Public employee benefits

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Public employee benefits include public pensions, disability, life, health and dental insurance coverage, and perks like cell phone reimbursement and vehicle use.[1] Public employees receiving a state pension receive a financial benefit, and most are adjusted annually with a cost of living increase.[2]

According to the Bureau of Labor Statistics, as of 2012 65 percent of all public employees had access to retirement benefits. Of those, 19 percent had access to a defined benefit plan and 59 percent had access to a defined contribution plan.[3]

When it comes to defined benefit plans, 83 percent of the public plans required employee contributions with an average contribution of 6.5 percent.[4]

For defined contribution plans, 59 percent of workers were required to make employee contributions, with 81 percent using pre-taxed dollars.[5]

Health insurance

For health insurance benefits, employers make a contribution towards the member's monthly premiums, with members covering the difference between the employer's contribution and the actual premium amount.[6] Health insurance in many states is now available to the children of recipients until the child reaches age 26.[7]

In West Virginia, state employee and teacher retirees receive a monthly subsidy to defer the cost of their health insurance premiums. As of 2010, the average subsidy was $333 per retiree. New hires, however, do not receive the subsidy.[8]

Bureau of Labor Statistics report

A 2012 Bureau of Labor Statistics report showed that 87 percent of all state and local government employees had access to health insurance and other wellness programs, with only 79 percent taking part (87 percent had access to health insurance, with 73 percent participating; 56 percent had access to dental care, with 49 percent of employees participating; and 39 percent had access to vision care, with 31 percent participating.[9]

For single coverage benefits plans, public employees paid 13 percent while the employer paid 87, according to the BLS report.[10]

The Bureau of Labor Statistics broke down health premiums and the average cost to employer and employee.

Single coverage employer and employee premiums by employee contribution requirement[11]
Percent of participating employees Average flat monthly employee premium
100 $452.04
Single coverage employer and employee contribution requirement[12]
Percent of participating employees Average monthly employee premium Average monthly employer premium
70 $100.34 $431.34

As to be expected, the amount increases when the plan is a family plan. According to the study, employees shoulder 29 percent of the costs while employers pay 71 percent.[13]

Family coverage employer and employee premiums by employee contribution requirement[14]
Percent of participating employees Average flat monthly employee premium
100 $941.04
Family coverage employer and employee contribution requirement[15]
Percent of participating employees Average monthly employee premium Average monthly employer premium
89 $430.26 $908.87

Medical care and other benefits

Percent employees with medical care and other benefits access[16]
Medical and retirement benefits Medical and life insurance benefits Medical and defined benefits Medical and defined contribution
86 percent 78 percent 80 percent 30 Percent

The Bureau of Labor Statistics also broke down medical compensation into the different options.

Percent employees with medical care and other benefits access[17]
Health savings account Flex spending account Dependent care reimbursement Healthcare reimbursement Pre-tax savings (No employer contribution) Financial planning
23 percent 34 percent 54 percent 59 percent 59 percent 24 percent

Cost of health benefits

As of 2010, of the unfunded pension and other post-retirement promises made to workers by states, $587 billion was for retiree health care, according to Pew, with less than 6 percent of that amount funded as of fiscal year 2008.[8][18] Only two states, Alaska and Arizona, had set aside at least 50% of the needed assets.[18] On average, states had a 7.1% funding rate of their non-pension benefits.[18]

As of 2010, New York City public employees did not contribute to their healthcare plans, but did pay co-pays when visiting the doctor. A 2010 study by the Rockefeller Institute of Government Analysis found that if New York public employees contributed 10 percent of their earnings, as state workers do, it would save the city nearly a billion dollars annually.[19] Other local governments in New York could save $838 million if their employees contributed to their healthcare costs.

NCSL insurance study

In 2011 the National Conference of State Legislators Health Program staff compiled data from all 50 states on health insurance coverage for state employees. The data examined premiums for two types of health insurance coverage, one low-cost plan and a comprehensive plan like a PPO, to reflect the current diverse insurance market.

  • Lowest cost insurance options—includes plans with high annual-deductibles; often linked with health savings accounts (HSAs).
  • Standard policy options—includes managed-care, preferred-provider plans that usually cover a broad array of health services.

States provided coverage for about 3.4 million state government employees and retirees. When dependents and family members are included in coverage, the total is about seven million people.[20]

State and local employee health plans cover about 10 percent of the total U.S. workforce and hold more than 20 percent of the nation’s total pension assets. In state employee plans, 37 percent of workers were in HMOs, 42 percent in PPOs, 16 percent in POS plans and 5 percent were in conventional indemnity coverage. However, Indemnity plans enrolled a majority of retirees in the Midwest, Northeast and South.[20]

Nearly all full-time state workers were eligible for coverage (97 percent), and take-up was high across most plans, averaging 91 percent. Seventy-four percent of part-time state employees had the option of electing health benefits, including elected legislators in some states.[20]

Since 2007 state benefit plans have attracted interest for three primary reasons:[20]

  • Rapidly rising commercial premiums are impacting state budgets;
  • State fiscal pressures are leading to more proposals to increase employee share of costs;
  • Co-payments and deductibles are on the rise in many places, separate from the established premiums.

Findings

Each of the states have a distinct structure for administering state employee health benefits. Many states offer a complex matrix of plans and premiums, varied by family size and type of plan (HMO, PPO, indemnity). A majority of states have some type of employee union or collective bargaining unit that may play a substantial role in defining benefits and costs.

Most states offer more than two insurance choices and plans can vary. Premiums can vary by family size, income and health habits (such as smoking), which results in some employees paying different rates. Some categories of public employees (police, university employees) may be offered different coverage or rates, as well.[20]

Some states have a flat rate for the state’s share, but offer several extra features or expanded networks from which employees may choose and pay for. The data team reported it was not practical to determine a mathematical average for these various categories of premium rates in a given state because of the many insurers.[20]

The NCSL report is based on a 50-state survey of state employee benefit agency websites and interviews with state officials and staff.

The NCSL report included data from 2009:

  • In 2009 the average cost of an individual policy was $502.43, with the state paying an average of $447.79 (89 percent) and the employee being responsible for the remainder, an average of $56.52 (based on 48 states).
  • In 2009, 14 states paid for 100 percent of the monthly premium costs for a basic or "standard" health plan for some or all individual state employees (Alabama, Alaska, Delaware, Florida1, Iowa, Kentucky, Maine, Minnesota, North Carolina, North Dakota, Oklahoma, Oregon, South Dakota and Texas).
  • In 2009, seven states paid for 100 percent of the "defined standard" monthly premium costs for at least some families of state employees (Alaska, Delaware, Iowa2, North Carolina, North Dakota, Oklahoma and Oregon).

2011 individual policy findings

For individual policies, the study found:[20]

  • The average cost for a standard individual policy was $519.13, with the state paying an average of $460.63 (89 percent) and the employee paying the remainder (based on 24 states).
  • The average cost for the lowest cost individual policy was $423.32, with the state paying an average of $402.56 (95 percent) (based on 24 states).
  • Ten states paid 100 percent of the premiums for the lowest cost individual insurance policy option: Delaware, Iowa, Kentucky, Michigan, Minnesota, Mississippi, North Carolina, Texas, Utah and Wyoming.
  • Five states: Iowa, Kentucky, Minnesota, North Carolina and Texas, paid 100 percent of the premium for standard individual insurance policies.
Individual state coverage averages (based on 24 states providing data)
Plan State Employee Total
Lowest cost option $408.26 $28.54 $426.80
Standard policy option (PPO) $467.26 $72.37 $539.62

2011 family policy findings

For family policies, the study found:[20]

  • The average premium for a standard family policy was $1,377.03, with the state paying an average of $1,096.63 (80 percent) and the employee paying the remainder (based on 42 states).
  • The average premium rate for the lowest cost family insurance option was $1,101.28, with the state paying an average of $974.66 (88 percent) (based on 42 states).
  • Nine states covered 100 percent of the premium for the lowest cost family insurance policy: Alaska, Delaware, Iowa, North Dakota, Oklahoma, Oregon, Pennsylvania, Utah and Virginia.
  • Two states, North Dakota and Oregon, paid 100 percent of the premium for standard family insurance policies.
Family policy state coverage averages (based on data from 40 states)
Plan State Employee Total
Lowest cost option $974.66 $169.20 $1,101.28
Standard policy option (PPO) $1,096.63 $277.17 $1,377.03

Retirement benefits

See also: Public pensions

Only a few state plans provide for normal retirement benefits when a person reaches a specified age without an accompanying service requirement. As of 2011, 4 plans provided benefits without a service requirement after the age of 65.[21]

Twenty plans allowed normal retirement with longer service requirements than earlier and generally increased age requirements to 65 or 67.[21]

Nine plans required 10 years of service and one required 25 years of service. Four plans, however, allowed retirement when a member reaches 65 regardless of length of service.[21]

Public pension funds also typically provide death benefits for active and retired members to be paid to eligible beneficiaries or survivors.[22]

In addition, some states offer supplemental benefit plan options to those receiving pension benefits. In Delaware, for example, supplemental benefit plan options include: auto/home insurance, long-term care insurance, legal insurance, vision insurance and pet insurance.[23] In California, CalPERS recipients may take advantage of three different long-term care benefits and a Member Home Loan Program offers members security, protection and choice when purchasing or refinancing a home.[24][25]

Public pension protections

Public pension benefits are protected through various legal means. In some cases, these protections stand as obstacles to public pension reforms that may affect current rather than just future employees.

State constitution

Several state constitutions explicitly protect the pension benefits of public employees. In these instances, clauses specifically refer to the rights or benefits of public employees without relying on an interpretation of the contracts clause.

State Location Text
Alaska Article XIII, Section 7 "Membership in employee retirement systems of the State or its political subdivisions shall constitute a contractual relationship. Accrued benefits of these systems shall not be diminished or impaired."[26]
Arizona Article 29 "“Membership in a public retirement system is a contractual relationship that is subject to article II, section 25, and public retirement system benefits shall not be diminished or impaired.”[27]
Hawaii Article XVI, Section 2 “Membership in any employees' retirement system of the State or any political subdivision thereof shall be a contractual relationship, the accrued benefits of which shall not be diminished or impaired.”[28]
Illinois Article XIII, Section 5 Membership in any State, local, or school district pension plan is an “enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”[29]
Louisiana Article X, Section 29 “Membership in any retirement system of the state or of a political subdivision thereof shall be a contractual relationship between employee and employer, and the state shall guarantee benefits payable to a member of a state retirement system or retiree or to his lawful beneficiary upon his death.”[30]
Michigan Article IX, Section 24 "The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby."[31]
Texas Article 16, Section 66 "Benefits granted to a retiree or other annuitant before the effective date of this section and in effect on that date may not be reduced or otherwise impaired." This section does not apply to statewide retirement systems. It is also important to note that before the Amendment went into effect in 2004, municipalities were allowed to, by voter referendum, exempt themselves from the Amendment's requirements.[32]

Contracts interpretation

Most state constitutions, along with the United States Constitution, contain provisions protecting the right of contract. Under many legal interpretations, these clauses have been held up as guarantors of pension benefits for current and retired state employees. Under this interpretation, an employee enters a contract for pension benefits with his or her employer at some stage of employment (either upon hiring or at a later "vesting" date) that cannot be altered. California has historically held the strongest judicial interpretation of a contracts clause when it comes to protecting public employee pension benefits.[33]

"California Rule"

One study highlighted what the author dubbed a "California Rule." The term applies when judicial interpretations have held that "the statutes establishing state retirement systems created contracts between the state and employees that prohibit the state from making any detrimental changes to the benefits provided to current employees within such systems, even on a prospective basis."[33] The study highlighted 12 states with a judicial interpretation of public employee contract rights based on California's model:[33]

State Decision Notes
Alaska Hammond v. Hoffbeck, 627 P.2d 1052, 1057 (Alaska 1981)
Colorado Police Pension & Relief Bd. v. Bills, 366 P.2d 581, 584–85 (Colo. 1961); see also City of Aurora v. Ackman, 738 P.2d 796, 801 (Colo. App. 1987)
Idaho Nash v. Boise City Fire Dep’t, 663 P.2d 1105, 1108–09 (Idaho 1983); Hanson v. City of Idaho Falls, 446 P.2d 634, 636 (Idaho 1968)
Kansas Singer v. City of Topeka, 607 P.2d 467, 475 (Kan. 1980)
Massachusetts Dullea v. Mass. Bay Transp. Auth., 421 N.E.2d 1228, 1235 (Mass. App. Ct. 1981)
Nebraska Calabro v. City of Omaha, 531 N.W.2d 541, 552 (Neb. 1995)
Nevada Pub. Emps.’ Ret. Bd. v. Washoe Cnty., 615 P.2d 972, 974–75 (Nev. 1980)
Oklahoma Taylor v. State & Educ. Emps. Grp. Ins. Program, 897 P.2d 275, 279 Requires that a change not impair the fund's actuarial soundness, or "detrimentally affect vested rights."
Oregon Or. State Police Officers’ Ass’n v. State, 918 P.2d 765, 773 n.14, 775 n.18 (Or. 1996)
Pennsylvania Catania v. Commonwealth, 450 A.2d 1342, 1349–50 (Pa. 1982)
Vermont Burlington Fire Fighters’ Ass’n v. City of Burlington, 543 A.2d 686, 690 (Vt. 1988)
Washington McAllister v. City of Bellevue Firemen’s Pension Bd., 210 P.3d 1002, 1004 (Wash. 2009); Bakenhus v. City of Seattle, 296 P.2d 536, 538–41 (Wash. 1956)

Social Security

An estimated 30% of public-sector workers across 12 states are not part of the Social Security system.[34]

External links

References

  1. Reuters "U.S. state pension funds have $1 trillion gap: Pew" Feb. 18, 2010
  2. National Conference of State Legislatures "State Retirement System Defined Contribution Plans" Sept. 2009
  3. BLS Retirement Benefits Table, March 2012
  4. BLS Defined benefits, March 2012
  5. Defined Contribution Summary, March 2012
  6. CalPERS Health Benefits Overview
  7. National Conference of State Legislatures "Covering Young Adults Through Their Parent's or Guardian's Health Policy" April 2010
  8. 8.0 8.1 Stateline.org "In graying West Virginia, a mountain of retiree health bills" July 13, 2010
  9. Bureau of Labor Statistics, Healthcare benefits: Access, participation, and take-up rates, March 2012
  10. / BLS Report, Medical care benefits: Share of premiums paid by employer and employee, March 2012
  11. BLS, Employer and employee premiums by employee contribution requirement, march 2012
  12. BLS, Single Coverage employer and employee premiums by employee contribution requirement, march 2012
  13. / BLS Report, Single Coverage Medical care benefits: Share of premiums paid by employer and employee, March 2012
  14. BLS, Family Coverage employer and employee premiums by employee contribution requirement, march 2012
  15. BLS, Family Coverage employer and employee premiums by employee contribution requirement, march 2012
  16. BLS, Medical care benefit combinations: Access, march 2012
  17. BLS, Other Financial Benefits Access, march 2012
  18. 18.0 18.1 18.2 The Wall Street Journal "States Press Workers on Healthcare " Aug. 27, 2010
  19. New York Post, City's unhealthy loss, Nov. 9, 2010
  20. 20.0 20.1 20.2 20.3 20.4 20.5 20.6 20.7 NCSL, State Employee Health Benefits, Jan. 25, 2012
  21. 21.0 21.1 21.2 Changes in Age and Service Requirements for Normal Retirement in State Retirement Plans, 2009–2011, National Conference of State Legislatures
  22. "CalPERS Retirement Benefits"
  23. State of Delaware Supplemental Benefits Program
  24. CalPERS Long-Term Care Benefits
  25. CalPERS Member Home Loan Program
  26. Article XIII, Section 7, Alaska State Constitution, Ballotpedia
  27. Article 29, Arizona State Constitution, Ballotpedia
  28. Article XVI, Hawaii State Constitution, Ballotpedia
  29. Article XIII, Section 5, Illinois State Constitution
  30. Article X, Louisiana State Constitution, Ballotpedia
  31. Article IX, Michigan State Constitution, Ballotpedia
  32. Article 16, Section 66, Texas State Constitution
  33. 33.0 33.1 33.2 Amy B. Monahan, Statutes as Contracts? The “California Rule” and Its Impact on Public Pension Reform, Iowa Law Review, May 6, 2012
  34. CNNMoney.com "Will having a public-sector pension affect my Social Security?"