Legislative Report #07-27

Report 07-27
July 27, 2007

BUDGET CONFEREES REACH ACCORD

The joint conference committee on House Bill 1473 (2007 Appropriations Act)  reached agreement on Thursday regarding the state budget. The conference report now must be approved by the full Senate and House voting to concur on two separate days. These votes are expected to be taken this weekend.

The conference report contains a number of important provisions for retirees. A summary of these provisions follows.

COST-OF-LIVING ADJUSTMENTS (COLAS)

Retired state employees, teachers, members of the judicial system, and legislators will receive a 2.2% increase for 2007. The COLA is effective July 1 but could not be included in the July 25 pension payments to state retirees since the budget had not been finalized. The increase, including the amount from July, will be included in the August payments.

The budget contains a General Fund appropriation of $36 million to supplement available gains in the Teachers and State Employees Retirement System (TSERS). The TSERS gains would only support a 1.0% if additional funds were not appropriated.

Retired local government employees also received a 2.2% COLA. However, unlike the raise for state retirees, the local COLA was included in the July pension payments. The local increase was funded entirely from available gains in the Local Governmental Employees Retirement System and did not require approval by the General Assembly.

STATE HEALTH PLAN CHANGES
(Please note that we will provide more details of this State Health Plan transition in a special Legislative Report early next week after the state budget is adopted.)

The conference report includes major changes to the structure of the State Health Plan as well as the usual two-year adjustments to deductibles, co-payments, family premiums. The most important change is the authorization for the replacement of the traditional indemnity plan with a new benefits plan.

The conference report includes provisions effective July 1, 2008 authorizing the Executive Administrator and the Board of Trustees of the State Health Plan to replace the traditional indemnity plan. The new benefits plan may be a PPO or other type of plan that includes noncontributory coverage (no premiums charged to individual members).

The General Assembly also amended the benefit structure of the three PPO options. The budget removes the annual limitations on physical and occupational therapy visits. The limits were a major deterrent to retiree enrollment in the PPO options.

REPAYMENT OF ESCROWED FUNDS

The budget includes $45 million to repay the Teachers and State Employees Retirement System for funds that were escrowed by the Governor in 2001. This represents the final installment of a five-year repayment plan.

OTHER ACTIVITY THIS WEEK

Senate Bill 720: Open Enrollment/Contributory Death Benefit
This bill establishes a one-time open enrollment period (February-May, 2008) to allow state and local government retirees an opportunity to participate in the contributory death benefit  plan if they did not enroll at the time of retirement. The Senate concurred in the House amendments to the bill and sent the bill to the Governor to be signed.