Retirement and Health Benefits 2020 Session Summary

“Yes, the show must go on, But it’s also important to survive until the curtain (retirement) calls.” ~ Freddy Mercury

Review of the 2020 Legislative Session

Pensions, Health Care, SEBB, PEBB, Other… The legislative session has concluded, the Governor has acted, and now as the show goes on, districts have to adjust.

Some statistics may be of interest: 1,019 bills were introduced in the House; 332 were passed; 826 bills were introduced in the Senate and 280 were passed. Overall, 386 bills passed both legislative houses and were before the Governor for action. The adopted budget, agreed to by both Houses, spent less than either of the earlier proposed budgets. Legislators pulled back spending to a degree to shore up the state’s ending balances as a prudent measure. The uncertainty of the effects of the Covid–19 virus led not only them to caution but the Governor vetoed in excess of $400 million in proposed spending.

So, what happened regarding pensions, health care, financials and other issues?

Pension/Retirement Related Proposals

EHB 1390 | At the request of the Select Committee on Pension Policy grants TRS/PERS Plans 1 beneficiaries an increase to their monthly benefit of three percent multiplied by the beneficiaries’ monthly benefit, not to exceed sixty-two dollars and fifty cents on the first $25,000 of benefit. This bill passed both Houses and was signed by the Governor. Retirees will see the increase reflected in their July check.

Comment: There’s a long story to this bill culminating in some very intense last-minute lobbying to keep it from being vetoed as a cost saving measure (given the impending fiscal demands due to the Covid–19 virus). The bottom line was that it was signed, a minor miracle.

SB 6383 | Concerning the retirement strategy funds in the plan 3 and the deferred compensation programs. Basically, retirement strategy funds offered to individuals by the State Investment Board in the Plans 3 and DCP (Deferred Compensation Program) may now include investments in the State’s Commingled Trust Fund.

This bill passed both Houses and was signed by the Governor. School Employee Benefit Board (SEEB) and Other Health Related Proposals

ESSB 6189 | The Joint Legislative Audit and Review Committee will conduct a study to identify the number and types of part-time employees and their eligibility for SEB Board benefits. The report is due to the Legislature by September 1, 2021.

The Health Care Authority must analyze the impacts of changes to the requirement that school employers remit premiums for employees that waive medical coverage. The analysis is due to the Legislature by September 1, 2021.

When school districts report annually to the Office of the Superintendent of Public Instruction on data related to substitute teachers, they must include the hours worked by each substitute and the number that were eligible for SEB Board benefits.

Beginning with the 2022 plan year, dual coverage under the SEB Board and benefits provided under the PEB Board is prohibited for the same type of coverage. The SEB and PEB Boards shall adopt policies to reflect this single enrollment requirement.

School employees’ eligibility for benefits provided by the SEB Board is maintained for the remainder of the school year if, during the Novel Coronavirus (COVID–19) declared state of emergency, the employee would otherwise lose eligibility because of a school closure or changes in operation, an employee being quarantined or required to care for a family member, or an employee must take care of a child during a school, day care, or child care provider closure.

This bill passed both Houses and was signed by the Governor.

HB 2458 | The SEB Board is provided with explicit authority to study and, subject to the availability of funding, provide the following employee-paid benefits: emergency transportation; identity protection; legal aid; long-term care insurance; noncommercial personal automobile insurance; personal homeowner’s or renter’s insurance; pet insurance; specified disease or illness-triggered fixed payment insurance, hospital confinement fixed payment insurance, or other fixed payment insurance offered as an independent, non-coordinated benefit regulated by the office of the insurance commissioner; travel insurance; and voluntary employees’ beneficiary association (VEBA) accounts.

If the Board is not providing these benefits a school district may provide these benefits to employees. With the exception of VEBA accounts, benefits provided by a district must be employee paid and may be administered using a payroll deduction.

If a district is found to be providing a benefit that competes with any form of basic or optional benefits that are provided by the Board the district, the provider, and the Health Care Authority (HCA) are directed to work together to eliminate the conflict.

Comment: At the last PEBB meeting, the HCA indicated they have no current plans to seek proposals for additional PEBB offerings. This bill passed both Houses was signed by the Governor.

Other Bills:

ESHB 1813 | Mandates that the costs of contracted employee health and retirement benefits must be built into school district contracts for pupil transportation.

This bill died by Senate action placing it on the “X” file, but it is expected to return in some form during the 2020–2021 session. (See future projections below.)

Other Bills That May Have Fiscal/HR Impacts For Districts

SHB 2614 | Concerning paid family and medical leave.

Makes numerous revisions to the Paid Family and Medical Leave program to provide clarity and improve the program’s administration, including waiting periods, conditional waivers, and supplementation of benefits. Exempts casual labor from the types of covered employment. Grants the Employment Security Department (ESD) statutory authority to administer oaths, take depositions, issue subpoenas, or compel a witness’ attendance in an administrative proceeding. Allows ESD to apply for and obtain a superior court order authorizing a subpoena in advance of its issuance. Authorizes employees to bring a private right of action to recover damages for an employer’s unlawful acts, under specified conditions. This bill is agency request legislation.

This bill passed both Houses and has been signed by the Governor.

HB 2739 | Modifies definitions for purposes of the shared leave program. This bill originated with a constituent who teaches in the Edmonds School District and has a child with multiple chronic conditions that require intermittent attention. He found that, given current policy, employees would be required to be on full-time leave and exhaust all or nearly all leave to accept shared leave. Across Washington, many people going through difficult circumstances are helped by caring colleagues that support them through shared leave donations. This bill provides clarification on current law and also helps people who have intermittent health needs.

This bill passed both Houses and has been signed by the Governor.

ESSB 5473 | Requires the Employment Security Department to study the impacts to the unemployment trust fund and employer contributions for unemployment insurance by allowing exceptions to provisions disqualifying individuals from receiving unemployment benefits for leaving work voluntarily without good cause related to: (1) inaccessible care for a child or vulnerable adult; (2) substantial increases in job duties or working conditions without commensurate increase in pay; (3) separation from a minor child. Requires ESD to meet at least three times with business and worker representatives to discuss the information gathered by ESD. Removes modifications to the term good cause for unemployment purposes for the separation due to inaccessible care for a child or vulnerable adult and related to separation from work related to the death, illness, or disability of a family member.

This bill passed both Houses and has been signed by the Governor.

SB 6123 | An agency must allow an employee to take paid leave as needed to participate in life-giving procedures if the employee provides written proof from an accredited medical institution, physician, or other medical professional that the employee participated in a lifegiving procedure. Leave granted to participate in life-giving procedures must not exceed thirty days in a two-year period.

This bill passed both Houses and has been signed by the Governor.

SB 6417 | Allows retirees to change their survivor option election after retirement. The bill passed both Houses and has been signed by the Governor.

Health Insurance Benefit In a separate part of the budget, the Medicare health insurance benefit subsidy was maintained. Up to $183/month will be applied to the cost of retiree health insurance as a subsidy.

Selected Financials

ESSB 6168 State Budget

Below are selected financial figures from the adopted supplemental 2020 budget:

Insurance Health Benefit:

2019–20 School Year:

• $973/month from 9/1/19-12/31/19

• $994/month from 1/1/20-6/30/20

• $1,056/month from 7/1/20-8/31/20

• $1,000/month for 2020–21 School Year

Employer Retirement Contributions:

• Increase of 0.23% to TRS to fund EHB 1390 (3% COLA for Plans 1 members) and an increase of 0.11% for SERS.

Unemployment Insurance Account:

Unknown Costs. New coverage is allowed if an individual can work due to Covid–19. The legislature appropriated $25 million to cover these anticipated expenses, but if not covered, then where do the extra dollars come from?

What will the future hold?

Three themes run through the Washington State legislature. The predominate theme will be the effects of Covid–19 on the state budget and operations. This patina will color all actions in the foreseeable future. A second, continuing theme is that labor continues to control a large part of the legislative agenda. Three, Seattle area legislators have tremendous sway on what bills get action.

Although many policy bills proposed during both the session failed to advance, some components will likely be re-introduced through either new legislation or reviving a previous bill during the 2021–22 Session(s).

Moving into speculation on the future, some key activities may occur:

1. As a result of the fiscal effects of Covid–19 shutdown, the Governor may call for a Special Session do deal with the impacts.

2. With the upcoming election, it will be a priority for the Democrats to maintain majorities in both houses. They currently hold a strong majority in the House, and a weaker one in the Senate. There is a chance that they may lose both majorities given the challenges of campaigning and raising dollars in a Covid–19 world and the number of announced vacancies to date. See below. The Republicans are organizing opposition by beating up the Democrats over their passage of the ‘Sex Ed’ bill, and their failure to use any of the increased state revenue to at least set license tabs back to $30. Of course, having Tim Eyman and Senator Fortunato (Pierce County) as announced gubernatorial candidates on a ticket with President Trump may hurt the Republicans at the ballot.

3. There are at least eleven retiring House members and three Senators to date who will not be returning. Filing week is May 11th which will identify all candidates. A reminder that all House positions are open, and about half the Senate. (See list below of Senate seats up for reelection) 

   Senator	District	Party
   Becker, Randi (Retiring)	2	R
   Billig, Andy	3	D
   Braun, John	20	R
   Cleveland, Annette	49	D
   Darneille, Jeannie	27	D
   Hasegawa, Bob	11	D
   Hawkins, Brad	12	R
   Hunt, Sam	22	D
   King, Curtis	14	R
   Lovelett, Liz *	40	D
   Mullet, Mark	5	D
   Muzzall, Ron ***	10	R
   O'Ban, Steve	28	R
   Padden, Mike	4	R
   Rivers, Ann	18	R
   Rolfes, Christine	23	D
   Schoesler, Mark	9	R
   Stanford, Derek ***	1	D
   Takko, Dean	19	D
   Van De Wege, Kevin	24	D
   Wagoner, Keith *	39	R
   Walsh, Maureen (Retiring)	16	R
   Wellman, Lisa	41	D
   Wilson, Lynda	17	R
   Zeiger, Hans (Retiring)	25	R

    

4. Post-election, there will be a reshuffling of committee assignments and leadership positions in both houses. The current House Majority Leader, Representative Pat Sullivan, is retiring. A replacement has yet to be announced.

5. There continues to be a need to get full funding of the SEBB benefits for districts. The law says that districts are to fund benefits on a per-head basis. The state funds benefits on a formula generated FTE allocation. This is an unfunded liability to districts.

6. Past legislation allowed employees to bargain for insurance benefits for employees working less than 630 hours. There will continue to be pressure on districts to offer these benefits to all employees. A proposal before the 2020 legislature dictated that identical SEBB health benefits and retirement benefits be paid to employees who work with private providers of transportation services to school districts. This proposal failed but is likely to return. Those contracted employees such as in food service, janitorial, special education, etc. working within school districts may well ask for similar benefit coverage.

7. As a reminder: The legislature will continue to make the implicit price deflator (IPD) the future measure when looking at inflationary increases. The traditional consumer price index (CPI) generates a higher rate of inflation using a different set of assumptions. The IPD generates a lower rate which stretches State dollars wider helping those that create budgets and allocate dollars. This potentially hurts those who are impacted by inflationary increases not measured by the IPD, like school districts.

8. Efforts will be made to continue to increase the Medicare insurance subsidy. Rates have gone up substantially and the current $183/month is not nearly enough to offset the increased costs.

9. Work will continue to put school retirees in the largest risk pool available to reduce their current insurance costs. Currently, K–12 retirees remain in the PEBB program/pool. The HCA is to study and make recommendations in this area.

10. Efforts to fundamentally change the state’s current pension system into a defined contribution model (401-K) may resurface under the argument of saving the state dollars. Senator Braun, the current ranking Republican on the Senate Ways and Means Committee, (WM) is a leading advocate of making changes.

11. Talk of merging the LEOFF 1 surplus budget funds into the TRS 1 pension fund may come up again. This merger would decrease the unfunded liability in Plan 1. It decreases the added surcharge employers (both state, school districts, counties and cities) are currently paying to decrease this liability. This is an issue dear to the Republican leaders.

12. Moving to a state-wide collective bargaining contract for all K–12 employees. (This is a real ‘pie-in-the-sky’ projection.) The statewide SEBB program and bargaining model should be adapted to the wider arena to cover salaries and other benefits. The current model allowing districts to develop their own salary schedules and state disparate funding has already led to inequalities between districts and regions.

13. K–12 education in a post-Covid–19 world will look different. Distance education, rural broadband issues, and on-line teaching will all be topics of focus. Even issues like transportation related to athletics (long-bus trips to competitions) will be a topic of concern and discussion.

14. Related to K–12 and challenging to school districts will be the provision of services for special needs students. How do provide services?

The show goes on amidst tremendous challenges.

If you have any questions, please feel free to make contact.

Fred Yancey | The Nexus Group LLC