Hot Topics in Collective Bargaining
Welcome to a series of columns on emerging topics at the collective bargaining table. This series will provide specific information concerning the demands that school board negotiators are seeing at the bargaining table.
||About the author: Philip Gerner, from the Robbins Schwartz law firm, represents school districts in a variety of legal negotiations. He is a frequent presenter for IASB on a full range of labor and employment issues.
Posted June 19, 2014
BARGAINING TABLE: TEACHER RETIREMENT BENEFITS
By Philip H. Gerner, III
Teacher retirement benefits remain a key economic issue for several reasons. First, unions often contend that they accepted lower salary increases in order to retain retirement and health insurance benefits. Second, senior teachers continue to expect districts to provide retirement benefits as an incentive for early retirement and to compensate teachers for lengthy service to the district.
Retirement benefits can benefit districts so long as they are an incentive for teachers to retire earlier than they would absent the incentive, and cost savings generated by the teachers’ retirement (replacement teachers hired at a significantly lower annual salary) exceed the cost of any retirement benefits payments, including any TRS ERO or 6.0% earnings cap penalties.
School Board Negotiation Options
Several legislative changes favor school boards negotiating teacher retirement benefits, specifically the Pension Reform Act “grandfather” contract provisions and the amended ERO. Significantly, the Act limits the duration of the “grandfather” of a teacher’s salary above the pensionable earnings cap ($110,631.26) to the term of the “ grandfathered” contract. Consequently, particularly in districts with higher teacher salaries, the value of pre-retirement 6.0% salary increases is reduced as salary amounts above $110,631.26, and paid after expiration of the “ grandfathered” contract, are not counted towards the teacher’s TRS creditable earnings. Accordingly, districts with higher teacher salaries should negotiate:
- Eliminating pre-retirement 6.0% salary increases in the successor contract.
- Retaining post-retirement health insurance contributions as a “trade off” for eliminating pre-retirement 6.0% salary increases, provided teachers elect TRS health insurance coverage.
In addition, the amended ERO benefits districts by granting school boards the right to approve/disapprove a teacher’s ERO request in accordance with ERO eligibility criteria adopted by the board with the union’s consent. The statute also terminates the ERO option effective June 30, 2016. School boards should negotiate the following provisions based upon the amended ERO:
- Teachers are eligible for contractual retirement benefits only if their retirement does not result in any ERO or 6.0% earnings cap penalty to the district.
- Adoption of ERO eligibility guidelines:
- Teachers must have at least 30 years district service to retire under ERO.
- The district’s ERO penalty costs must be less than the first-year cost savings of hiring a replacement teacher.
- The teacher’s retirement does not result in any 6.0% earnings cap penalty.
Teacher ERO retirements are limited to a maximum of one per year.
This article is intended for informational purposes only and should not be considered legal advice. The opinions expressed here are those of the author, not necessarily IASB. Districts should consult their school attorney for further clarification.
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