Verona Area School District changes retirement benefits

Aim to stabilize growing health care costs; unions support
By: 
Scott Girard

Tier breakdown
Tier 1: Age 55+, 15+ years in district; Age 60+, 10+ years in district; 25+ years in district
Tier 2: Age 50+, 15+ years in district; 20+ years in district
Tier 3: Anyone not in Tier 1 or 2 hired before July 1, 2011*
Tier 4: Anyone not in Tier 1 or 2 hired after July 1, 2011*
*Board changed retirement benefit requirements to 20 years in district

Verona Area School District officials revealed nearly a year-and-a-half of work to put an end to rising health care costs for retired employees, offering a change to the system through new “tiers.”

The plan was formed by representatives from the school board, superintendent Dean Gorrell, business manager Chris Murphy, director of human resources Jason Olson and representatives from the Verona Area Education Association and the Verona Educational Support Professionals Association. District officials had identified the problem of rising health care costs and wanted to work out a long-term solution that would work for the district and its retirees, Olson said.

The district spends around $2.3 million on retiree health care costs in each budget, but actuaries had predicted that would grow to around $5 million in the next 20 years, something Olson said the district saw as “unsustainable.” The new system will have no effect on current retirees and will split current district staff into four tiers to determine the type of coverage they’ll receive in the future.

The first tier consists of those already able to retire and receive benefits. That tier, which includes around 102 staff members, would have a two-year window in which to retire and would receive the same health benefits offered to current retirees, except for a lower coverage limit of $150,000 for families or $73,000 for single coverage.

The window offers the employees a chance to assess the situation and make an informed choice, Olson said.

“We don’t want any scenarios where people feel like they have to retire ‘or else,’” he said.

If those employees chose not to retire within that window, they would move to Tier 2. That tier includes around 219 current staff members, who would receive the same coverage, as well, with health care costs capped at $120,000 for a family or $57,000 for a single person.

Tier 3 and 4 employees cover the rest of the district’s staff. They face the biggest change, as when they retire, they will no longer be eligible for the district’s health care plan.

Instead, they will receive $3,000 per year of service in the district placed into a health retirement account. When they retire, they can take that money and apply it to a plan of their choice, whether a spouse’s or through the new Affordable Care Act insurance markets.

Part of the motivation for the new plan was to ensure costs stayed at a fixed rate, rather than fluctuating with the growing costs of health care. The district will have to borrow funds initially, with payments of the principal and interest making up a $2.5 million annual cost, $200,000 more than what it currently pays but well below the projected cost if the system did not change.

The change would begin with the 2014-15 budget on July 1.

VAEA president Greg Verhelst attended the meeting and thanked the administration for its collaboration, adding that he is on board as a leader of VAEA and plans to begin reaching out to its membership to answer any questions they have.

“I think it’s a win-win,” he said. “I think in the long run, it’s sustainable, which is a benefit to the district to save money and put money back into the classroom. It’s also a win-win for us, because we know what the options are, we’ve been given time to think about what the options are. We’re looking out for 20 years.”

VESPA president Mariann Kropp said in an email Tuesday the organization also supports the proposed changes, though she hopes conversations will continue on some of the specific points now that the “bigger picture” is out there.

“Jason has been very good at listening to and responding to all our concerns,” Kropp said in the email.

The school board will hear a first reading of the changes to the employee handbook, as well as the district’s borrowing policies, at its June 16 meeting. If passed, the final vote will take place at the board’s July meeting.

To keep the fund solvent, the district would borrow funds initially and place them into a trust that will be invested and earn interest.

Gorrell said if approved, there is a 30-day window in which citizens opposed to the borrowing can attempt to gather the signatures of 25 percent of the electorate from the last gubernatorial election to derail the borrowing, though he didn’t expect that to happen.

Multiple board members and those involved in the negotiations expressed gratitude that the group was able to work out the issue well ahead of it becoming a problem.

“We’re not aware of a single board in the state of Wisconsin that’s doing this,” Gorrell said. “I think it speaks well to our board to recognize you all in your efforts to recognize commitments that were made by past boards to recognize the needs of current students.”

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