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RSEA Members Legislative Alert: - ERS Omnibus Bill (SB1459/HB1882)
May 16, 2013
SB1459 passed the Senate unanimously and has been reported from the House Pensions Committee
Senators Duncan and Watson worked with all the employee organizations over the past weekend to craft a revised proposal that starts the ERS pension fund on a path to actuarial soundness, a top priority of RSEA. Included in the bill is a future cost of living adjustment for those who have been retired for 20 or more years.
Changes made in the Senate include the following:
- All current and new employees hired before 9/1/13 would be grandfathered from the provisions that change retirement eligibility.
- Pension contribution rates for the state will be 6.5% in 2014 and 7.5% in 2015. Contribution rates for active employees will be stair-stepped over a period of four years from 6.6% in 2014 to 7.5% in 2017.
- The tiered health insurance premium contributions in retirement will only affect employees with less than five years of service by 9/1/14.
None of these changes would affect current retirees.
Please contact your State Representative and ask them to support the bill when it comes up on the House Floor in the next few days.
RSEA is supporting this legislation because it will eventually bring the fund into actuarial soundness. At that time, retirees will see a cost of living adjustment that will help restore their buying power.
May 13, 2013 PM
Legislative Alert Status - SB 1459 just passed the Senate with all the active employee groups supporting it. It will be on its way to the House tomorrow.
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Please call your state representative and let them know how important this bill is to the ERS retirement fund and all retirees.
The bill starts the path back to an actuarially-sound basis.
May 13, 2013
HB1882 ran out of time on the House floor last Thursday (May 9). Now RSEA members need to focus their attention on Senator Duncan's SB1459 and the General Appropriations Bill conference committee.
SB1459 is on the Intent Calendar in the Senate and is eligible for consideration. The conference committee is scheduled to meet May 13. Article I (which includes ERS) is included in the posting.
We will post more information as it becomes available. Contact your Senator and let them know you want this bill to pass.
April 18, 2013
Summary
Last week (4/8), the Senate State Affairs Committee and House Pensions Committee heard committee substitutes to the omnibus bill (SB1459 by Senator Duncan and HB1882 by Representative Callegari) that attempts to address unfunded liabilities in the ERS retirement fund.
We appreciate both Senator Duncan and Representative Callegari working hard for a goal to move the fund into an actuarially sound condition this session. That is the only way retirees can get a future benefit enhancement.
However, while there is funding associated with the bill to increase the state contribution, there are provisions affecting current employees and future retirees which are significant. While both the state and employees, including retirees, should bear a burden to help achieve this goal, additional state funds will be needed.
What RSEA Members Can Do to Help
RSEA members should contact their State Senator and their State Representatives with the following message:
- It is important that the ERS retirement fund be returned to an actuarially-sound basis.
- Future retirees who are now current employees can share in the cost to making the fund actuarial sound, but there needs to be more balanced sharing by the state.
- It is critical that more state funds be appropriated to the ERS retirement fund by increasing the state contribution to match the employees' contribution.
Discussion of the Issues: The proposals put forward in the two current committee substitutes are not balanced. While the proposals do not make any changes to current retiree benefits, the bills make sweeping changes to future retirees' benefits and only grandfather those employees who are 50 or older.
The bills do not include any further increase in the state contribution rate beyond what is currently in the two versions of the appropriations bill (6.6% in each year of the biennium in the House version; 6.5% in the first year and 7.65% in the second year in the Senate version).
The promise of a benefit enhancement for retirees (a one-time 3% cost of living adjustment for those retired at least 20 years) is not guaranteed until the fund is actuarially sound. The actuarial impact statement shows that, even with these changes, the total contribution rate for FY 2014-15 is still insufficient to pay down the existing unfunded liability. So, no cost-of-living adjustment would appear for at least two more years under the current proposals.
There is also a proposed change to health insurance benefits for future retirees. The proposed legislation includes a tiered retirement premium contribution. Active employees with fewer than ten years of service would be subject to paying a portion of their health insurance premium at retirement, from 50% at ten years to 25% at fifteen years. The state would pay 100% of the premium at twenty years of service.
RSEA, along with the other employee/retiree groups, has pleaded with the committees to consider a greater state contribution instead of the proposed erosion of benefits for future retirees. We also asked for some assurance that retirees would see a benefit enhancement.
This week, Senator Duncan and Representative Callegari laid out the actuarial impact statement in their respective committees. Senator Duncan told the members of the Senate State Affairs Committee that more work needs to be done on the bill since it does not yet achieve actuarial soundness. However, Chairman Callegari said he would probably move the bill out of the Pensions Committee at the end of the week.
Before the state asks active employees and future retirees to shoulder the entire burden, there should be additional effort made for the state to increase its contribution rate. According to ERS, a combined contribution rate of 16.37%, along with the changes in the proposed bill, would make the fund sound. There is already a proposed increase for active employee contribution rates to go from 6.5% to 7% in both versions of the appropriations bill. Another 1.72% from the state added to the rate in the second year of the Senate version, and it's done - actuarial soundness would be achieved during this legislative session.
