June 2011
Saginaw Township Members Ratify New Agreement
On June 29, 2011 the SEIU 517M members working for Saginaw Township Schools ratified a new one-year contract with an 85% approval margin. Due to SEIU and the District working together to save over $500,00 over the last 2 years, there hasn’t been significant layoffs in this unit.
SEIU Member Active in Polish Festival
SEIU 517M Technical Unit Board Member Arnold Beller is the American Polish Festival Chairman. There will be a Festival held in Sterling Heights on July 8-10. View local coverage of the upcoming festival.
New Report Shows How Michigan Can Save Money
L-R: Phil Patrick - SEIU 517M, David Baker - AFSCME, Phil Thompson - SEIU 517M, Gina Nelson - UAW, Frank Houston - A Better Michigan Future
View Letters to the Editor concerning the New Solutions Report.
A new report made public on Monday, May 23, 2011 shows where the state could save money by cutting management positions and cutting the contracting out of state work. SEIU Local 517M Executive Vice President Phil Thompson directed the press conference and SEIU Local 517M Divisional Vice President Phil Patrick of the Human Services Support unit spoke on behalf of unemployment services in Michigan. View New Solutions for Michigan Report. View New Solutions for Michigan Report Executive Summary
The State employees’ New Solutions for Michigan report analyzes newly accessible data and takes an under-the-hood look at ways to streamline the operation of state agencies based on the insight and experience of public employees who provide essential services day in and day out. The report represents another effort by state employees to propose reforms to the governor and legislature that can help save taxpayer dollars and protect essential services.
Recommendations show how Michigan could save upwards of $185 million in FY2011-12 alone by:
- Prioritizing frontline service delivery and reducing managers
- Pursuing better value from contractors, consultants and agency staff
- Delivering better services through collaboration between agency leaders and frontline employees.
New Solutions for Michigan reveals that the state classified workforce averages fewer than six non supervisory staff for every manager and/or supervisor (5.87:1) – well above other states’ norms. In some agencies, the staff-manager ratio is even smaller: less than one manager per staffer at the Attorney General’s Office and about four managers per staffer at the Department of State.
“Just like Michigan families, our state must stretch every dollar and spend it where it’s needed,” said Phil Patrick, a 32-year employee with the Unemployment Insurance Agency and Divisional Vice President of SEIU Local 517M. “Lansing must make sure that our agencies are lean and resources are focused on frontline services.”
Increasing Michigan’s ratio by just one staff per manager would yield a savings of $75 million annually in wages alone. Moving the state toward an 11:1 target in the long term could save hundreds of millions in annual spending and protect essential services.
New Solutions for Michigan also uses data newly available on the Michigan Transparency website to shed new light on contracting costs, which amount to 26 cents for every $1 of state spending, compared to 10 cents for state employee salary and benefits. The state spends two-and-a-half times more on contractors than its own workforce and has committed billions of dollars in long-term contracts with out-of-state firms.
The state spends $1.1 billion on contracts annually, without counting community health and higher education. A 10 percent cut in those costs would save Michigan $110 million annually.
New Solutions for Michigan recommends that the state perform a comprehensive cost/benefit analysis of contracts, as required in the Public Service Accountability Act, to ensure agencies are providing services in the most cost-effective manner possible.
The report also exposes a weakness of Michigan’s generally useful transparency website – many contracts are difficult to find. For example, the Department of Transportation contracts available online include none related to design, inspection, and other professional services contracts. DOT staff report that the agency typically requests large, up-front sums for engineering services and then engages individual contractors directly, bypassing the official process for review.
A Summary of House Bill 4572 (H-7) as Reported From Committee
House Bill 4572 – CAP ON PUBLIC EMPLOYEE HEALTH INSURANCE
Sponsor: Rep. Joel Johnson
Committee: Oversight, Reform, and Ethics
Complete to 6-22-11
A Summary of House Bill 4572 (H-7) as Reported From Committee by the Non-Partisan House Legislative Analysis Section
House Bill 4572 would create a new law to be known as the Public Employer Health Insurance Cap Act. The new act would go into effect for the 2012 calendar year.
Under the bill, a public employer that offered health insurance to its employees through an insurance carrier, or through self-insurance, would be prohibited from paying more of the annual premium or illustrative annual premium cost (and any payments for reimbursement of co-pays, deductibles, or payments into health savings accounts or similar accounts used for health care, optical, or dental costs) than a total of $5,000 for single-person coverage, $10,000 for two-person coverage, or $15,000 for family coverage. The bill would require the state treasurer to adjust the maximum payment annually based on changes in the medical care component of the United States consumer price index (for the most recent 12-month period for which data were available).
The bill also specifies that the caps would not apply until the expiration of an existing collective bargaining agreement or other executed contract, if that agreement or contract was inconsistent with the caps. However, a collective bargaining agreement or other contract that is executed after the effective date of this legislation if it is enacted into law, could not include terms that are inconsistent with these requirements.
In addition, if a public employer chose not to, or failed to, comply with these requirements, then the public employer would be required to permit the state treasurer to reduce by 10 percent each statutory revenue sharing payment, and the Department of Education to reduce by 10 percent each payment of any funds for which the public employer qualified under the State School Aid Act during the period of non-compliance.
Finally, the bill specifies that these requirements would apply to all public employees to the greatest extent consistent with constitutionally allocated powers.
As used in the act, the term “health insurance” is defined to mean employee medical, dental, or optical benefits. The term “public employer” is defined to mean this state; a county, township, village, city, school district, or other political subdivision of this state; an authority; a public institution of higher education; or any other entity jointly created by two or more public employers.
FISCAL IMPACT:
State Government Fiscal Impact: Currently, for health, dental, and vision coverage for state employees hired prior to April 1, 2010, the state pays, per employee participant, $7,033 annually for employee only coverage, $13,954 annually for employee and spouse coverage, and $19,572 annually for family coverage. For health, dental, and vision coverage for state employees hired after April 1, 2010, the state pays, per employee participant, $5,665 annually for employee only coverage, $11,220 annually for employee and spouse coverage, and $15,799 annually for family coverage.
Based on FY 2010-11 data from the current health insurance plan offered by the state to employees hired prior to April 1, 2010, capping the state’s contribution to $5,000 for single-person coverage, $10,000 for 2-person coverage, and $15,000 for family coverage would result in an estimated annual savings to the state of $128.0 million Gross. Of that amount, roughly 50 percent of the savings, or $64.0 million, would be realized in the state’s General Fund. Remaining savings would be associated with employee compensation costs funded by federal or state restricted funding sources. For employees hired after April 1, 2010, capping the state’s contribution to $5,000 for single-person coverage, $10,000 for 2-person coverage, and $15,000 for family coverage would result in an estimated annual savings to the state of $2.2 million Gross and $1.1 million GF/GP. Combined, total annual savings to the state is estimated at $130.2 million Gross and $65.1 million GF/GP.
The attached tables (on Page 4) summarize combined health, dental, and vision premium costs for employees hired prior to and after April 1, 2010 under the current insurance plan structure and under the structure proposed in HB 4572 (H-7).
The estimated savings amount does not include any potential savings from capping the state’s contribution toward retiree health insurance costs. Also, the estimated savings amount does not assume any savings for employees who participate in the current employee and dependents (with no spouse) coverage category. Under the provisions of HB 4572 (H-7), there would be three categories of coverage as opposed to four categories of coverage under the current structure.
Savings to the state over time under HB 4572 (H-7) would potentially decrease due to the fact that an increased percentage of total state employees will have been hired under the new state health plan.
Local Government and Higher Education Fiscal Impact: Comprehensive data on the contributions made by employees and employers toward health insurance costs for local governments and public universities are not available. Therefore, no estimate can be provided as to the amount of savings those entities would realize under the provisions of HB 4572 (H-7).
Legislative Analyst: J. Hunault
Fiscal Analyst: Robin Risko
Kyle Jen
■ This analysis was prepared by nonpartisan House staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.
| Combined – Health, Dental, and Vision Premium Costs
For Employees Hired Prior to April 1, 2010 |
|||||||||
| Current | Under HB 4572 (H-7) | ||||||||
| Coverage Type | Number of Participants* | Employee Share | State Share | Total | % Employee Share | Employee Share | State Share | Total | % Employee Share |
| Employee Only | 10,426 | $742 | $7,033 | $7,775 | 9.6 | $2,775 | $5,000 | $7,775 | 35.7 |
| Employee & Spouse | 7,281 | $1,479 | $13,954 | $15,433 | 9.6 | $5,434 | $10,000 | $15,434 | 35.2 |
| Family | 17,063 | $2,056 | $19,572 | $21,628 | 9.5 | $8,629 | $15,000 | $23,629 | 36.5 |
| Combined – Health, Dental, and Vision Premium Costs
For Employees Hired After April 1, 2010 |
|||||||||
| Current | Under HB 4572 (H-7) | ||||||||
| Coverage Type | Number of Participants* | Employee Share | State Share | Total | % Employee Share | Employee Share | State Share | Total | % Employee Share |
| Employee Only | 785 | $1,293 | $5,665 | $6,958 | 18.6 | $1,958 | $5,000 | $6,958 | 28.1 |
| Employee & Spouse | 548 | $2,581 | $11,220 | $13,801 | 18.7 | $3,801 | $10,000 | $13,801 | 27.5 |
| Family | 1,284 | $3,577 | $15,779 | $19,376 | 18.5 | $6,376 | $15,000 | $21,376 | 29.8 |
* Number of Participants does not include the number of employees who are currently participating in the employee and dependents (no spouse) coverage category. The total number of these employees is 6,554 (6,095 hired prior to April 1, 2010, and 459 hired after April 1, 2010).
Updates on State Retirement Bills HB 4701-4702
View Q&As concerning HB 4701
—-
A special toll-free number (1-877-851-2521) has been set up which members can call and will be patched through to your legislator’s office.
Update 6/20/2011 – House Fiscal Agency Analysis of HB 4701 and HB 4702
Update 6/13/2011 – SEIU Local 517M is Absolutely Opposed to this Legislation.
All members are encouraged to visit our website at www.seiu517m.org for the latest information regarding this legislation. Basically, it changes the rules for state employees in the Defined Benefit Plan as well as the Defined Contribution Plan. If passed by the Michigan Legislature and signed by the Governor, it would discontinue the infamous 3% required contribution in to retirement “health savings” accounts. The problem is that it increases the contribution to 4% for current members of the Defined Benefit Plan (DB Plan) who choose to remain in that plan—and for those who don’t, it “freezes” their pension benefit at the September, 2011 level. Those state employees would then become members of the Defined Contribution Plan (DC Plan).
In addition, it also changes the rules for current and any new state employees in the Defined Contribution Plan. Employees, who have between 10 and 14 years of service with the state, will have the value of their service somehow “monetized” so that a cash payment can be made upon retirement from state service into a newly-established “Health Retirement Account” (HRA) from which they can pay for future health care costs. HRAs have been around for awhile—primarily in the private sector—and used mostly by employers as a method for reducing their employee health care expenses.
State employees with less than ten years of service will be treated similarly, except the retirement age for receiving this one-time lump sum “monetized” payment changes to 60 years old.
Finally, state employees with less than four years of service really get hit the hardest—they basically get a one-time lump sum payment of $2000 at retirement into an HRA for medical expenses.
WHY IS SEIU SO OPPOSED TO THIS CONCEPT?
SEIU Local 517M believes that this very complicated legislation breaks the commitment that was made to state employment back in 1997 when the Michigan Legislature made “transformational changes” in our retirement systems by basically shutting down our DB plans for all new hires. Michigan was then one of only two states to discontinue DB plans for their state employees—and even today, is one of only three that have even experimented with this idea. At that time, a Defined Contribution Plan was established for state employees that promised to pay 4% into the plan with an additional 3% dollar for dollar match. It also promised that health care plans would be vested after ten years, with state employees earning a premium split at the rate of 3% per year up to the maximum of 90% of the premium to be paid by the state (upon completion of 30 years of service).
State employees were told that this “transformational change” would save state taxpayers “tens or even hundreds of millions of dollars” within ten years of enactment. All state employee unions fought this change back in 1997—but we lost to the Governor Engler-controlled Michigan Legislature.
Now, less than fourteen years later, the Michigan Legislature is proposing to once again, to dramatically shift the ground under state employees, and once again make state service a less attractive career option for the “brightest and the best” choosing public service.
SEIU Local 517M has some of the best talent in the retirement arena reviewing this legislation, and preparing testimony in opposition to these changes. But more importantly than just SAYING NO to these changes, we are prepared to offer realistic alternatives that would make more sense for state employees—certainly be fairer-and still, save money.
OUR COMMON GOAL IS TO DEVELOP SOUND PLANS THAT PROVIDE RETIREMENT SECURITY FOR ALL OF OUR MEMBERS WHILE WORKING TO DEVELOP SMART, CREATIVE AND SOUND PLANS THAT WOULD PROVIDE RETIREMENT SECURITY FOR THE GENERAL WORKING PUBLIC AS WELL. IT CAN NOT BE A “WE VERSUS THEM” APPROACH. WE WILL LOSE THIS BATTLE IF WE LOSE THE PUBLIC’S SUPPORT FOR THIS CONCEPT. WE ARE ALL IN THIS TOGETHER.
Phil Thompson, Executive Vice President
Update – 6/9/11 by Capitol Services
The House Appropriations Committee will be taking these bills up Wednesday, June 15th at 9, for testimony only. In addition to the information in the preliminary summary below, two other points are worth mentioning:
1) HB 4701 would exclude payment for overtime services rendered on or after October 1, 2011 and
2) HB 4701 also allows state employees to return to work without adverse impact on their pensions, providing that the State Budget Director decides the retiree “possesses specialized expertise and experience” and that it is cost-effective.
———————————-
Update 6/9/11 – House Bill 4701 – OPEB Reform Legislation Introduced by Representative Bill Rogers
Summary Completed by the Office of State Representative Bill Rogers View summary here
—————————————————–
Update 6/8/11 – Preliminary Overview of HB 4701-4702
By Ellen Hoekstra, Capitol Services, Inc.
HB 4701 (Rep. Bill Rogers, R-Brighton) was introduced on May 31 and referred to the House Appropriations Committee. The bill amends PA 240, the State Employees’ Retirement Act. The legislation would affect state employees’ retirement benefits in the following ways:
- Requires defined benefit plan members to “choose” to contribute 4% of their compensation to the employees’ savings fund to provide for the amount of retirement allowance calculated on service after September 30, 2011, as described in Sections 35A and 50A. A member who makes this choice may also designate that this amount is to be paid only until the member’s “attainment date”—when he or she reaches 30 years or service or retirement, whichever occurs first. Years of service beyond 30 would be treated as tier 2, defined contribution years for members who made this designation. However, the designation is optional and members who choose to contribute 4% until retirement may have years of service beyond 30 used in the calculation of their defined benefit pensions.
- Sets an election and designation time period from July 1- August 31, 2011.
- Deferred members reemployed on or after July 1, 2011 and former nonvested members re-employed on or after that date will become qualified participants in Tier 2.
- Deferred and former nonvested members re-employed as described above, as well as members who do not choose to contribute 4% of their compensation will no longer be eligible for non-duty disability.
- Defined benefit plan members who do not elect to contribute 4% will have their pensions frozen at the current amount, with any future contributions going into “Tier 2”. These members will also have a limitation of 240 hours of accrued annual leave and service credit purchased prior to September 30, 2011 (or under a payment plan commenced prior to that date).
- Corrections and conservation officers may continue to qualify for the supplemental early retirement allowance as currently spelled out in the act for “covered employment” only if they elect to make the 4% contribution mentioned above.
- Employees who have less than four years of service and all newly hired employees would receive a lump sum one-time $2000 payment into their health savings accounts.
- Employees who were hired after 1997 and are in the Tier 2, defined contribution plan but have more than four years of service will also be shifted into health savings accounts, with the contributions to those accounts actuarially determined. Other qualifications include their being at least 60 years of age with 10 years of service or 55 with 30 years. Furthermore, there cannot be a separation from service longer than 60 months.
The legislation would cease the existing 3% contributions –on or before October 1, 2011. Contributions already made would be refunded to employees. The bill would replace the mandatory 3% contribution with the”voluntary” 4% contributions as of the first payday October 1, 2011.
The bill also appropriated $1.9 million to the Office of Retirement Services for administration of these changes.
* * * * * * * * * * * * * *
HB 4702 (Rep. Chuck Moss, R-Birmingham) was also introduced on May 31 and referred to the House Appropriations Committee. This bill amends PA 77, the legislation that was enacted last session to set up trust funds for retiree health care for employees in the state-operated pension plans. This bill is tie-barred to HB 4701 and sets up a system that would mandate contributions to such trust funds, as defined in the act governing each public pension system that would be paid out under the health reimbursement accounts set up by the legislation.
Although the only system immediately affected by this pair of bills is the State Employees Retirement Act, HB 4702 creates the structure to do the same thing for school employees, judges, state police, and legislators, should bills be introduced that would amend these acts. Reimbursable expenses include medical, dental, and vision to be paid for “past members or their funding account dependents under the applicable retirement act.” “Health reimbursement account dependents” are defined in the bill as a past member’s legal spouse and any unmarried children considered dependent under section 142 of the Internal Revenue Code.
The bill also permits the establishment of separate prefunding accounts by the relevant trustees. As permitted by law, voluntary contributions (and earnings on them) made by a member or past member who is deceased may be distributed to beneficiaries or the estate once eligible medical expenses are reimbursed. In addition to whatever mandatory contributions are required, members may make voluntary contributions from 1-5%. The vesting schedule for employer contributions is as follows:
- 50% after two years of service
- 75% after three years of service
- 100% after 4 or more years of service.
Following termination of employment, a trust must reimburse medical expenses to past members until their accounts are exhausted.
We will update this story when further information becomes available.
Human Services Support Unit Holds Saginaw Member Meeting
The HSS Division of SEIU 51M held a general membership meeting on Thursday, June 23, 2011 at the Saginaw RICC.
The meeting was conducted by President Phillip Patrick and Vice President/Grievance Consultant Denise Edwards. Ann Mapes was the guest speaker. Ann gave an excellent presentation on HB 4701/4702. She explained thoroughly and concisely what the bill entails and how it would affect each member based on their years of service with the State. Members were engaged and questioned her vigorously. Ann and President Patrick discussed the ramifications of HB 4701/4702 at length, including the Union’s position on this legislation.
Members were asked to make a donation to COPE be it a one-time donation or on a continual basis. HSS members at the Saginaw meeting are to be commended for their unselfish and generous donations made.
The topics of discussion was member driven and focused on the status of LTI’s, retirement, healthcare costs, bargaining information and the effect the New Solutions proposal would have on them, if any.
Members were given information regarding the pending legislation that if passed, would affect them greatly as both citizens of the State of Michigan and State employees. President Patrick reminded members that updated information in always available on SEIUs website.
Membership was advised that various strategies and campaigns would continue to be launched by the Union, including a rally in Detroit on July 25th.
Q and As on HB 4701
Q: I read that the proposed retirement bill would freeze employee’s pensions at 30 years and switch them to the Defined Contribution plan. My understanding is that this is only an option, and that employees could continue contributing the 4% past 30 years and receive more than 30 years pension if they chose to. Is this true?
A: Members who are in the Defined Benefit plan and who elect to contribute 4% may also choose to pay 4% until they retire and thus earn years of credit for years beyond 30 or choose to pay only till they have attained 30 years and for the additional years, transition into Defined Contribution for the remaining years.
Q: I’m in the defined benefit plan and want to remain in that plan. I make $40,000 a year, what will the impact be on my wages?
A: If you choose to stay in the plan you will pay $1,600 a year towards your retirement healthcare or $61.54 a pay period.
Q: What if I make $60,000 per year and I choose to stay in the defined benefit plan?
A: You will pay $2,400 a year towards retirement healthcare or $92.31 per pay period.
Q: I was in the defined benefit plan and switched to the defined contribution plan back in 1997. Will I receive a lump sum of the 3% I’ve been paying towards retirement healthcare?
A: You will receive that lump sum back.
Q: Will I also see the 3% required contribution stopped:
A: Yes
Q: I’m in the defined contribution plan and was hired after 3/30/97. Will I continue to accrue 3% per year towards my healthcare premium if this bill passes?
A: No. A lump sum will be deposited into a Heathcare Retirement Account (HRA) after you reach age 55 with 30 years of service or age 60 and 10 years of service and retire. The amount is based upon how many years of service you have now and is described in the summaries on our website. After that is deposited, there will be no additional money added to that account by the state.
Q: What about members who were under the defined benefit plan but switched to defined contribution back in 1997. Those employees could have a variety of years of service; not just between 10 and 14 years. How does this Bill affect my health care?
A: Employees who were previously in the Defined Benefit Plan who elected to move to the Defined Contribution Plan in 1997 are not affected by the monetization and health reimbursement accounts in HB 4701 and HB 4702.
Section 68B(10)(a) of HB 4701 states, in part:
(10) This Section does not apply to any of the following:
(a) A former member who made an election to become a qualified participant under Section 50.
Section 50 covers the opportunity DB members as of March 30, 1997 were provided to elect in writing to terminate their membership in Tier 1 (the DB plan) and to become a participant in Tier 2 (DC plan).
Social Security’s Enduring Truths
By James Roosevelt, Jr., President of Tufts Associated Health Plans Inc.
Printed in AARP Magazine, June 2011
There is a saying that if you repeat something often enough it becomes the truth. Nothing better illustrates that point than the notion that Social Security will be bankrupted by the boomers.
Indeed, the generation of Americans born between 1946 and 1964, who drew their first Social Security checks in 2008, will place heavy demands on the system as they reach their retirement years. But this is also a generation that has been paying into the system since they started working in the early 1960s. Much of the money that boomers are and will be drawing from Social Security is and will be their own.
But these important factors are usually left out. Instead, the purveyors of fear want you to believe that boomers are retiring on the backs of their children and grandchildren. If you buy that, they have statistics showing fewer contributors supporting more beneficiaries – “proof” that the program is unsustainable.
These utter distortions, however, are nothing new. My grandfather had to contend with them. In the 1936 presidential campaign, the Republican nominee, Alf Landon, labeled Social Security a “hoax.” In dismissing the program as “unworkable,” the GOP platform of that year stated that Social Security would be unable to pay benefits to two-thirds of retirees. My grandfather would not be surprised by the fear mongering today. Indeed, Social Security’s critics have been casting the same aspersions on the program for 75 years.
Let’s take a true measure of where we are. Social Security has not only been the most effective government program, it has been the most responsible government program. Social Security costs are funded out of its own dedicated revenue stream. It does not and cannot borrow money to finance its operations. There is no deficit financing. Social Security is the epitome of Yankee frugality. It could not be better managed. The administrative cost is .09 percent. It returns more than 99 cents to beneficiaries on every dollar collected. I dare you to find a private retirement plan that can claim that.
By the end of 2010, the Social Security trust fund had a positive balance of $2.6 trillion. As a result of interest earned on the trust fund balances, the fund’s surplus will continue to expand to approximately $3.67 trillion at the end of 2022. After that year, it is projected that the balance will begin to decline. Still, reserves will be sufficient to pay full benefits through the year 2036. After that, Social Security would still be able to pay for 77 percent of benefits.
Since when is news that a program is completely solvent for 25 years bad news? Even in year 26 and thereafter it could still fund three-fourths of anticipated benefits. This is decidedly not a program that is broke or going broke. In fact, this is quite a remarkable achievement.
Kairos Unit Meeting
Kairos Health Care member meeting. There are two different times for this meeting. One meeting starts at 9:00 am and the other begins at 5:30 pm.