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Retiree Benefits in the New Year

Posted by: POLC Staff Posted date: December 28, 2016

The fight in Lansing over retiree health care and pension reform is not over.  We must remain vigilant.

On December 6th a meeting was held between all the unions, Committee Chairman Chattfield and Tom Leonard, newly elected Speaker of the House.  At this early morning meeting, all of the unions were informed together that the package of bills to reform retiree benefits would not move forward in lame duck.

Since that time, Governor Snyder has proposed a task force to recommend to him proposals on how to address unfunded liabilities in retirement benefits for local government employees.

In an interview, Mr. Snyder said he wants to broaden the group that his strategy director, John Walsh, met with for much of 2015 on the issue. He wants the task force to be bipartisan and include groups representing local governments and local government employee unions. And he wants it to produce recommendations within the first six months of the year, preferably by the end of April, but definitely before July.

“Get everyone at the table,” he said. “I’m not sure we’ll get unanimous consensus on everything but everyone would have been at the table so we all understand the consequences of the different choices.”

Mr. Snyder’s comments come after a brief, failed attempt by House Republicans to change retiree health benefits for local government employees. Those bills would have required local governments with retirement health care systems funded less than 80 percent to begin requiring retirees to pay at least 20 percent of their health care costs. Those funded more than 80 percent would not have been affected.

The bills also would have required local governments to no longer provide retirement health care for new employees, and instead pay no more than 2 percent of an employee’s base salary into a health savings account.

There was a backlash, led by police officers and firefighters, and the legislation was pulled almost as soon as it was introduced.

Mr. Snyder echoed some of the thoughts of critics of those bills about them taking a one-size-fits-all approach.

“One thing that concerned me about the dialogue on how it was going on here in Lansing is it was very broad brush. It was like post retiree medical benefits, let’s do all of them this way,” he said. “It’s a complicated subject so my view is there’s probably four or five of these kind of sets of three or so categories for each one that the right answer is we should be getting the facts and breaking it down into sort of those kind of pieces.”

Mr. Snyder said the issue must be broken up in looking at how to handle well-funded communities, poorer communities and the bulk of local governments in the middle. Then there’s the question of which employees are new hires, how many retirees the local government has and how many years will employees be active.

Some of the answers will be easy and doable in the short-term while others will be difficult. Mr. Snyder said he envisioned using trigger mechanisms to help local governments look five to 10 years down the road with future actions that would be needed if those triggers were hit.

As to the House’s brief, abandoned effort on the issue, Mr. Snyder said: “I thought the time would be short to do all the things that needed to be done in terms of understanding the issues, but I respect them so that was their prerogative to go do that. I think it helped highlight the issue to a lot of people.”

Officials representing local governments, groups which participated in Mr. Walsh’s efforts, said they would welcome the task force.

“This is a critical issues for cities,” Chris Hackbarth of the Michigan Municipal League said. “We absolutely believe we need to continue to offer retiree health care as a benefit. We need to be able to attract and retain talent at the municipal level. We need a good public sector workforce. But it has to also be a cost structure that’s sustainable and that we have some controls over it.”

Judy Allen of the Michigan Townships Association said many of the group’s members reached out to say the legislation should not take a one-size-fits-all approach.

POLC in conjunction with MAPO will remain active on this important issue and will be involved in every step of the legislative process.


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