School District officials said that “it was
important to communicate to teachers and the community the enormous financial implications of retaining retiree health benefits.” The community also should know that “school districts, municipal and state governments and many private companies have found it necessary to eliminate these benefits to preserve their financial stability.”
Here is the School District’s data about retiree health benefits and the costs associated with providing them:
- “Currently, Culver City teachers who have ten years seniority with the District and who retire between the ages of fifty-five and sixty-five, receive the full medical benefits they have been accustomed to as an active employee. This benefit includes fully paid coverage by the District for a spouse, domestic partner or other named dependent. At sixty-five, when retired employees are eligible for Medicare, the District continues paying up to $2,000 annually as a Medicare supplement/ subsidy for the rest of the employee’s life.
Same Benefits While Here
* “Under the District’s offer, teachers hired beginning on July 1, would not be eligible for retiree health benefits above the legally required District contribution under the Public Employees Medical and Hospital Care Act. They would, of course, continue to receive the same medical and health care benefits as all teachers while they are working in the School District.
* “For years, the cost of retiree health benefits has been deferred to future generations, rather than funding the liability as earned when services were provided by employees. Deferring the cost to future generations is a result of using a ‘pay-as-you-go’ method of funding retiree benefits. On the other hand, most pension plans are “pre-funded,” meaning that the program is funded during the working years of employees—the time during which the retiree health benefits are earned. The cost of this ‘pay-as- you-go’ method has skyrocketed over the last nine years.
* “The District’s latest actuarial study indicates that the ‘pay-as- you-go’ cost of providing retiree health benefits in 2006 will be $359,718 (or the equivalent of a nearly two percent across-the-board salary increase for certificated employees). However, this cost is projected to increase over the next ten years at an annual rate of 8.9 percent so that providing retiree benefits is estimated to cost the District $772,738 in 2015.
* “Paying the costs of promised retiree benefits on a ‘pay- as-you-go’ basis will continue to compete for current year dollars which, in turn, has an immediate impact on the amount of funding available for active programs, employees and their salary increases.
* “Because the Teachers Union previously negotiated the liquidation of more than $1.5 million in ‘pre-funded’ retiree benefits during the 2000-2001 contract negotiations, every penny of retiree benefits is currently paid from the District’s General Fund.
- “School districts and municipal, county and state governments across the nation are recognizing that providing retiree health benefits is so costly that it is threatening their financial stability going forward. As a result, many such entities have eliminated, and are eliminating, retiree health benefits for their employees altogether.
What Teachers Oppose
* “The Teachers Union negotiators have said they oppose the ‘two- tiered’ benefits system that would be created under the District’s plan. However, under the contract negotiated by the Teachers Union, the District long ago agreed to operate under a three-tiered plan for teachers retiring after age sixty-five: Teachers who retired before March 1, 1991 receive a maximum of $192 per year to purchase a CALPERS Medicare Supplement.
“The balance of the cost of the plan is paid by the retiree. Teachers who retired between March 1, 1991, and June 20, 1996, receive a supplemental reimbursement equal to the medical CAP in the year in which they retired. And teachers who retire after June 20, 1996, receive a maximum supplemental reimbursement of up to $2,000 per year toward a Medicare supplement.”