March 22, 2011

Study of State Retiree Benefits and Premiums Forthcoming, Raises Concerns

By Monica M. Walk

A CALL for proposals for an outside independent consultant to review the cost of healthcare coverage currently provided to State of Illinois retirees has raised some concerns for both retirees and current State employees.

THE CALL for proposals comes from the State of Illinois Commission on Government Forecasting and Accountability (CGFA), and was initiated by Illinois State Senator Jeffrey Schoenberg (D-9th, Evanston).

“THE FUNDAMENTAL idea is to start charging State annuitants—teachers, professors, judges—who received public pensions to impose premiums,” explained Merrill Gassman, PhD, Professor Emeritus of biological sciences, and President and Webmaster of the UIC Chapter of the State Universities Annuitants Association (SUAA). “It is still in the early stages, but it is a concern to SUAA.”

THAT CONCERN was articulated in a “Call to Action” alert issued by SUAA (, which noted two main issues:
1. The Request for Proposal (RFP) from outside independent consultants was not subject to the Illinois Procurement Code.
2. The RFP states: “The premium contribution should be means tested and based on the retiree’s overall annual household income.”
The action alert urged employees covered by the State health care plan to contact the CGFA commission members, including Schoenberg, about these issues.

AN ADDITIONAL e-mail document from SUAA noted concern that the contract could be awarded to an entity that is biased, if the RFP is allowed to bypass the procurement code.

AT A time when transparency in government has become a much-heralded theme, Gassman said, “The contract code should be abided by. We have a right to know.”

CGFA REVENUE Analyst Anthony Bolton responded to a query about adherence to the procurement code by sharing a link to the Illinois Procurement Code and the specific section (30 ILCS 500/1-30) applicable in this situation.

“BASICALLY, THE legislative branch is exempt from the procurement code and is instead directed to make rules to govern their needs that may incorporate parts of the Code,” Bolton said via e-mail, noting that the Joint Committee on Administrative Rules is the key office for explaining how procurement works for the legislature and organizations covered under it, such as CGFA. “CGFA is a part of the legislative branch under law,” Bolton said

THE ISSUE of household income being used to decide premium contributions is of personal concern for both current retirees and current employees, Gassman said.

“THE ISSUE has been raised if it is fair to take the entire household income into account in such a proposal or just the individual retiree; there is some controversy,” Gassman confirmed. He noted that employees pay insurance premiums based only on their own incomes and not on their spouses’ incomes. “So, if they take the entire household, that doesn’t seem fair for the retiree….Whose means are being tested? It doesn’t seem fair to test the whole household when it [the benefit] is just on the retiree. For employees, it is just their salary and their payment.”

CITING FROM a document from SUAA, Gassman explained that “household income” means the combined income of the members of the household, including the applicant, the spouse of the applicant, and all persons using the residence as their principal place of residence. The SUAA document noted that households including such members as a mentally challenged adult child, an ailing parent, teenagers with income, or a wealthy spouse have attached incomes that may include Social Security Disability, Social Security, another pension, and an inheritance.

THE REQUEST for proposal calls for a study of healthcare costs around the country and how they are covered for retirees and their dependents, CGFA’s Bolton said. The intent, he said, is to “find out what the options are and how other states handle it. Based on what is found around the country, they [the consultant] will be asked to mock up how that could look in Illinois…a general synopsis of the more popular programs around the country and how they would look in Illinois. It’s really just purely research to see what the options are in Illinois.”

ACCORDING TO Bolton, $473 million is spent annually on retirees in Illinois, with $12 million contributed by retirees. Another $150 million is currently spent each year for retirees’ dependents, with $40 million contributed by retirees.

BOLTON REPORTS a contract will be ready by May 2, 2011, or sooner. He does not have a timeline for announcements about the study.

GROSSMAN EXPLAINED how the situation affects current employees who anticipate a future as retirees and annuitants. “People take jobs for many reasons, including the benefits anticipated when they retire. You make financial decisions in life for family and self while employed based on these considerations.

“IT IS unfair for the state to turn around and make changes in the benefit structure that is not a two-party agreement,” Grossman continued, stating that the process has been done without direct consultation of the parties involved.

ERIC MADIAR, chief legal counsel in State Senator John Cullerton’s office, recently composed a defense of the Illinois Sate Constitution’s pension clause. He states that the clause “….makes a public employee’s participation in a pension system an enforceable contractual relationship, but also constitutionally protects the pension benefit rights contained in the Pension Code when an employee joins a pension system, including employee contribution rates.” (For detail, see Madiar’s full document Is Welching On Public Pension Promises An Option For Illinois?.)

Senator Schoenberg’s office did not respond to queries from APAC News prior to deadline.

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