Perennial school support staff health insurance credit bill advances

February 27, 2020

Legislation requiring school divisions to provide a health insurance credit (HIC) of $1.50 per year of service to all retired members of local school divisions (other than teachers) with at least 15 years of credible service has advanced to the Senate floor. HB 1513 (McQuinn) originally required school divisions to provide a health insurance credit of $4 per year of service, but was amended in the House to the reduced figure. The bill also gives local school divisions the option of providing an additional $1 per year for a total credit of $2.50, as well as removing the $45 cap for monthly payments.

An HIC is provided to eligible retirees as a reimbursement to assist with the cost of employee health insurance premiums. Retirees are reimbursed based on their number of years of service and the credit amount per year of service. Under the Code of Virginia, the Commonwealth currently provides the state share of a $4 HIC for teachers recognized and funded under the Standards of Quality (SOQ). As with SOQ salaries, the state and local share of this HIC is determined by the composite index of local ability-to-pay (LCI). This is one of several HIC overseen by the Virginia Retirement System (VRS). Employer contribution rates are calculated by VRS staff and the current proposed rate for the biennium for the teacher HIC is 1.21 percent.

The HIC for non-teacher local employees is currently set at $1.50 per year of service, but participation is optional for localities and school divisions. Currently, 37 school divisions have opted to provide this HIC to their eligible employees. The legislation as written would require the remaining 96 school divisions to provide this HIC. Unlike the employer rates for the teacher HIC, each of the HIC for local employers is individually actuarially rated. However, VRS calculated that the increase in annual cost as percentage of covered payroll would rise 0.02 percent for participating school divisions and 0.89 percent for non-participating school divisions if HB 1513 were enacted.

The House budget proposal contains an amendment providing approximately $1 million in General Funds in each year of the biennium for the state share of the expanded HIC proposed. The total local fiscal impact of the legislation would be $2.9 million in FY 2021 and in subsequent years. HB 1513 would impose an unfunded mandate on localities and VACo has expressed concerns over this legislation for that reason.

As there was no Senate companion legislation to this bill and the Senate budget does not contain an amendment funding the fiscal impact to the Commonwealth, the Senate Finance and Appropriations Committee amended the bill by adding the financial contingency clause before reporting the bill unanimously, 15-0. This means that even if passed, the bill will not become effective unless the General Assembly includes an appropriation for the expanded HIC in the final form of the budget.

VACo Contact: Jeremy R. Bennett

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