The 2011 ERS Board of Trustees election is underway, and TPEA encourages all eligible state employees and retirees to vote. The six-member ERS Board includes three elected Trustees who serve staggered six year terms, along with three appointed Trustees. Voting began March 4 and ends April 8, 2011. Watch for your ballot, which is being mailed by ERS.
TPEA and the Texas Department of Public Safety Officers Association both endorsed Brian Ragland because of his exceptional qualifications. Since the role of a trustee is to oversee the operation of ERS, including the state retirement fund's investments and the state's health insurance benefits, having a strong financial management background is essential. As a state employee with a CPA and a MBA, Brian Ragland is the most qualified candidate, and he will be a strong advocate for state employees and retirees.
You should receive your ballot and information on the candidates in the mail soon. Information is also available online at the ERS website. You can vote online if you have your 11 digit ERS Employee ID number, which is on the ballot mailed to you. TPEA is encouraging employees to vote online, if possible, since this will save ERS money.
There are five good state employees who are running for the Trustee position. TPEA applauds all of the candidates for their concern for our benefits and their involvement in the election process. The ERS Board of Trustees makes decisions that impact your pocket book. Last year ERS faced an unexpected deficit in our health plan and the Board voted to increase costs to state employees and retirees by $142 million. Remember, it is important to distinguish between powers and duties of the Board of Trustees and those of the Legislature. For instance, the Legislature sets the health insurance premium contribution policy, and it is the sole prerogative of the Legislature to determine whether our retirement plan offers ongoing cost of living adjustments (COLAs). Please vote!
TPEA will continue to keep employees and retirees informed about how the state’s budget shortfall poses a potentially critical threat to our health insurance benefits. The House and Senate versions of the appropriations bills provide a little less than $2.5 billion dollars to fund the ERS Group Benefit Plan during the upcoming FY 2012-2013 biennium. ERS has estimated that this level of funding is $591 million in All Funds and $365 million in General Revenue less than what would be necessary to maintain current health benefits over the next biennium. This is primarily because ERS is predicting continuing annual health care cost inflation in the state plan of 9.1 percent.
The ERS projections on the contribution policy and plan design changes that would be necessary at the level of funding currently proposed are significant.
It’s worth noting, if the legislature only adjusted the state contribution policy for employees and retirees:
- The state contribution for individual employees and retirees would need to be lowered to 80 percent of the insurance premium from the current 100 percent.
- The state’s share for dependent coverage would also decline from 50 percent to 40 percent.
Based on likely premium levels, these adjustments would amount to an increase of nearly $96 per month next plan year for individuals and $186 a month for full family coverage.
Alternatively, ERS has indicated that the health plan design could be changed to add substantial medical services deductibles. A deductible requires plan participants to pay first dollar for medical costs out of pocket up to the deductible amount every year.
- If coinsurance for the plan stays at 80 percent, it would be necessary to impose a $2400 annual deductible per participant.
- Or, if coinsurance is set at 100 percent, the annual deductible would need to be $3400 per participant.
With the $2400 deductible an individual could face up to $4400 in out of pocket medical costs a year. A family could be responsible for up to $11,900 annually.
As TPEA testified in both the House and the Senate, many state employees and retirees simply could not absorb the cost shifting that would result from the changes being discussed. The average annuity for ERS retirees is slightly more than $18,000 a year. The average salary for active employees is a little more than $39,000, but the median salary is less than that since 27 percent of employees gross $30,000 or less and 68 percent earn $40,000 or less.
TPEA is requesting that the Legislature increase funding for the ERS health care program. This will be difficult given the $15 to $27 billion budget shortfall the state faces. TPEA is also asking the legislature and ERS to consider a variety of approaches to slow down run-away health care inflation, particularly for hospital care. TPEA is hopeful there are ways to lessen the impact of increased costs on employees and retirees, and we are working with key legislators in this effort. The final determination of these issues will likely be late in the legislative session.
To further confuse this issue, ERS indicated at its last Board of Trustees meeting that it intends to issue a RFP for entities to act as Third Party Administrator for HealthSelect. However, in addition to asking for bids to oversee the current Point of Service plan, ERS will be requesting bids for a Medicare Advantage plan for qualifying state retirees, as well as a separate High Deductible Health Plan with a Health Savings Account. TPEA has requested additional information on these options from ERS. We will provide more information as we receive it.
Both the House and Senate versions of the budget drop the state contribution rate for ERS retirement from the current 6.95 percent to the Constitutional minimum of 6 percent. This will have the effect of lowering the employee contribution rate down from 6.5 percent to 6 percent. TPEA has testified in support of adding $37 million in General Revenue to return the state contribution rate to 6.5 percent, which would increase the employee contribution rate to 6.5 percent. Even though there is no immediate impact from reducing contributions to the ERS retirement fund, TPEA is committed to restoring the fund to actuarial soundness to provide an opportunity for benefit enhancements for state retirees.
Both budget bills also zero out the state contribution for LECOS, the supplemental retirement fund for law enforcement and custodial officers. This would similarly drop the employee contribution from one half of a percent to zero. TPEA supports restoring the LECOS contribution rate.
Legislation (HB 1974 by Rep. Sheets) has been introduced to begin changing the state retirement plan from a traditional defined benefit pension plan to a 401(k) defined contribution plan for new employees. TPEA does not believe this legislation will pass this session but the Appropriations bill does require ERS and TRS to examine these issues and issue a report on the subject.
TPEA and DPSOA are again pleased to host a celebration for state employees and retirees. This year’s event will be on Thursday, April 7 from 5 to 7 pm at historic Scholz Garten in downtown Austin. Music will be provided by the Texas Tycoons, an All Star assemblage of Austin musicians who play roadhouse blues and Texas standards. Please bring your state ID. TPEA will provide complimentary beverages, snacks and door prizes. This event has grown in popularity every year, please join us April 7.
Due to legislative restrictions, TPEA cannot send full advocacy information to state email addresses. In order to continue to stay up to date about the latest developments in legislation affecting state employees and retirees during the 2011 session, go to http://www.tpea.org and sign up with your home email address now. You can also follow our twitter feed.
The Texas Public Employees Association is the oldest and largest state employee group. As a non-partisan, non-union association, TPEA is the leading advocate for ALL state employees and retirees before the Texas Legislature.