Susie Q

Thu, Jan 14, 2010 : 7:07 p.m.

The AAEA bargaining team has surveyed their members often on the issue of health care insurance and the surveys consistently show that the members want a choice of options that meet their different needs. I am sure the AAEA will continue to investigate and consider different options such as the district paying into flex accounts or HSAs. I am just pleased to see that the the Mackinaw Center has given out the information that many of us in education have known for a long time....that teachers are contributing to the cost of our health insurance....just like those in other professions....at least in Ann Arbor.

Lisa Starrfield

Thu, Jan 14, 2010 : 11:46 a.m.

1bit, I have a menu of options to choose from only two of which are MESSA. MESSA is the best choice for my family given my son's particular needs at the moment. An HSA or high deductible plan would cost us a fortune.

Lisa Starrfield

Thu, Jan 14, 2010 : 11:43 a.m.

BCBS did deny services for my son. They said they would pay for it and then refused to. Fortunately, I had been warned that this was likely and had already switched insurance plans... and had to wait a few weeks for my new plan to take effect. This was not the first time BCBS left my family unserved because they refused to pay for needed medical services.

bradc

Thu, Jan 14, 2010 : 11:30 a.m.

Why is it we want to put MESSA out of business and not BCBS? MESSA through it's management has provide great care to it's subscribers and through fiscal management a reserve fund. This year rather than raise premiums to subscribers and districts it took funds from the reserve. Now the thieves in Lansing want to change the health plans to steal the reserve. They get the reserve and MESSA's competitors lose a tough competitor. Those districts that switched from MESSA under a bidding process are now coming back to MESSA because the other suppliers are raising rates that districts can't afford. Looking at BCBS why in the study in the article are they charging districts more money for premiums than MESSa and providing less? Also people say the Teachers have such a large lobby, funny nobody in the State Legislature is going after BCBS's reserves that are far more than required by law, not requiring BCBS to reduce rates and nobody says anything about BCBS non profit giving out large bonuses to they're executives. Although I agree we need to resolve financing issues in schools, the proposals for going against teachers should be looked at from their point of view once. that last two contracts for sure they took reduced pay incentives to maintain medical coverage. Two if they take a pay cut, it helps in the short run but hurts significantly in the long run with reduced retirement (they don't get cost of living adjustments). Three the state legislature is trying to change health care benefits with a new state program which will cost the districts more like the pensions. And third the State legislature is trying to pass a bill that teachers wages and benefits are taxable instead of just pay. A double wammy. The best way to solve the problem would be to cuts preferencial programs and close some buildings.

Lisa Starrfield

Wed, Jan 13, 2010 : 7:15 p.m.

aataxpayer, They pay for services my son desperately needs where other insurance companies have denied the same services. They are a good organization.

Lisa Starrfield

Wed, Jan 13, 2010 : 5:59 p.m.

WHY is MESSA a problem if you aren't paying the extra costs and I am?

Lisa Starrfield

Wed, Jan 13, 2010 : 8:35 a.m.

Why don't we start with the state paying back the teachers for the money they stole and then the district's won't have to pay that 18%?

alarictoo

Tue, Jan 12, 2010 : 5:14 p.m.

bradc: "borrowing and not repaying." When I was in school there was a word for that. "Stealing." Lisa Starrfield: "What I find fascinating is that after weeks of attacks on teachers' 'fat cat' and 'Cadillac' health care plans, when finally information comes out to support our contention that our health care benefits are NOT out of line... folks suddenly switch to attacking our pensions." That is interesting, isn't it?;^)

bradc

Tue, Jan 12, 2010 : 4:54 p.m.

What a lot of people don't realize is that the previous state governments borrowed money from the state pension funds when they were ahead of the game to cover other state budget problems and never paid them back. When the pension investments tanked, with the market, the state levied higher fees to the districts to make up for the pension underfunding. It isn't the teachers being greedy and wanting more. Or the fund needing to levey more to cover better pensions, it's the fund needing to make up for a loss created by state government borrowing and not repaying. If it hadn't been touched, it wouldn't be in the deficit that is and districts wouldn't be paying as much in contributions.

Lisa Starrfield

Tue, Jan 12, 2010 : 3:53 p.m.

What I find fascinating is that after weeks of attacks on teachers' 'fat cat' and 'Cadillac' health care plans, when finally information comes out to support our contention that our health care benefits are NOT out of line... folks suddenly switch to attacking our pensions.

Lisa Starrfield

Tue, Jan 12, 2010 : 1:18 p.m.

aataxpayer, What's the solution? I don't have control over the pensions and neither does AAPS. I can't help that the state has raided our pension funds or that they were underfunded for years. How do you propose we fix the problem other than demanding we switch to a defined contribution plan? But do you have a suggestion for handling the financial disaster that would be?

alarictoo

Tue, Jan 12, 2010 : 12:24 p.m.

aataxpayer: "We do, however, need to control pension and retiree health care costs better. The 18% figure for pension and retirement this year is a huge budget problem. We must stop making promises we can't afford to keep." While I do agree with you that these numbers are out of line, this is not an issue that AAPS or any other school district can change. It is part of the structure that the State of Michigan has built, and it will require work by the state's legislature and MDoE to fix this. Sounds like time to start calling Jenn Granholm and our district reps and raise a little stink.

Lisa Starrfield

Tue, Jan 12, 2010 : 9:55 a.m.

1bit, There are health care plans and there are health care plans; cheap plans are that cheap. With cheap plans, insurers refuse to pay for needed treatment, claim they will cover it but then deny it. I have chosen to pay for the most expensive plan available because it best meets my family's needs and it pays for services my eldest son desperately needs. Given that AAPS is paying less than the state average in the private sector for our health care, I don't know why you would begrudge us that choice.

a2flow

Mon, Jan 11, 2010 : 9:55 p.m.

MW, If I understand your question correctly, it's not entirely correct. The pension system is based on years of experience, with each year being a multiplier of 1.5%. So if you started working at age 50 and retired at age 60, you would receive 15% of your three highest consecutive years of working. So if you made 50K in salary, you would take that number and multiply it by 1.5. This would give you a pension of 7500 per year in pension starting at age 60. Because of the longer duration of working, someone working 3o years could retire at 52, with a much greater pension, depending of course on their three consecutive highest years of salary.

Steve Norton, MIPFS

Mon, Jan 11, 2010 : 8:47 p.m.

@aataxpayer, Look, I'm just quoting from the report. I'm not qualified to say what portions are or are not guaranteed by law. But I am trying to explain what the limits are to what we can do. If you want more, write your state legislator. But remember: there are a lot of retirees out there, including many who get benefits from MPSERS. And they vote. As for the underfunded liability, look at when that was evaluated: end-September 2008, in the teeth of the stock market plunge. The plan is underfunded because the value of its invested assets has fallen dramatically. It hasn't always been that way, and may change in the future. This gets to the question of "normal" costs: my read is that "normal" costs are what districts need to add to the program to cover the retirement of the people joining the workforce, assuming that the plan had existing workers and retirees covered. When they are not, that's the unfunded liability part. @mw, I think the "rules" being referred to are GAAP, and probably federal rules which require that pension plans adhere to accepted accounting principals. But this is not my field. Also, the relatively easy terms for qualifying for a pension that you quote were tightened in the 2007 legislation. @SpamBot1, I don't think anyone mentioned Engler in this thread, though I did elsewhere. And I certainly don't mean to blame the former governor for the current state of the system, at least not directly. I was responding to some writers who wanted to blame everything on the MEA. I was pointing out that John Engler's Republican Party would not have been very beholden to the MEA, so you might think they would have pushed changes through. Especially since Engler was working with a legislature dominated by his own party in both houses for six of his twelve years in office (and a solid Republican Senate the whole time). Yet, major changes did not occur until the Republican Senate extracted them as the price of something the Democratic governor and House wanted very badly. The point is that the politics of this are complicated. Not to mention the voting bloc of seniors who do not want their pension pulled out from under them. (Retirees, by the way, are one of the few population sub-groups growing right now in Michigan.) Making a change to MPSERS will require either lots of money to cover the transition, or a huge cut in current retiree benefits (to the extent that is legal). And NONE of this can be addressed at the local level, which is what this article was about orginally.

SpamBot1

Mon, Jan 11, 2010 : 6:54 p.m.

Steve --- I think the board generally respects your ability to state facts (and not painfully bias ones), which is why I'd like to ask a favor. Do you care to explain what Engler has to do with underfunding of MPSERS? --- Thanks.

mw

Mon, Jan 11, 2010 : 4:58 p.m.

First, there would be ongoing increases in the amount of contributions that employers would have to pay based on the "normal cost" variance between the plans. Anybody able to translate that into English? Second, there would be costs of paying off the existing unfunded liability on a different payment schedule, as required when a system is closed to new hires." So the unfunded liability is the same regardless, but the repayments schedule is different? How different? And the different schedule is required by...state law? Federal law? This (from the linked article) is *crazy*, BTW: "Employees hired after January 1, 1990 (enrolled in the Member Investment Plan, or MIP) may retire with a full pension allowance at any age if they have 30 or more years of service; or at age 60 with 10 or more years of service; or at age 60 with five years of service, with the service credited in each of the last five years before retirement and through age 60. Employees hired before January 1, 1990 (enrolled in the Basic plan) may retire with a full pension allowance at age 55 with 30 or more years of service, or at age 60 with 10 or more years of service." Somebody could start teaching at 50 and retire with a full pension at 60? Or they could start teaching at 22 and retire with a full pension at 52?!? No wonder the state's school districts are out of money.

Steve Norton, MIPFS

Mon, Jan 11, 2010 : 3:21 p.m.

Those interested in this issue should see a Senate Fiscal Agency analysis from last spring. You can find the article here: http://www.senate.michigan.gov/sfa/Publications/Notes/2009Notes/NotesMarApr09ks2.pdf Note that this analysis explicitly excludes a discussion of health care benefits provided by MPSERS. Some quotes of note from that document: "It is very critical to note that MPSERS is a plan that requires contributions from employees, as well as from employers, in order to have funds available to pay out the earned pensions. Employees hired after January 1, 1990, and before July 1, 2008, pay $510 plus 4.3% of salary above $15,000. However, due to the enactment of Public Act 111 of 2007, employees hired after July 1, 2008, pay $510 plus 6.4% of salary above $15,000...." "Each year, the Office of Retirement Services publishes the upcoming fiscal year's retirement "rate", and employers (e.g., school districts) pay that published MPSERS rate applied to their payroll. The total rate includes both a pension component and a health care component. The rate for 2008-09 is 16.54%, of which 6.81% is to pay for health care costs and 9.73% is to cover the costs of funding pensions." "If MPSERS were converted to a DC plan for new employees hired after a certain date, and if the DC plan were identical to what is provided to new State government employees, there would be costs associated with the change. First, there would be ongoing increases in the amount of contributions that employers would have to pay based on the "normal cost" variance between the plans. Second, there would be costs of paying off the existing unfunded liability on a different payment schedule, as required when a system is closed to new hires." "Because MPSERS requires contributions from employees in the plan, the "normal cost" to employers (e.g., school districts) of funding pensions will be 4.21% of salary in fiscal year (FY) 2009-10. This compares to the normal cost of funding 401k accounts under the State's DC plan estimated by ORS for FY 2009-10 at 6.55% of salary (again, with the State first contributing 4.0% of salary and matching up to 3.0% of employee contributions).... If MPSERS were restructured to a DC plan with the same parameters as the State employees' DC plan, then there would be an increase in costs to school districts... equal to the difference between these rates (4.21% compared to 7.05% of salary). "As of September 30, 2008, the [unfunded accrued actuarial liability] was $8.9 billion. When a DB system remains open and enrolls newly hired employees, this unfunded liability is paid off over 28 years as a level percentage of payroll. If a DB system becomes closed to new employees, accounting rules require the unfunded liability to be paid off over 30 years as a level dollar amount. In the first year, the amortization payment would be 7.4%, instead of 5.4% if the system were open. The additional cost of this requirement is estimated at $208.0 million, or 2.0% of payroll, in the first year; the cost would decline slowly over the next 14 years. "For FY 2009-10, employers in MPSERS have to pay 6.15% applied to salaries to make up for some of the market shortfall. This is in addition to the 3.98% "normal cost". Combining the two means that, in FY 2009-10, employers will have to pay 10.13% of each eligible employee's salary into MPSERS."

mw

Mon, Jan 11, 2010 : 2:36 p.m.

My point has always been that there is no way to shift teachers from a defined benefit to a defined contribution system without finding a good deal MORE money for many years into the future. That is because the benefits of current retirees must be maintained, while the funds that now support those payments would instead be redirected to individual accounts. No. Pensions are not like Social Security -- the contributions of current employees are NOT intended to pay for current retirees. Instead, pensions systems are supposed to collect and invest contributions of members and use those proceeds to pay when those members retire. So there shouldn't be any transition costs. Yes, it's true that the Michigan public school pension fund is underfunded (as most public employee pension funds are): http://www.educationreport.org/pubs/mer/article.aspx?id=10454 But delaying the transition to 401K plans is going to make problem worse (by incurring more and more pension obligations that we can't pay for). There is no advantage at all to waiting -- the fact that new public school employees are continuing to enter the system does not help us at all to pay for existing obligations. All it does is create more pension obligations for those new employees. When you find yourself in a fiscal hole, first stop digging.

Steve Norton, MIPFS

Mon, Jan 11, 2010 : 2:17 p.m.

aataxpayer, I don't necessarily disagree with moving to a defined contribution pension system. It has many advantages, including portability and no "vesting" period. It also has risks, in that investing the funds us up to the individual who may not benefit from the lower costs and institutional advice a large pension system can get. My point has always been that there is no way to shift teachers from a defined benefit to a defined contribution system without finding a good deal MORE money for many years into the future. That is because the benefits of current retirees must be maintained, while the funds that now support those payments would instead be redirected to individual accounts. Here is why it is not possible to totally separate pension and health benefits for retirees: MPSERS covers both. Of the nearly 18% of payroll which districts must contribute to MPSERS, nearly half goes straight back out to cover the health benefits of current retirees. The health portion of MPSERS is pay-as-you-go. The other half goes to keeping the assets of the pension system at the level accounting rules require. It's true that, if new teachers were shifted to a DC system, the future obligations of the current DB system would decline. But it would take many years before it would cut costs significantly. If current employees were paying into their own accounts, and districts matched that, we would still have to find the money to pay into the old DB system. Then there is the problem of retirement health benefits. The half of the required MPSERS contribution that goes to pay health care costs has been growing most over the last decades. These costs would still have to be covered, but current employees would no longer be paying into the system. In both cases, where will the money come from? I don't dispute that MPSERS needs to be changed, though perhaps my reasons are different from yours. It's a huge burden on school districts' budgets, that's true. But many of the features that made it so generous were changed in 2007. We just won't see their effects for another decade. More importantly, from my point of view, is the fact that MPSERS is in trouble right now. Like Social Security, it is facing a squeeze caused by the growth of people receiving benefits and a decline in the number of people paying into the system. And just like Social Security, options for reforming the system are not easy and not cheap.

Do not taunt Happy Fun Ball

Mon, Jan 11, 2010 : 1:54 p.m.

$11,0000 is alot for teacher health care insurance.

Lehigh

Mon, Jan 11, 2010 : 1:48 p.m.

Steve, I really appreciate your comments about the relative 'cost' of a dollar in salary vs. a dollar in benefits. Not something I would have thought about otherwise. Are you suggesting that we actually should have a higher Benefits to Salary ratio, because that would provide the same net income to the employee while costing the district less? I know I was surprised when I looked through the AAPS budget docs and saw that for many AAPS employee groups, benefits 'costs' were equal to nearly half of salary expenditures. Seemed like 25% - 33% was a more reasonable ratio. On the health care costs -- good point, but too big to get into here. Many private sector employees have also seen relative wages decline as their salaries have been cut/held steady while health care contributions have risen. Not to mention the cap on income that is subject to FICA.

Craig Lounsbury

Mon, Jan 11, 2010 : 1:40 p.m.

"The data show that exactly half of the 602 family plans offered to teachers statewide require no employee contributions. Average annual premiums in 2008-2009 were $15,786. In districts where employees were required to chip in, the average annual contribution was 4.2 percent." "According to an analysis provided by the center, the average Michigan family premium in 2008 for all businesses and industries was $11,321, and employees contributed $2,522 - or 22 percent - of the cost." If those numbers are accurate that seems a significant difference to me.

Susie Q

Mon, Jan 11, 2010 : 12:38 p.m.

While I am astonished that the Mackinaw Center is the bearer of these tidings, I am relieved that someone has brought this information to light. The Ann Arbor teachers have contributed to the cost of the health insurance premiums for years. The amount has varied depending on what plan one chose. This year, in an effort to save money for the district, the AAEA members agreed to much higher co-pays for prescriptions. I am paying triple what I paid a year ago, and some teachers are paying much more than that, if they have to take a brand name drug as opposed to a generic. $65.00 for a one month prescription is not unusual. Last year I contributed approximately $3500 toward the cost of my health insurance premium; this was over 25% of the annual cost, higher than the 22% (or $2522) cited in the article as the average paid by workers in Michigan. I am not complaining about any of this. I am glad to have a job with benefits, but I wish that the uninformed folks that continue to complain about teacher pay and benefits would realize that there is often more to the story.

Steve Norton, MIPFS

Mon, Jan 11, 2010 : 11:10 a.m.

Wow, it's strangely quiet here.... I wonder why. A couple of observations. First, keep in mind that a dollar in salary costs a school district a lot more than a dollar in benefits. (MPSERS contribution plus FICA and so on.) This provides an incentive for districts to offer benefit rather than salary for compensation. Second, spiraling health insurance costs have been the bane of both schools and the private sector. Capping health insurance contributions, and limiting the increase in that cap (as AAPS does) helps the district control its budget, but it ends up giving an annual pay cut to teachers as health insurance rates rise faster than the cap. Health care reform is crucial for the future of our economy, whether you're in the private or public sectors.