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LANSING UPDATE

January 2013
By: Capitol Services, Inc.

AFT Michigan Retiree Update

The Governor has recently signed SB 1360, now PA 359, establishing a new deadline of January 9, 2013 for school/community college employees to select their retirement options under the sweeping retirement legislation enacted last session. As you know, AFT Michigan had filed a lawsuit challenging the legality of the deadline in PA 300 of 2012 and its contents. Although court action upheld AFT Michigan's position on the deadline, it did not agree with our position on the constitutionality of its provisions. One of the major elements of PA 300 was a significant increase in how much many retirees have to pay for health care, as the following article describes.

Monthly Insurance Rates Soar for Many Retirees

Monthly insurance rates have soared for MPSERS retirees who fall into either of these two categories: those who retired before January 1, 2013 who were not eligible for Medicare as of that date, and all of those who retire after that date. Under PA 300 of 2012, retirees in those categories are required to pay 20% of their monthly premiums.

Unlike what was previously true, payments made for Medicare will no longer "count" as retirees' contributions towards their premiums. Thus, retirees with Medicare (Parts A & B) who previously had nothing deducted from their pensions would pay $50.32 if covering just themselves. If both husband and wife were MPSERS retirees, they would pay $95.66.

The largest cost increase in dollar terms is an increase of $134. 59 per month for a retiree with Medicare covering a spouse who does not. With the increase, that retiree will now pay $214.28 per month. The largest percentage increase is for a married couple who are both MPSERS retirees on Medicare and covering themselves and a child; their monthly costs increase nearly 500%, going from $24.35 to $145.93 per month. The largest amount deducted per month in any category will be $299.45 for retirees covering themselves, spouses and children, without Medicare. The full chart of monthly insurance costs is available on the Office of Retirement Services website -- www.michigan.gov/ORSschools.

Post-retirement Employment Options Expanded

A bill just signed into law as PA 464 of 2012 increases the ability of some school retirees to retain their retirement allowances and health benefits while returning to work in schools in critical shortage areas or as substitute teachers, instructional coaches or school improvement facilitators. Previously state law had reduced either pension or retiree health benefits (or both), with the reductions depending on a number of factors, including retirement date.

Under the new law, retirees can return to work in "critical shortage disciplines", which are updated annually by the State Superintendent of Public Instruction, until July 1, 2014, providing that the reporting unit (school district) pays the full contribution rate for both pension and retiree health benefits for the retiree for people hired back into a "critical shortage discipline". (A list of "critical shortage areas" is expected to be posted by the Michigan Department of Education on Thursday, January 10). Also, the retiree must:

• Have been retired for at least 12 months prior to re-employment.
  
• Be re-employed for no more than 3 years.
  
• Not use any of the new service time or compensation to re-compute his or her pension.

The new law also exempts retirees who retired after July 1, 2010 from the current benefit reductions if they are hired as substitute teachers, instructional coaches, or school improvement facilitators. Just as for people re-employed in critical shortage disciplines, this provision applies until July 1, 2014 and requires that employers pay 100% of the contribution rate for both pension and retiree health benefits for retirees hired back. Certain provisions apply to retirees as well, including the prohibition against having the pension recalculated, using the new service time and compensation. Additionally, retirees in this category must:

• Have been retired for at least one month before being re-employed.
  
• May earn no more than one-third of his or her final average compensation in any calendar year.

Ellen Hoekstra
January 3, 2013