Cutting benefits is not the answer
By Robert Broome SEANC Executive Director
An unfunded liability exists in the State Health Plan and the state’s retirement plan, which means the systems are forecasted to require more money than currently available. It is a serious problem that needs the right solution.
Serious problems often generate knee-jerk reactions, and we see that today in impulsive proposals that ignore key facts, blame program beneficiaries, mischaracterize benefits as exorbitant, and assume that cuts to state employees’ benefits are the only way forward.
That’s a misinformed reaction, not a viable solution.
Decades of poor decisions and bad deals by politicians — not overly generous benefits — created this unfunded liability.
From 2000 to 2010, the state deliberately underfunded the retirement system. As employees faithfully paid in their 6 percent, lawmakers did not match it. This means that a state employee with 20 years of experience spent over half their career putting more money into their retirement plan than their employer.
Previous state treasurers gave away billions to managers of so-called “alternative” investments at the
expense of state employees, retirees and taxpayers. Since 2001, fees paid to Wall Street fund managers increased by more than 1,100 percent, even though the retirement system’s assets increased by only 50 percent.
In exchange for outrageous fees and risky strategies, we got lackluster returns. Had the state retained its asset allocation from 2000 and avoided alternative investment contracts, there would be more than $20 billion of additional funds in the retirement system today. That’s more than enough to satisfy the system’s unfunded liability.
Some people claim that moving from a defined benefit pension plan to a defined contribution 401(k) system is the right solution, but research and experience show they are wrong. A study by the National Institute on Retirement Security found that costs to fund a target retirement benefit under a pension plan is 12.5 percent of payroll. The cost to provide the same benefit under a defined contribution plan is 22.2 percent of payroll.
Moving employees over to a 401(k) plan isn’t like flipping a switch. The state cannot legally dissolve its pension system for vested employees. Converting to a defined contribution plan involves significant upfront investments and an ongoing, unnecessary administrative cost of running dual systems. West Virginia tried it. After 15 years, substantial costs forced a move back to a defined
benefit system.
Fixing the unfunded liability is not difficult. It’s simply a matter of refusing to waste money, and State Treasurer Dale Folwell is doing just that. Folwell has cut fees and is on track to save $344 million over four years. Furthermore, the treasurer is committed to further reductions in expenses as these bloated contracts expire. Combined with full funding of the employer share of retirement costs and the recently passed Unfunded Liability Solvency Reserve Act, these actions should fill the unfunded liability in the retirement system within a decade.
Treasurer Folwell is also bringing strategies and solutions to the table for the State Health Plan. At the top of his list is using the State Health Plan’s size to negotiate provider contracts that benefit Plan members as well as taxpayers. Renegotiations have already resulted in savings of $55 million, and it is clear that Folwell is just getting started.
Blaming state employees and retirees for the unfunded liability is illogical and unsupported by facts. Knee-jerk responses like cutting benefits is not the answer. The right solution is to prudently manage the State Health Plan and retirement system, and that’s exactly what Treasurer Folwell is doing. Let’s allow him to do his job.
Executive Director Robert Broome
This column first appeared in The (Raleigh) News & Observer on Aug. 10.
2018 SEANC Legislative Victories
SEANC Made History!
SEANC was the only organization invited to the negotiating table during state budget talks, and was able to make history — winning an increase in the minimum salary to $31,200, or $15 per hour, for all state employees covered by the State Human Resources Act. North Carolina became the first state in the nation to implement a minimum salary of $15 per hour for state employees.
Secured Pay Raises, Bonuses and Bonus Leave
• Included a 2% pay raise for most state employees.
• Included five days of bonus leave.
• Included a 1% bonus for retirees.
The budget also:
• Maintained the defined benefit retirement plan.
• Maintained longevity pay.
• Maintained full funding for State Health Plan and retirement systems.
Recruitment, Retention and Safety Gains in Adult Corrections
• A 4% pay raise for all adult corrections assigned to a prison.
• Quarterly oversight of the department by the legislature.
• Passed HB 969, making it a felony with a consecutive sentence for inmates exposing themselves to correctional personnel.
REPORTER THE
Jonathan owens, Editor-In-Chief Beth Dew, Managing Editor amanDa wise, Associate Editor sara Cowell CoBurn, Associate Editor
State Employees Association of North Carolina 1621 Midtown Place • Raleigh, NC 27609 Telephone 919-833-6436, 800-222-2758 www.seanc.org
SEANC accepts advertising material from companies and persons seeking to communicate with SEANC members. Acceptance of this advertising does not indicate SEANC approval or endorsement of any representation that the message, product or service is as represented by the advertiser. SEANC accepts no responsibility and shall not be liable for any use of or reliance on any such information, product or service. SEANC is a private entity and is under no obligation to carry advertisements of any nature, political or otherwise, that may be viewed as contrary to the interests of the association and its membership.
• $15 million for safety upgrades.
• Doubled the line-of-duty death benefit for correctional personnel to $100,000, retroactive to deaths in 2017.
• Won differential pay for officers required to serve at a custody level higher than that to which they are assigned.
Other Victories
• Secured SEANC access at all agencies and SEANC participation in new employee orientation.
• EMPAC-endorsed State Treasurer Dale Folwell has cut more than $300 million in fees from the retirement systems, making more money available for those in the system.
• Ensured no premium increases for the State Health Plan for the next three years.
• Protected SEANC’s ability to deduct dues, insurance premiums and other payments from paychecks.
• Folwell has also ordered Blue Cross Blue Shield of North Carolina to cut 15 percent from provider contracts, which could save the plan $1 billion over three years, keeping health plan costs for members from rising.
• SEANC is a leading organization in the multi-state “One Voice” initiative seeking to improve the lives and working conditions of correctional personnel all over the country.
• Fought off attempt to decrease the income tax rate cap to 5.5%.
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MEMBERS IN ACTION
District 42 member Tracy Webb meets with a Central Regional Hospital employee during the food
Director of Member Services Brenda Hooker answers questions and explains SEANC's insurance programs to Caswell Center employees on July 27. Ninety-nine new members joined that day.
Executive Director Robert Broome, District 22 Chairwoman Deborah Harney and corrections officers from around the United States spoke to Members of Congress on June 20 about the importance of including input from corrections officers in efforts to reform our criminal justice system.
Member Relations Representative Dennis Hartley (right) discusses SEANC membership benefits with a University of North Carolina Chapel Hill employee during the UNC Summer Splash on June
6.
truck event on June 14 in Butner.
Director of Operations Mitch Leonard speaks at the District 2
Member Appreciation/Retiree Forum at the Western Governor’s Residence in Asheville on July 12.
SEANC Member Relations Representative Celia Wilson speaks with a group of employees at J. Iverson Riddle Developmental Center about the benefits of membership. District 7 member Ronnie Fox (at far left) serves a snow cones to a new member.
Scholarships were presented by District 21 to Joseph Keith (left), Jordan Gould (right) and Javin Currie (not pictured).
District 17 provided dinner for the University of North Carolina System staff assembly in Greensboro on July 30.
SARA COWELL COBURN
MARY D. TILLEY
SUBMITTED BY ROBERT BROOME
The SEANC Scholarship Foundation and SEANC districts across the state announced they are awarding more than $100,000 in awards; $40,500 of that is being given out by the statewide SEANC Scholarship Foundation to 49 well-deserving students. The five categories of statewide scholarships include:
Four-year financial — a $1,000 scholarship to attend a four-year college or university.
Four-year merit — a $1,000 merit scholarship to attend a four-year college or university.
Two-year financial — a $500 scholarship to attend a community college, technical school or trade school.
Two-year merit — a $500 merit scholarship to attend a community college, technical school or trade school.
Member only — a $500 scholarship awarded to SEANC members.
Kaleigh
Tyriq
SCHOLARSHIP AWARDS
James
Robin
Donna Faye Hinson Albemarle Wingate University Member of District 10 Stanly Comm. College
The SEANC Scholarship Foundation held its annual Bowl-a-thon on Saturday, July 21 at Buffaloe Lanes North in Raleigh.
Thanks to the support of many, this tournament was a great success, raising $5,000 for the Scholarship Foundation! The event featured 85 bowlers and a silent auction with items donated by SEANC members and local businesses.
Special thanks to the Scholarship Foundation Board, our corporate sponsors — Doug Sutton Insurance and Colonial Life, our lane sponsors Districts 10, 12, 17, 21, 39, 44, 61, 67 and Mitch Leonard, and our team sponsors — Districts, 19, 42, 58, 64, 65, SEANC Executive Committee and SEANC Staff, our many volunteers, and for donations from Districts 2, 16, 60 and 66. Joseph
College
Daughter of District 9
member Malinda Gantt Dept. of Health and Human Services
Taneisha Ingram Thompson Clinton Fayetteville State University Member of District 22 Dept. of Public Safety
Jennifer Webb Farris Riegelwood Walden University
Victoria Elaine Kosinski Kinston Lenoir Comm. College
Daughter of District 58/70
Collen
SCHARSHIP BOWL-A-THON
Anderson Long and his team had the highest single game score. Pictured back row: T.J. Jacovitch, Tim Carter, Steve Brooks and Dylan Jacovitch. Pictured front row: Long and his grandfather, Director of Operations Mitch
Derek Neal Goldsboro Louisburg College
Son of District 59
member Phyllis Neal Dept. of Health and Human Services
PHOTOGRAPHS BY SARA COWELL COBURN
District 10 member Kim Martin high fives District 22 member Rashia Norman after bowling a spare.
The Divas of District 42: (left to right) Shirley Ballard, Tralene Williams, Rhosaundra Watson, Ann France and Diana Barbry.
Pictured left to right: State Retiree Chairman Benny Brigman, First Vice President Jimmy Davis, District 9 Chairman Jamie Robinson, Western Regional Representative Cliff Johnson and District 7 Chairman Henry Belada.
District 21 Chairwoman Virginia Lindsey celebrates a strike.
Representing State Employees in Grievances, Court of Appeals, and NC Office of Administrative Hearings
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State employees are good people. But even good people make mistakesmistakes that violate your rights as a career employee, discriminate against you, or cost you a promotion or job.
My practice is restricted to state personnel disciplinary and licensing matters. I have litigated personnel cases in the Office of Administrative Hearings since the 1990s.
If you have a grievance, disciplinary appeal, or any state employment matter, call (919) 865-2572 or email me at michael@mbyrnelawnc.com.
Learn how I put 20 years of experience and consistent success in state personnel cases to work for you - when your rights are on the line.
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Message from State Treasurer Dale Folwell
Submitted by The Office of State Treasurer
When I applied for the job of state treasurer, I promised members of SEANC and the people of North Carolina that I would freeze family premiums for the more than 720,000 participants in the State Health Plan. There are two reasons why I was so passionate about this pledge.
First, we don’t consume health care – it consumes us. A teacher or state trooper who is just starting their career has to work five days out of every month just to pay their family premium. Second, the State Health Plan is mostly made up of people like me who are more than 50 years old. You can’t run an insurance company with all bad drivers. We have to bring younger, healthier people into the plan to sustain it for the long run.
During my first year on the job, we froze family health care premiums, co-
pays and deductibles for 2018. I’m proud to say that we are once again freezing premiums, this time for families and individuals for 2019. We also negotiated rates with UnitedHealthcare to provide Medicare-eligible retirees with Group Medicare Advantage Plans in 2019. The result was $55 million in savings for the Plan, its members and taxpayers.
That isn’t all we’re doing to reduce health care costs. You will receive a new insurance card that says “Paid for by you and taxpayers like you.” We want to make sure you understand that as taxpayers, you pay the bills for state employee health care. The next time you consume health care, you’ll also receive a redesigned Explanation of Benefits, or EOB, statement. The previous EOB didn’t explain anything and was of no benefit. The new, easy-to-read version provides a clear picture of what your provider has charged and where you are in meeting your deductible.
The State Health Plan wants you to be a watchdog over your health care costs, and the new EOB and insurance cards are just some of the ways we’re helping members become more informed health care consumers. By becoming better stewards of our health care spending, we can make great strides toward driving down medical and pharmacy costs for you and taxpayers like you.
We will continue to update you on our progress toward reducing health care costs for you and all North Carolina taxpayers. Thank you for your service to the people of our state.
