Shorewood mulling options for retirement plans
Rising medical costs force re-evaluation of retiree benefits
Shorewood — School officials are working through the details of a plan to distribute the district's referendum-funded retirement trust and remake district retirement benefits going forward.
In a spring 2011 referendum, Shorewood voters, on a 63 percent "yes," 37 percent "no" vote, approved approximately $10 million in new district debt to fund a retirement benefit trust for district retirees. So far the district has borrowed about half that amount and paid out a fraction of the trust to pay for health insurance that keeps district retirees covered until Medicare eligibility. In government parlance, the health insurance, as well as other retiree benefits, are referred to as other post employment benefits, or "OPEB" for short.
The current plan under consideration by the Shorewood School District would distribute the balance of the OPEB trust among current retirees and employees, and establish an account for new hires which the district would pay a fixed amount into each year. The board plans to borrow the remaining $5 million approved by the referendum.
"This whole plan is based on the premise that we borrow the rest of the money," said board and HR committee member Ruth Triesman, "that the citizens agreed we should pay off our liability."
While Shorewood Education Association President Michael Halloran says he appreciates the work being done by the committees and administration, the proposed benefits are "degraded" in his opinion and doesn't necessarily address the question of how to best maintain district staff.
"There really isn't an answer to that right now," Halloran said. "Oftentimes when we make decisions solely on dollar impact, we might be asking the wrong questions."
Increases prompt changes
As healthcare costs have increased dramatically over the years the size of OPEB liabilities have likewise increased as a result, prompting school districts and other government agencies to alter their plans in such a way that healthcare doesn't threaten their financial stability in the long term. For example, Fox Point-Bayside in 2012 came up with a similar plan to distribute a district retirement fund, Nicolet came up with a tiered system of benefits to control costs, the North Shore Fire Department recently came under fire from its union for cutting benefits to help fund its long-term OPEB liability, and Whitefish Bay last year changed its plan to give current employees a pro-rated benefit and establish retirement accounts along for new hires.
Shorewood's plan of funding OPEB benefits through a referendum, a unique approach among area districts, keeps retiree benefit payments out of the district operating fund, meaning administrators don't have to decide between retirees or students while budgeting, Superintendent Marty Lexmond said.
The current plan under consideration by the HR committee would distribute the nearly $10 million OPEB trust among current and future retirees and create a health retirement account for employees going forward.
Fixed vs. variable cost
Triesman said the HRA makes more financial sense, since the district would have a fixed retirement cost each year instead of a benefit cost which could scale with the price of health insurance — though, she added, employees who leave the district before retirement age would forfeit their HRA, the balance of which would be recycled back into a fund for other employees.
While administrators see the plan as an example of financial management and want the benefit to be as attractive to employees as they can make it, Halloran says they need to think about employees more before making a decision.
"The conversation has been, what do we do with the money in the trust?" Halloran said. "That kind of becomes a deficit model conversation, as opposed to saying, what's the best benefit we can design for the staff?"
The Human Resources Committee will continue its discussion at its November meeting and may make a final recommendation to the School Board at that time.
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