School Board Set to Consider Plan for Reducing Retirement Benefits

The Whitefish Bay School Board's to reduce the cost of retirement benefits has culminated in a plan that will go before the board on June 27.

Whitefish Bay School District officials say the district's current retirement benefits are unsustainable, costing the district $3.1 million per year, when last year, for example, the district only set aside $970,000 for retirement benefits.

The district formed a special subcommittee eight months ago and has since come up with a plan that brings the annual required contribution to just over $1 million.

The school district's cost of providing retirement benefits has ballooned with exponentially rising health insurance costs. At the same time, the amount the district has been able to contribute has also slimmed due to recent state budget cuts.

The district has tried to negotiate cuts to retirement benefits over the past 12 years but has not been able to substantially reduce the post-employment benefits liability. With the passage of Act 10 in the state Legislature, the district now has control over most salary and benefits costs.

Whitefish Bay and Nicolet are the first two school districts in the Milwaukee area to take on the task of reducing retirement benefits, and district officials say other school districts will soon follow suit.

Shawn Yde, the district’s business manager, said the district might have to make adjustments in the future to keep its benefits competitive with other area school districts.

“We don’t know where we will stand from an attract–and-retain standpoint until the rest of the other districts catch up,” Yde said.

Since the initial conceptual plans were presented, district officials have surveyed district employees and gathered input at public meetings. Superintendent Mary Gavigan said the subcommittee has tried to balance the district's need to reduce unsustainable benefits with the retirement promises made in the past.

"This plan focuses on making the benefit fiscally sustainable while also recognizing the ethical, moral and integrity issues that needed to be considered in recognition of past agreements with our employees," Gavigan said.

Benefit changes

District employees were surveyed about their preferences between three different benefit options, and the majority of district employees favored the following plan:

Employees hired after July 1, 2011: Would not receive post-retirement health insurance benefits or a severance benefit when they retire.

To make up for the loss in benefits, these newer employees would receive a current-funded, employer-paid tax-sheltered annuity set at $1,000 per year of full-time service for those groups who are eligible. The benefit requires 20 years of service and would be forfeited if the employee leaves prior to 20 years and the minimum retirement date.

The TSA was developed as a way of leveling the playing field for newer employees, while giving the district the ability to recruit and retain new hires. Yde said the $1,000 TSA could be adjusted to remain competitive with other school districts in the future.

Employees hired before July 1, 2011:

• Cap the retiree health insurance contribution, maintaining the same percentage of the premium in effect at the time of retirement, provided that the dollar amount doesn't exceed the amount paid during the 2011-2012 school year.

• Freeze severance benefits to the level earned as of July 2012. Currently, the district's severance benefit allows 110 days pay and 1/12th of a day's pay for each unused sick day.

All current employees: The minimum age for which an employee can apply for early retirement would be pushed back from 55 to 57. Some employees have been hired under contracts allowing eligibility at 55, but this proposal would set the minimum age of 57 to all employees.

The next step

The School Board will take up this issue again at a special meeting on June 27. Gavigan said the proposal is conceptual at this point, and district officials are currently in the process of translating the policy into benefit descriptions for employee handbooks. The board will discuss employee handbooks in more detail in July.