School Board approves plan to replace insurance coverage with annuity payments starting in 2015
Grafton School District employees will begin having their retirement benefits pared next year.
Concurring with a committee recommendation to trim costs, the School Board on Monday unanimously approved a plan that calls for eventually eliminating health insurance for retirees in favor of giving them annual annuity payments and raising the number of years employees must work in the district to be eligible for retirement benefits.
“We have an $850,000 budget deficit. It’s really tough to meet the educational needs of the district with the money we have,” Supt. Mel Lightner told the board.
“It’s simply not sustainable to continue paying the retirement benefits we have now.”
Two weeks ago, the board agreed to begin reducing benefits for retirees but had an ad hoc committee revisit a proposal by Lightner that called for implementing a full range of cuts this year in the employee handbook.
The committee — which includes Lightner, board members Paul Lorge, Eric Oleson and Carrie Walls, Director of Business Services Kristin Kollath and Human Resources Manager Jill Ziegelbauer — revised the plan to provide a two-year paring process:
• Under the board-approved plan, teachers who retire after March 1, 2015, will be eligible for retirement benefits if they meet “the rule of 85” — having the number of years of credited teaching experience plus their age total at least 85 — and have been employed by the district for at least 15 years.
Those teachers will receive a maximum annual payment of $18,000 toward a family health insurance premium or a maximum payment of $8,000 toward a single health insurance premium for three years.
In addition, retirees will receive an annual payment of $4,200 for five years to a tax-sheltered annuity.
Retirees will receive no dental insurance coverage or paid-leave payouts.
• Teachers who retire after March 1, 2016, will receive additional benefit cuts.
In lieu of health insurance, retirees with 20 or more years with the district will be given annual payments of $15,000 for five years to a tax-sheltered annuity. Those with 15 years with the district will receive annual
$7,500 annuity payments for five years.
The changes require teachers to give retirement notices by Feb. 1 in 2015 and 2016.
Lightner has urged the board to cut retirement benefits because nearly 80% of the expenditures in the district’s $23 million budget are for employee compensation. However, board members agreed to delay full
implementing reductions in response to concerns that 11 teachers eligible for retirement this spring wouldn’t have enough time to consider their options.
The proposed changes were also criticized by members of the Grafton Education Association teachers union. Jim Girmscheid, a GES representative with 39 years in the district as an elementary school teacher, told the board the changes will create a hardship for retirees.
“No matter how you want to spin it, it doesn’t ease the burden,” Girmscheid said. “It actually increases the financial burden for everyone retiring next year.”
Lightner agreed that trimming benefits is difficult but said there is no other alternative. The district spent $671,000 on retirement benefits last year, “which has to be reduced,” he said.
By providing annuity payments, the district is helping offset the cost of insurance for teachers who retire before they are eligible for Medicare, Lightner said.
During Monday’s meeting, several board members initially voiced concern about the committee’s plan, which they said might be cutting retirement benefits too quickly.
“It seems like a bit of a short bridge for me,” Board President Terry Ziegler said. “Maybe not a cliff, but a short bridge. It steps (benefits) down pretty fast.”
Board member Michael Holloway concurred.
“I agree with the notion that we’ve got an unsustainable program. On the other hand, I don’t believe this is the tool to cut the budget in the short term,” Holloway said.
But Lorge, the board treasurer, said the changes are as fair to teachers as the district can be in the face of serious fiscal challenges.
“The quicker we get to this new model, the quicker they can plan for retirement,” he said.
Board member Clayton Riddle called the decision “a harsh reality.”
“If this if the highest (benefit level) we can do, then I think we have to go with it based on the committee’s best guess,” Riddle said.
Lightner also recommended the board eliminate paid-leave payments, which give employees credit for unused sick days, as a cost-saving measure. During the past two years, the paid-leave provision has cost the district more than $108,000, he said.
With as many as 11 teachers eligible for retirement this spring, the district could face as much as $110,000 in paid-leave payouts, Lightner said.
“Since it is a relatively new benefit and since teachers who retire this year will receive a sizable cash payout, I think the board should give strong consideration to eliminating the paid-leave payout,” he said.
However, the board declined to act on Lightner’s recommendation, instead asking him and Kollath to explore alternatives.
Lightner said the board will face other crucial cost-cutting decisions in 2014-15 budget preparations, including the probable elimination of eight to 11 teaching positions.