Pension/Health


Pension Fund Update (September 2022)

by Tom Klusman, Retiree-elected ERS Board Trustee

CURRENT / YTD  STATUS

As of this writing, the most recent YTD (end of August) stats peg our fund’s total value now at $5.8 billion.  You may recall that at the beginning of this year our total fund value was at $6.2 billion.  These tumultuous times have failed to bring in anticipated investment returns, while our fund has paid out expenses and benefits, resulting in this drawdown. 

You often hear me refer to our actuarial accrued liability; this is the number we need to be at to be fully funded to meet our current obligations to all members.  This year’s Annual Actuarial Valuation moved that number up slightly from $6.7 to $6.9 billion.  So, our current total fund value is about $1.1 billion shy of where it needs to be.

Other YTD stats are: We have paid out $274 million in benefits and expenses, with $260 million of that being the seven (7) so far (Jan thru July) retiree payrolls.  Incoming employee & employer contributions YTD stand at $97.3 million. 

The investment portfolio has performed well in a not-so-good market, with a  -3.75% ‘return’ (aka: loss) so far this year.  In dollars, this is a loss of $231.6 million.  Remember on this point that we plan for (assume) a 7.5% return, so we need to generate over 11% in returns in the next 4 months to get there by the end of the year.  That is 11% of 6 billion, by the way.

On the sunny side of this story is how do our losses look in comparison to others?  As we all know, there are good times and bad times, and how you fare in each reveals good, or poor planning.  You often hear me refer/compare us to the State system (WRS), since they are indisputably revered as a well-run and successful fund.  Their returns for the 1st half of 2022 report them at a loss of -13.25% whereas our fund over that same period was at a loss of -7.22%; so that shows our investment staff and managers are doing great work in tough times.

OTHER SIGNIFICANT THINGS

I wrote back in Spring that we have quite a bit going on this year.  An update on each:

  • The Annual Actuarial Valuation was presented to the ERS Board at our June 30th It is essentially our annual check-up that calculates (using some mathematical statistics and probabilities) what our liability is and compares that to our assets.  Although it is presented in June, it looks at data as of January 1, 2022.  So, this year’s report, more than others, came with the elephant in the room that much has changed in the 6 months that it took to run the report.   Nonetheless, the report pegged our Funded ratio (FR), on an actuarial value of assets, at 83.4%.  This is up from 2021’s FR of 80.7%, largely due to the strong investment returns of 2021.  If you would like to read the full report, or past years’, you can find them here:      https://www.cmers.com/CMERS_RD/About-ERS–The-Fund/Financial-Reports–Policies.htm
  • This past week (at our August 24th meeting) we began work on the “Experience Study” which occurs only once every five (5) years. In this process, we review and revise (if appropriate) the assumptions our Actuary will use to project our assets and liabilities and use those numbers to determine our funded status, what/how much contributions will be needed to fund those liabilities vs assets, and such things.   We apply past experience, which is probably where the name comes from, and expert/ professional opinions & recommendations on economic and market projections.   This process will continue on into September and maybe later depending on Board action and deliberations.
  • Coming up in October & November will be the ERS’ “Stable Contribution Policy” update. This also is done only once every five (5) years.  Here, our actuary will take calculations created from the earlier mentioned tasks and determine how much funding (contributions) will be necessary annually over each of the next five (5) years to meet the normal cost (benefits accruing to active members) and payments to eliminate our unfunded liability (the aforementioned difference between how much we need and how much we have). 

So, I hope your take-away at least is that times could be better, but good things are happening and we are very fortunate to have great staff at ERS keeping our ship on course in rough seas. 

I will be present to explain more on this and answer any questions at the MRPA meeting on September 14th.  I hope to see you there! 

Sincerely,

-Tom Klusman



August 12, 2022 Volume XII, Number 224- National Law Review


WERC’s City of Racine Decisions Impact Public-Sector Health Insurance Collective Bargaining: What Do Public-Sector Employers Need to Know?

Friday, July 8, 2022

 

On July 6, 2022, the Wisconsin Employment Relations Commission (WERC) issued two rulings prohibiting collective bargaining over subjects related to employer-provided health care coverage plans per Wis. Stat. § 111.70(4)(mc)6. The two rulings—City of Racine, Dec. No. 39446 (WERC, 7/22) and Dec. No. 39447 (WERC, 7/22)—reaffirm the broad discretion and unilateral control that local government employers, like Racine, have under the statute including deciding whether to provide a health care plan to public safety employees. With regard to the language analyzed in these two decisions, WERC concluded that with the exception of employee premium contribution and Medicare Part B payments, the other language involving an employer-offered health care plan, including health care plan participation for future retirees and family members, constituted prohibited subjects of bargaining.

The impact of these two City of Racine decisions may be profound. WERC acknowledged one union’s arguments about the possible negative statewide impact on hundreds of collective bargaining agreements. This Legal Update summarizes the City of Racine decisions by highlighting the prohibited bargaining matters relating to employer-provided health care plans for fire and police unions and providing considerations for public-sector employers for assessing their collective bargaining agreements and negotiations in light of these two rulings.

WERC Rulings on Disputed Bargaining Proposals

The City of Racine cases centered around several proposals involving health insurance benefits for existing public safety employees, retirees, and spouses and dependents. These proposals included:

Medical Coverage and Health Insurance Plans

Both fire and police union bargaining proposals included medical coverage provisions, which state that full-time employees shall be eligible for employer-provided health insurance and that Racine shall define a national health insurance premium. WERC concluded these proposals were prohibited subjects of bargaining under Wis. Stat. § 111.70(4)(mc) 6. The proposals required Racine to have a health insurance plan available to public safety employees, and the proposals dictated the terms of the plan design by requiring that full-time employees be eligible for employer health insurance coverage. WERC determined Wis. Stat. § 111.70 (4)(mc)6 only permits collective bargaining over employee premium contribution, which WERC determined occurs after the employer decides to offer a plan and after the plan and its design have been established. WERC stated, “[o]nce [the decision of who will be covered by the plan
and what benefits the plan will provide] has been made, then bargaining can occur as to what the employee premium contribution will be.”


The police union also included a proposal that said health insurance plan specification booklets would be provided to eligible employees “upon request from the Human Resources Department,” and “on-line in the Human Resources Department page on CORI.” WERC determined this proposal was prohibited, because it assumed the existence of a health insurance plan, which WERC concluded is a prohibited subject of bargaining under the statute.


Coverage for Retirees under the Existing and Future Agreements


Both fire and police union bargaining proposals included the statement that all employees who retired after January 1, 1996, “shall be subject to placement within the insurance program established for active bargaining unit employees.” WERC concluded this disputed sentence was prohibited under Wis. Stat. § 111.70(4)(mc)6 because it would create an obligation for Racine to have an insurance plan for current employees and employees who retire during the term
of the next contract. WERC also indicated that municipal employers “have no duty to bargain over insurance benefits for employees who have already retired” because retired employees are no longer represented by the bargaining unit.


Notably, WERC stated, “[a]s to employees who may retire under the terms of the agreement the City and the Association will bargain, the Commission concludes that the language of Wis. Stat. 111.70(4)(mc) 6., has eliminated the right to bargain insurance coverage as part of deferred compensation.” WERC supported the decision by stating, “[i]f current employees have lost the right to bargain over whether the City will even offer insurance benefits as current
compensation while they are employed, it logically follows that the Association is prohibited from bargaining over such benefits as part of deferred compensation if an employee retires during the term of the next contract.” As such, the statutory language prohibits bargaining for insurance coverage benefits both as current compensation during employment and insurance coverage benefits as deferred compensation after retirement.


Medicare Part B Premiums


Both fire and police union bargaining proposals required the City to provide City health insurance and pay Medicare B premiums for retirees who were hired prior to January 1, 2007 (fire union’s proposal), or January 1, 2010 (police union’s proposal). Retirees who were hired on or after January 1, 2007 (fire union’s proposal), or on or after January 1, 2010 (police union’s proposal), would be ineligible for Racine’s Medicare B payments but entitled to receive Racine’s health insurance upon reaching Medicare eligibility age or federal retirement age, whichever occurs later. WERC gave a mixed ruling here. WERC found the language requiring Racine to offer a health insurance plan for retirees is a prohibited subject of bargaining because it designates the design of the plan, such as who would be covered and under what terms. However, WERC found that bargaining over Medicare B payments as deferred compensation for current employees who retire during the term of this agreement was a mandatory subject of bargaining, because Medicare B is not a “health care coverage plan” provided by Racine and consequently falls outside of the statutory prohibition. Notably, WERC did not address whether this payment of Medicare Part B premiums is a prohibited impact
bargaining proposal under Wis. Stat. § 111.70(4)(mc)6.


Substitution of Insurance Coverage Provided by Another Employer for a Retiree


Both the fire and police union proposals required Racine to allow retirees to hop off the insurance plan if the retiree has alternative employment with insurance benefits, and to allow the retiree to hop back on the plan after they leave that employment. WERC concluded these proposals are prohibited because the proposals presume the existence of Racine’s insurance plan and coverage eligibility under the plan, which is prohibited under the statute.


What Should the Public-Sector Employer do Next?


As noted, the WERC decisions find certain provisions to be prohibited. That means the provisions are essentially illegal to be bargained or included in a collective bargaining agreement. Unlike “permissive” subjects which continue during an existing contract until the expiration, it may not be sufficient or legal for the employer and union to simply
set the issue aside until the next bargain based on WERC’s decision.


In consideration of the City of Racine decisions, public-sector employers should do the following immediately:


1. Remember that benefits are important to employees. This issue is important to your organization’s employees and your organization’s relationship with their union. The union and employer both have a strong desire to offer a competitive benefits package. But as it relates to the design of health insurance and retiree health insurance, employers have significant unilateral authority. Careful and thoughtful approaches to designing employee benefits is essential. Also important is how the employer approaches this issue with the local union and employees to preserve effective relationships and achieving cost-efficient mutual understanding that the language is prohibited and unenforceable and commitment to removing the language from the collective bargaining agreement. While the contract language may no longer be enforceable or appropriate for a collective bargaining agreement, every employer will need to individually determine what is the best approach for addressing their situation.


2. Analyze Your Organization’s Existing Collective Bargaining Agreements. All collective bargaining agreement language between different employers is distinct and unique. The City of Racine decisions address language in dispute between Racine and its fire and police unions. Every public-sector employer needs to evaluate their own organization’s existing collective bargaining agreement language with public safety employees and address possible prohibited language that may require attention under their individual agreements.


For example, WERC has made it clear that they believe the law reserves to the employer complete discretion whether to offer a health insurance plan to public safety employees and any language requiring the employer to offer a health insurance plan may be prohibited. WERC stated:

As logically flowing from that discretion and consistent with a part of the rationale in the City of Monona decision, the Commission is persuaded that the statute gives the City discretion to determine whether it will even have a health insurance plan for public safety employees. Thus, any Association bargaining proposal over the “employee premium contribution” must be framed in the context of that City discretion if it is to be a mandatory subject of
bargaining primarily related to wages.


In consideration of this statement, many employers will need to address and revise collective bargaining language to preserve employer discretion to offer a plan in the first place.


3. Promptly Address Problematic Language with the Union. If there is language within the collective bargaining agreement or a proposal that could reasonably be found to be prohibited based on the City of Racine decision, then the employer should approach the Union to discuss removing this language from the collective bargaining agreement and the employer may cease bargaining on any proposals containing prohibited language.


4. When no Understanding Exists, Consider Filing for a Declaratory Ruling. If the employer believes that the collective bargaining agreement language or proposal language is prohibited and unenforceable and the union disagrees, then the employer may pursue a declaratory ruling with WERC on those possible prohibited subjects of bargaining. This approach is essential in the event the collective bargaining agreement includes language like plan participation, HSA contributions, or flexible spending plans similar to the prohibited language found in the City of Racine decisions. Moreover, if your organization is making plan design changes which will limit the pool of persons who are eligible to participate in the plan, then now is the immediate time to address this issue. While declaratory ruling processes are expensive and time consuming, and frankly should be avoidable in light of the conclusive nature of the City of Racine decisions
and the guidance that WERC provides, the costs of addressing this issue immediately through declaratory ruling can outweigh the long-term impacts of not addressing this issue.


5. This Will Get Political. WERC noted that a municipal employer may unilaterally continue to provide the same insurance benefits identified in a collective bargaining agreement that WERC found were prohibited subjects of bargaining in its decisions. As a result, employers should prepare for lobbying of local elected officials by local unions and members to “leave the benefits alone” or to unilaterally establish promises of these benefits in handbooks and policies. Careful thought should be given by employers when approaching these requests and when crafting language.


6. Explore Benefit Changes. As workforce demographics have changed, so has the value employers receive from the benefits it offers. For some workplaces, retiree health insurance benefits may be viewed as undesirable and a remnant of a different era. Employees may want new benefits in place. Moreover, certain retiree benefits offered by employers may be tax inefficient or too costly without good return on investment. As such, employers should consult with their benefit providers and consultants to identify different benefit options so as to craft a benefits package that is designed to attract and retain high quality employees.


7. Impact Bargaining. Wis. Stat. § 111.70(4)(mc)6 prohibits a municipal employer from bargaining “all costs and payments associated with health care coverage plans and the design and selection of health care coverage plans by the municipal employer for public safety employees, and the impact of such costs and payments and the design and selection of the health care coverage plans on the wages, hours, and conditions of employment of the public safety employee.” In the City of Racine decisions, WERC largely concluded the proposed language was prohibited based on the first part of this statutory prohibition and did
not provide detailed analysis regarding what aspects of impact bargaining are prohibited. In the event a union raises a proposal as an effect of the health care plan design or selection, then the employer needs to be ready to address whether it may lawfully engage in bargaining over that issue.


8. Watch for Appeals. This decision impacts important benefits for employees. It would be prudent to expect appeals of the WERC’s City of Racine decisions. But appeals do not stop your organization from immediately confronting problematic prohibited language in your collective bargaining agreements. It will take significant time for these cases to be resolved at the appellate level. Your organization may be better protected by pursuing your own declaratory ruling in the interim. Further, your organization can better rely on your own declaratory ruling decision rather than the possibilities associated with relying on the City of Racine decisions.


9. Don’t assume. This is a complex issue. This issue requires individualized analysis of your organization’s collective bargaining agreement. While your organization may think it has a simplistic issue, the problem may be much deeper and complex, including when addressing issues associated with vesting of benefits. In consideration of the multitude of issues that emanate from these decisions, work with your municipal attorney, corporation counsel, or outside legal counsel.


©2022 von Briesen & Roper, s.c
National Law Review, Volume XII, Number 189
Full article: https://www.natlawreview.com/article/werc-s-city-racine-decisions-impact-public-sectorhealth-insurance-collective

 

NOTE: “The MRPA is studying and researching this ruling to determine the potential implications to our members.  All further relevant information that we receive re. this ruling will be posted on this Pension/Health page”.

[HR]

A Bill that would end the Windfall Elimination Provision for public pension recipients in the Social Security Program

April 15, 2022

Dear Wray,

Thank you for contacting me to share your thoughts on Social Security benefits. I appreciate you taking the time to let me know your views on this important issue.

Social Security represents a promise that the federal government has made to seniors and those who are approaching retirement age. Individuals and families have paid into this program, and they lived their lives depending on this promise. It is a promise we must keep. As Congress works to preserve this program for future generations, my top priority will be to protect those in retirement and individuals approaching retirement age.

As you know, Representative Kevin Brady (TX-8) introduced H.R. 5834 on November 3, 2021. This bill eliminates the Windfall Elimination Provision (WEP), a title of the Social Security Act that can reduce or eliminate Social Security benefits for an individual who also receives a public pension from a job not covered by Social Security. This bill would repeal the WEP and replace it with an updated benefits calculation formula, allowing for individuals who receive public pensions to also be eligible for benefits under the Social Security Act. For existing retirees, Social Security will provide a restoration of benefits payment to cover benefit loses under the WEP.  I cosponsored this legislation because I believe it appropriately addresses a shortfall of our social security system. 

Thank you again for contacting me on this important issue. I appreciate that you took the time to make me aware of your views. Please stay in touch as we continue to move Wisconsin and our nation forward. You can reach my office at 202-225-3031 or by visiting my website at Steil.house.gov.

On Wisconsin,

Bryan Steil
Representing Wisconsin’s 1st District



IRS warns some retirees at risk of tax penalty: What to know

The IRS has a new warning for retirees, and while it’s not about a scam it could end up costing older taxpayers more money than they expect to pay.
The agency issued a statement urging Americans to check the amount being withheld from retirement accounts and monthly pension or annuity checks, as soon as possible, in order to avoid a penalty next year.
Since the year is almost over, the IRS said those who discover they have been paying too little, might need to make a quarterly estimated or additional tax payment directly to the agency.
The Tax Cuts and Jobs Act, which enacted a slew of changes to the U.S. tax code, altered the way dues are calculated by the IRS. As such, some retirees are at risk of having too little withheld from regular payments.
Overall, more taxpayers than normal are at risk of having to pay the agency next April.
According to a simulation conducted by the Government Accountability Office (GAO) in August, which reviewed the revised federal tax withholding tables for 2018 implemented by the IRS and the Treasury Department, 21 percent of workers are at risk of having their taxes underwithheld – 3 million more than projections based on the old tax code.
Only 6 percent of taxpayers are expected to have wages accurately withheld, while 73 percent are likely to have their taxes overwithheld. The former is three percentage points less than a simulation conducted using the same withholding structure and the old tax code. Accurate withholding was assumed to be within $100 of what is truly owed.
This year, employers are using W-4 forms already on file to calculate withholding amounts, which has posed problems for taxpayers because the sweeping tax reform changes address everything from personal exemptions to the standard deduction. The Tax Cuts and Jobs Act gave the Treasury Department authority to determine the withholding allowance structure because the old method was no longer suitable, and there was not enough time to issue a new W-4.
When asked in February about how many errors the Treasury has seen so far this year, Treasury Secretary Steven Mnuchin declined to comment directly, instead urging taxpayers to use the IRS withholding calculator.
Employees can update their withholding amounts and the administration has encouraged them to use the tax calculator, available on the IRS website. Retirees can also use the tool, entering their pension like income from a job. They can also consult a financial adviser.
For Social Security tax payments, the IRS says individuals can ask the Social Security Administration to withhold taxes at specified rates ranging from 7 percent to 22 percent. Changes can be made online.
Changes to IRA withholding amounts can also typically be made online.
The Trump administration released a proposal for the new 1040 tax document, or the U.S. individual income tax return, in June. It is expected to release a new W-4 form later this year.


MEDICARE ENTITLEMENT AND ELIGIBILITY

(Click on the following link)  Medicare entitlement and elig – 2021


HOW TO EARN SOCIAL SECURITY CREDITS

(Click on the following link)   How You Earn Credits 2020 467510 Rev 1.2020

 


TAX DEDUCTION FOR RETIRED PUBLIC SAFETY OFFICERS

By President Wray Young

The Pension Protection Act, which was signed into law in August of 2006, allows retired public safety officers to exclude from income distributions made from their eligible retirement plan that are used to pay the premiums for health insurance.  This also includes the MetLife Dental & Vision plans negotiated for Milwaukee retiree firefighters and police.  The distribution must be made directly from the pension plan to the insurance provider.  You can exclude from income the smaller of the amount of the insurance premiums up to a maximum of $3,000 but the amount excluded cannot be used to claim a medical expense deduction. The MRPA is not qualified to give you tax advice so please direct any questions you might have regarding this benefit to your tax preparer or the IRS which, in turn, might refer you to IRS Publication 575.


 

Government Pension Offset & Windfall Elimination Provisions Will Reduce your Social Security Benefits – Wray Young

Kerry Leist, VP/Operations for NATIONAL BENEFIT CONSULTANTS, INC. passes along the following: There is important information regarding the Government Pension Offset & Windfall Elimination Provisions that will reduce your social security benefits and those of your surviving spouse if you should die before her/him.
Click to view:

 

Medicare Info

Kerry Leist, VP/Operations for NATIONAL BENEFIT CONSULTANTS, INC. passes along the following important information regarding Medicare eligibility. There are populations of protective services and a few others that lack 40 quarters. Some of those think they do not ‘qualify ‘ for Medicare. If entitlement is not at 40 credits it will costs those folks more for Medicare unless they qualify on a spouse’s record.  Credits can be obtained through qualified employment or on a self-employment basis. Click on the following link to see more information on Medicare costs and benefits

If you have any questions concerning the attached Medicare information, please contact Kerry Leist at 262-327-4370


 

Police Relief Association (PRA) – By:  Shannon M. Seymer-Tabaska

The Police Relief Association is a non-profit organization (501c3) whose PRA Board is elected by the membership, to include the Milwaukee Police Department Retirees Association (MPRA), the Milwaukee Police Association (MPA), and the Milwaukee Police Supervisor’s Organization (MPSO).   The current PRA Board members include: President:  Branko Stojsavljevic, Vice President: Vacant, Treasurer:  Shannon M. Seymer-Tabaska, Secretary:  Dena Klemstein, Directors:  Patrick Doyle (retired member), David Feldmeier, and Eric Pfeiffer.  In addition, the PRA Board has City Attorney Office representation under City Attorney Patrick McClain. 

To be an active member of the PRA, one must be a sworn active law enforcement officer and/or a retiree who pays monthly dues of $2.08 into the PRA fund, which includes those members approved for a duty and/or ordinary disability.  If a MPD member did not leave in good standing (i.e. termination and/or resigned) his/her PRA benefit ceases. 

At retirement, active law enforcement members have the option to “opt out” of the PRA, but the PRA Board discourages this option as the majority of members lose a $9000.00 benefit that their beneficiary is entitled to at time of death.  Once the latter “opt out” election is made, a member can’t re-enroll in the PRA.  In addition, in 1998, there was a member election regarding the $9000.00 benefit amount wherein members elected to increase their dues to receive the $9000.00 benefit, but if a member did not make the election, their entitlement is $8000.00.  There are also a few older retirees who only pay $1.25 per month into the PRA fund, so their benefit is reduced as well.

As an active member of the PRA, it is pertinent that any life change (i.e. marriage, birth/death, re-location, etc…) that result in beneficiary, address and/or phone changes, the PRA is provided the updated information. Updated information can be provided on a beneficiary form that can be found on the PRA website:  http://www.pra-milwaukee.com/

and/or the member can contact us at (414) 649-8373 to request a form be emailed and/or mailed.     

To claim a death benefit for a PRA member, the designee at death (i.e. spouse, surviving children) must contact the PRA at phone number (414)649-8373 to verify the member was active and in good standing and must provide a death certificate for the decedent.  Members should be aware that the PRA Board members time is voluntary, thus, we do not have a full-time staffed office and will make a good faith effort to respond as soon as possible.

Currently, the PRA Fund is at 8.5 million dollars and it is the PRA Board’s fiduciary responsibility to ensure money collected from members and through donations (i.e. Combined Giving and/or private donors) is invested for fund growth and we all thank you for allowing us to serve the membership as your PRA Board.

                                                        Branko, Shannon, Dena, Pat, David, and Eric


From Greg Thiele

As many of you know, I have had hearing aids for about 15 years. I had to pay out of pocket each time I needed new ones. Today I was at the Avada office in Wisconsin Rapids for my annual test, which is always free. While talking to my audiologist was I was informed that United Health Insurance is now covering portions of hearing aids. He thought that Humana also might be covering some of the cost. While at the office his receptionist contacted United Health and Avada’s corporate offices. I need new hearing aids. The cost is around $5000. United Health informed the receptionist that my out of pocket cost is around $800. They pay the rest. The portion they cover also has to do with how much is left on your deductible. I  for one never knew that United Health was covering any of this. From what they told me, United Health will cover up to around $5000. I was also informed that Avada was bought out by a large company that now owns almost 95% of all hearing aid companies in the world. This company put pressure on many of the insurance companies to start to cover the cost. This company also lowered the cost of hearing aids to make them more affordable. The hearing aids that I am getting for $5000 were almost $9000 last year.   I hope this information helps some of you in the future.   Greg