School Retirement Legislation
Conference Report on Senate Bill 1227
Cynthia Ann Paul
School Employee Retirement Conference Report (SB 1227)
· Retirement Incentive for MPSERS Employees- The Conference Report provides a 1.6% multiplier for employees currently eligible to retire and a 1.55% multiplier for employees who have a combined age and years of service totaling 80, if they retire between July 1 and September 1, 2010, and would be eligible to retire by August 31, 2010. The Final Average Compensation would be capped at $90,000 under the enhanced multipliers; any higher FAC would be part of the pension calculation, but at the 1.5% multiplier.
One extension (for a retirement date no later than September 1, 2011) per reporting unit would be allowed, if requested by the employer and employee, and another 2,500 of retiring employees could be granted an extension, with the ORS distributing the additional 2,500 extensions on a pro-rata basis. Pension costs would be amortized over a five-year period.
· Increased Employee Contributions- Starting on July 1, 2010, all employees in MPSERS will contribute 3% of salary (in addition to any pre-existing pension contributions) into an IRS Trust Fund account, defined as an appropriate irrevocable trust established under House Bill 4073. However, employees who worked and made less than $18,000 in 2009-10 or new employees who are expected to make less than $18,000 in the 2010-11 school year will contribute 1.5%, rather than 3% during that school year, increasing to 3% yearly thereafter.
· Hybrid Plan for New Employees-The Conference Report concurred with the Senate's version of the hybrid plan, except a five-year period will be used on which to calculate the FAC, rather than the Senate's nine-year period. Employees in the hybrid (hired on or after July 1, 2010) will contribute $510 annually plus 6.4% of salary above $15,000, in addition to the Tier 2 contributions, in addition to the 3% contributions to the health care trust fund. Any entity receiving full or partial, direct or indirect funding from the School Aid Fund, and not participating in MPSERS, may opt into the hybrid retirement plan for its employees, upon approval by the Internal Revenue Service. In addition, existing MPSERS employees hired before July 1, 2010 (i.e., not part of the hybrid plan) may opt into DC component of the hybrid plan without an employer match. Hybrid plan employees may contribute more than 2%, and employers may locally negotiate higher matches than the required 1%, not to exceed a total match of 3% (for an employee contribution of 6%). However, any additional employer match beyond 1% is at the discretion of the employer, and is decided annually. An employer or may negotiate matches for non-hybrid employee contributions
· Third-Party Contracted Employees- Charter schools and school contract employees will not be required to join MPSERS. New retirees who draw a pension and return to work directly for a MPSERS reporting unit will remain subject to the current earnings limitation cap (roughly 1/3 of final average compensation), meaning they can draw a pension and health care and earn a salary equal to roughly 1/3 of their FAC. However, if a retiree working directly for a reporting unit exceeds that earnings cap, then the retiree shall forfeit pension and retiree health care, until the retiree ceases employment. New retirees that return to work indirectly (either via a 3rd party or as an independent contractor) would have their pension and retiree health care suspended (i.e., not provided) for the period of time they are performing core services.
· Contractual Right to HealthCare Benefits- The H-4 version of the IRS 115 Trust Bill (HB 4073) provided retirees a contractual right to healthcare benefits, Sec. 17. This contractual right was removed in the S-4 version of HB 4073 that was voted on in the Senate and the House this morning. The S-4 version also included intent language that the bill “shall not be construed to define or otherwise assure, deny, diminish, increase, or grant any right or privilege to health care benefits or other postemployment benefits to any person…..”
* Purchased time- Under the conference report current employees can use the time that they have purchased to be eligible for retirement under regular standards or the eighty and out forumula.
* Final Average Compensation (FAC)- The Conference Report requires employees choose five consecutive years to determine their FAC and employees CANNOT use 240 hours of their leave time toward their fac.
· Phased in Retirement Option- The Conference Report did not include a phased in retirement option.
· Retirement Rate Charged to Employers- The Conference Report does not include an FY 2010-11 MPSERS rate. The rate will depend upon the actual dollars coming in from the 3% employee contributions for retiree health, and on the number of employees who retire with an incentive under this legislation, since the additional retirees will generate extra retiree health and pension costs, and the payroll base will be smaller due to the retirements.
· Reporting Unit Requirements- The Conference Report includes the language found in the Senate and House versions of SB 1227.
· Appropriations to Office of Retirement Services- It appropriate $4.5 million to ORS for implementing the statutory changes.
· Tie-Bar- Tie-bars the bill to House Bill 4073, the Public Employee Retirement Health Care Funding Act (A.K.A. the IRS 115 Trust Fund Bill).
Votes:
SB 1227-
· Conference Committee
o The following conferees voted to report the conference report out: Sens. Gilbert, Jansen, Reps. Bolger and Griffin.
o The following legislators voted “no” on the conference report committee: Sens. Cherry and Reps. Meadows.
· The Senate Passed the legislation by a 21/14 vote with 3 Senators excused. The vote was as follows:
Yeas-Allen, Garcia, Kuipers, Sanborn, Birkholz, George, McManus, Stamas, Bishop, Gilbert, Nofs, Switalski, Brown, Jelinek, Pappageorge, Thomas, Cassis, Kahn, Richardville, Van Woerkom, and Cropsey
Naes- Anderson, Clark-Coleman, Jacobs, Prusi, Barcia, Clarke, Jansen, Scott, Brater, Gleason, Olshove, Whitmer, Cherry and Hardiman
Excused- Basham Hunter Patterson
· The House passed the legislation by a 56/45 vote with 7 Reps. not voting. The vote was as follows:
Yeas- Agema, Denby, Jones, Rick, Opsommer, Amash, DeShazor, Knollenberg, Pavlov, Angerer, Dillon, Kowall, Proos, Ball, Elsenheimer, Kurtz, Rogers, Bolger, Espinoza, Lori, Schmidt W., Booher, Genetski, Lund, Schuitmaker, Byrnes, Green, Marleau, Scott P., Calley, Griffin, McMillin, Scripps, Caul, Haines, Meekhof, Sheltrown, Clemente, Hansen, Melton, Slezak, Constan, Haveman, Meltzer, Spade, Corriveau, Hildenbrand, Moss, Stamas,,Crawford, Horn, Nathan, Tyler, Daley, Johnson, Nerat and Walsh
Nays- Barnett, Gonzales, LeBlanc, Scott B., Bauer, Gregory, Lindberg, Segal, Bennett, Haase, Lipton, Slavens, Bledsoe, Hammel, Liss, Smith, Brown L., Haugh, Mayes, Stanley, Brown T., Huckleberry, McDowell, Switalski, Byrum, Jackson, Meadows, Tlaib, Dean, Jones, Robert, Polidori, Valentine, Donigan, Kandrevas, Roberts, Warren, Durhal, Kennedy, Rocca, Womack, Ebli, Lahti, Schmidt R., Young and Geiss
House Bill 4073
· It passed the Senate this morning by a vote of 23/10/5- excused; and the vote was as follows:
Yeas- Birkholz, George, Kahn, Sanborn, Bishop, Gilbert, Kuipers, Stamas, Brown, Hardiman, McManus, Switalski, Cassis, Jacobs, Nofs, Thomas, Cropsey, Jansen, Pappageorge, Van Woerkom, Garcia, Jelinek and Richardville
Nays- Allen, Brater, Gleason, Prusi, Anderson, Cherry, Olshove, Whitmer, Barcia, Clarke
Excused- Basham, Hunter, Patterson, Scott, Clark-Coleman
· It passed the House by a vote of 77/24. The vote was as follows:
Yeas- Agema, Denby, Kandrevas, Pavlov, Amash, DeShazor, Knollenberg, Polidori, Angerer, Dillon, Kowall, Proos, Ball, Donigan, Kurtz, Rogers, Bauer, Ebli, Lahti, Schmidt R., Bledsoe, Elsenheimer, LeBlanc, Schmidt W., Bolger Espinoza, Lipton, Schuitmaker, Booher, Genetski, Lori, Scott P., Brown L., Green, Lund, Scripps, Brown T., Griffin, Marleau, Segal, Byrnes, Haines, McDowell, Sheltrown, Byrum, Hammel, McMillin, Slezak, Calley, Hansen, Meadows, Spade, Caul, Haveman, Meekhof, Stamas, Clemente, Hildenbrand, Melton, Stanley, Constan, Horn, Meltzer, Switalski, Corriveau, Johnson, Moss, Tyler, Crawford, Jones, Rick, Nathan, Valentine, Daley, Jones, Robert, Opsommer, Walsh, and Dean
Nays- Barnett, Haase, Liss, Slavens, Bennett, Haugh, Mayes, Smith, Durhal, Huckleberry, Nerat, Tlaib, Geiss, Jackson, Roberts, Warren, Gonzales, Kennedy, Rocca, Womack, Gregory, Lindberg, Scott B., and Young
For more backround information on this conference report, click here.