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Legislative Report

Report 09-12
April 17, 2009

STATE HEALTH PLAN BILL WILL GO TO CONFERENCE

On Tuesday, the House of Representatives approved Senate Bill 287 that makes changes to the State Health Plan. There were three amendments adopted in the course of the floor debate. These included:

  • a requirement that the State Health Plan Blue Ribbon Task Force consider the benefits of implementing a closed prescription drug formulary
  • a requirement that an independent audit claims payments and claims administration with any recoveries from the state’s claims administrator used to minimize benefit reductions.
  • A prohibition on co-payments and other allowable charges for prescription drugs that exceed the actual cost of the drug to the patient.

The Senate voted on Wednesday not to concur in the House approved version of SB 287.
Both chambers have appointed members to a joint conference committee that will begin work next week.

The House and Senate have identical provisions regarding the annual deductibles and out-of-pocket maximums paid by members. These will not be subject to change by the conference committee. However, areas of difference such as co-payments for specialist and general practitioner visits, prescription drugs, and dependent premiums will be subjects of negotiation.

LOCAL RETIREE COLA HITS SNAG

The Board of Trustees of the Retirement Systems met on Thursday and reviewed an informal opinion by legal counsel regarding the Board’s authority to approve Cost-Of-Living Adjustments that are higher or lower than the most recent change in the Consumer Price Index (CPI). In January, the Board had approved a 1.0% COLA for local government retirees while the CPI had risen by only one-tenth of one percent. The Director of the Retirement Systems Division requested a review by legal counsel.

In the opinion of the Board’s attorney, the state law requires the Board, subject to the availability of funds, to grant COLAs that are no higher or lower than the increase in the CPI. Therefore, the Board’s January action went beyond this statutory authority. The attorney did indicate that the General Assembly had the authority to grant a higher COLA and the Board voted to support House Bill 934 that would authorize a 1.0% COLA for retired government employees.

ACTION NEEDED ON LOCAL COLA!

We urge all of our members, especially retired local government employees, to call their Representatives in the House. Ask them to support House Bill 934: Local Employees’ Retirement System COLAs. Please make sure to point out that this bill does not require any state money. The COLA will be paid from earnings already available in the Local Governmental Employees’ Retirement System.

House Bill 934 likely will be heard by the House Committee on Pensions and Retirement on April 29. The members of the Committee are listed below. Please contact them as soon as possible.

Rep. Tucker, Chairman
Rep. Bell, Vice Chairman
Rep. Folwell, Vice Chairman
Rep. Holloway, Vice Chairman
Rep. Hurley, Vice Chairman
Rep. McGee, Vice Chairman
Rep. Farmer-Butterfield
Rep. McLawhorn
Rep. Ross
Rep. Tolson

HIGHLIGHTS OF THE SENATE BUDGET

The Senate version of the appropriations bill for the 2009-11 biennium (SB 202) was approved by the Senate on April 7. The budget proposal offsets a projected $3 billion deficit with a mix of continuation budget reductions and use of Federal assistance.

Senate Bill 202 does not provide COLAs for active state employees or for retired teachers and state employees. The budget does continue longevity pay for active employees. There are several changes that affect state pensions and related retirement benefits.

  • $21 million for the Teachers’ and State Employees’ Retirement System (TSERS) to offset a deficit for the year ending December 31, 2007 that was identified by the state’s actuary.
  • $1.3 million for the Consolidated Judicial Retirement System as recommended by the state’s actuary.
  • $128.4 million in 2009-10 and $267.9 million in 2010-11 additional funding to continue non-contributory State Health Plan benefits for active and retired employees.

OTHER BILL ACTIVITY

The House Committee on Pension and Retirement met on Wednesday and took action on the bills listed below.

  • House Bill 345 would exempt state, local, and Federal government pension payments received by North Carolina residents from payment of state income taxes. The bill received a favorable report and will be re-referred to the House Finance Committee.
  • House Bill 862 authorizes a two-year study of the state’s pension systems and the State Health Plan. The bill received a favorable report and was re-referred to the House Committee on Rules.
  • House Bill 872 allows paid firefighters and rescue squad workers who have 20 years of service and who are age 55 or older to participate in a Deferred Retirement Option Plan (DROP). An eligible member of the Firemen’s and Rescue Squad Workers’ Pension Fund could have monthly pension payments from the Fund deposited in the member’s DROP account while the member continued to work. The member could withdraw funds from the account upon retirement or separation from service. The bill received a favorable report and was re-referred to the House Finance Committee.