public employees equal representation

19 Our ASK of You! Generate conversations Generate conversations Encourage completion of Governor’s postcard Encourage completion of Governor’s postcard Distribution and completion of Legislative postcards Distribution and completion of Legislative postcards Board of Education resolutions Board of Education resolutions Labor Council resolutions Labor Council resolutions Activists for Legislative Education (ALE) mtgs. Activists for Legislative Education (ALE) mtgs.


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