Flexibility
and Authority to Fund Other Post-Employment Benefits
The
MICA Board of Directors urges the 2008 Legislature to provide local governments
an optional investment vehicle to fund the long-term costs of other post
employment benefits (OPEB). In
addition, the Legislature must specifically authorize the creation of trusts to
allow local governments full flexibility to meet their financial obligations
under new governmental accounting standards.
New governmental accounting standards (GASB 45) that are being phased-in between 2007 and 2009 require new financial disclosures by governmental entities about the long-term costs of other post employment benefits (OPEB) like retiree health care. The intent of the standard is to have the governmental entity fund the future costs of OPEB as they accrue or are earned by current employees. Effectively meeting that intent requires that local governments have available to them long–term investment vehicles. Authorization to invest in suitable long-term investment vehicles does not exist under current law. Further, GASB 45 while not mandating it gives more favorable financial treatment to OPEB obligations or liabilities that are funded via the creation of trusts that segregate the monies set aside to meet OPEB expense. Again, authorization to create such trusts does not exist under current law. Finally, any state-administered investment vehicles must be free of the possibility of the state appropriating the monies for other purposes as happened in the early 1980’s to employers’ contributions to PERA and TRA.
Guidance
and Clarification on Implementation of Expanded
Definition
of “Dependent” for Health Insurance Purposes
The
MICA Board of Directors urges the 2008 Legislature to clarify the law expanding
the definition of “dependent” for health plans to unmarried children ages 19 to
24 who are not full-time students.
The board further urges the legislature to work with the National
Conference of State Legislators, other affected states and the state’s
Congressional delegation to minimize or eliminate payroll administration
problems and adverse tax consequences for employees and employers resulting from
the expanded definition.
Largely unnoticed, the 2007 Legislature expanded the definition of “dependent” for health plans to include unmarried children ages 19 to 24 who are not full time students. The new law is generally effective January 1, 2008. Under prior law, coverage ended when the child turned age 19 unless he or she was a full-time student in which case coverage could continue until age 25 or when the child was no longer a full-time student, whichever came earlier. As the result of the law change, counties and their employees are anticipating additional premium increases of 1% or more on top of increases already in the pipeline. While the legislature’s rationale for enacting the law may have been a well-meaning attempt to reduce the number of uninsured, the Legislature’s separate action to exempt the state and its employees from the expanded definition caused other employers to take some umbrage at the change. Local government employers also face a dilemma in that the new, expanded definition is in conflict with MS 471.61, which authorizes group insurance benefits for their employees.
Compounding the premium increases are significant administrative issues. Employers will now have to periodically determine eligible employees and dependents, the value of the expanded benefit to affected employees (how this is done is by no means clear), and then pay FUTA and FICA taxes on that value and withhold employee FICA as well as state and federal income taxes from the affected employees’ pay. The tax issues cannot be rectified by the Legislature as they are governed by federal, not state, law. Therefore, if the Legislature is committed to the expanded definition of “dependents,” it should work with other affected states - possibly through the National Conference of State Legislatures - to lobby Congress to exempt the expanded benefit from FICA, FUTA and income taxes, just like employer- provided health insurance for under 19 year old children (under 25 years old for full-time students) is treated currently.
For
Officer or Firefighter Disabled in the Line of Duty
The
MICA Board of Directors recommends that the Legislature fully fund the state
reimbursement for local governments’ cost for continued health insurance for
peace officers or firefighters injured in the line of duty or limit such
payments to those instances where the peace officer or firefighter can engage in
no gainful employment.
Current law requires state and local government employers to continue to pay the employer share of health insurance costs for peace officers and firefighters injured in the line of duty until they reach age 65. The requirement is conditional on the peace officer qualifying for a “duty-related disability pension.” Unlike disability benefits under the PERA coordinated plan, social security or most private disability insurance -- all of which require that a recipient qualify based on inability to engage in any gainful employment, the PERA police and fire plan allows disability benefits to be provided under a less stringent standard -- when the recipient is unable to perform his or her duties as a peace officer or firefighter. The immediate issue is that the state has fallen short of reimbursing local governments for their costs for continued health insurance for these individuals and will not commit to paying 100 percent of these costs in the future. The Legislature that mandates this benefit should unconditionally appropriate sufficient monies to reimburse counties for this expense, as the law requires. Absent such appropriation, the Legislature should relax the mandate such that subsequent employment of the affected peace officers and firefighters where health insurance is provided by the new employer would relieve former local government employers of contributing to the affected peace officers’ and firefighters’ health insurance costs.
PERA
Earnings Offset
The
MICA Board of Directors recommends the Legislature eliminate the earnings offset
for under-age 65 PERA retirees who are reemployed by a local governmental
unit.
Counties are facing critical labor shortages. A pool of available, qualified labor they must tap to fill job openings are their own recent retirees. Unfortunately, former local government employees under the age of 65 are penalized if they return to employment with the county because their earnings in excess of the Social Security earnings limit offset their pension $1 for every $2 that their earnings are in excess of that limit. No similar penalty is imposed for reemployment in the private sector putting counties at a competitive disadvantage in competing for these people's needed talents.
Remove
the Age Limitation on the Intern Exemption for PELRA
The
MICA Board of Directors urges the 2008 Legislature to remove the age cap on the
current intern exemption for the Public Employee Labor Relations
Act.
Current law provides that interns under age 22 who work for less than 100 days in a year and are currently enrolled as a student or have an intention of returning to school during or after employment are exempt from the Public Employee Labor Relations Act’s provisions. The law unfairly discriminates against older students, particularly immigrants, who have delayed their education or are returning to school. This is particularly unfortunate for theses individuals who are seeking to improve their lives and career prospects. Removing the age limit will remedy this inequity. The 100 day in any year limit will still subject long term employees to the provisions of PELRA without regard to age.
Remove
Restrictions on Employer Match for
Deferred
Compensation Plans
The
MICA Board of Directors recommends that the Legislature remove the statutory
provision restricting employer matching contributions to employee deferred
compensation plans to only the State of
If a county negotiates a
compensation package that includes a matching employer contribution for those
employees electing to contribute to a Section 457 deferred compensation plan,
present law only allows the employer to contribute to the State of
Allow
Long-Term Care Insurance
Program
The
MICA Board of Directors recommends that the Legislature expand voluntary
participation in the state’s long-term care insurance program to county
employees and retirees.
State employees and retirees may purchase long-term care insurance at group rates through the state. While authority exists for local governments to offer similar policies or benefits to their employees and retirees, the size of their groups are usually too small to allow real savings to be achieved in the premiums for their participating employees and retirees. Allowing county and other local government employees and retirees to participate in the sate program would fix this shortcoming and achieve the broader intent of getting employees to plan for these costs and not end up on medical assistance at state taxpayers’ expense.