Falls schools consider tax-sheltered annuity to save $6 million in retirement liability
Menomonee Falls - The Menomonee Falls School District is reviewing whether to switch from a post retirement health benefit plan to a tax-sheltered annuity, a move that would save the district $6 million in retirement liability.
A tax-sheltered annuity is not a tax benefit, it is a defined contribution similar to a 401(k) and would replace the post retirement health benefit. The TSA also makes all employee groups equal in retirement benefits. Previously, different employee groups received different benefits, such as educational assistants and school nutrition managers, who did not receive any post retirement health benefits, but are eligible for a TSA.
The School Board is scheduled to vote on the change April 8.
TSA is a defined benefit with a defined contribution and does not increase with inflation. It also allows previous employees to be grandfathered into the plan. If approved, OPEB liability would be reduced from $11 million to about $5.5 million, School Board member Scott Ternes said.
Administrators, teachers and professional/technical employees are eligible for the TSA option at age 57 if they have given 20 years of service. Custodial employees, educational assistants and school nutrition managers are eligible at age 62 with 20 years of service.
"Everyone has to have 20 yeas of service, in the past that was not the case," Ternes said.
Administrators would receive $1,500 per month for five years; teachers and professional and technical staff receive $1,250 per month for five years and administrative assistants and custodial employees receive $1,000 per month for three years through the TSA, according to district documents.
Educational assistants and nutrition managers will get $250 per month for one year.
The current retirement health plan for an administrator with a family costs the district $101,114 over five years. The cost to the district for an administrator through TSA is $90,000 over the course of five years.
This is not the first change to post retirement health benefits. Before 2011, the School District offered 10 years of health insurance to employees who were retiring, Superintendent Patricia Greco said. As of July 2011, that benefit was cut from 10 years to five years of health insurance, which reduced the liability from $18 million to $12 million.
Switching to TSA reduces it by another $6 million.
"The value of five years of health insurance on a family plan is about double what the tax shelter annuity will be so it reduces the liability to the district by another 50 percent," Greco said.
Over the last two years, the district has had a 75 percent overall reduction in health care costs, which includes the reduction in OPEB liability by moving to TSA. Transitioning from a self-funded, high deductible health insurance plan has saved the district $2.3 million per year.
Employee contributions into the Wisconsin Retirement Systems reduced costs by $1.5 million per year, Greco said.
- Old Falls Village Days set for June 4-5
- Street festival to mark Memorial Day in Menomonee Falls
- Menomonee Falls Police Reports: May 26, 2016
- The 'wurst' idea for the best summer
- Load your basket with these picnic tips
- Something for all us to scream about: Ice cream tips for a hot, hot summer
- Video: Summer fun in suburban Milwaukee
- Menomonee Falls North Middle School seventh-grader to compete at National Spelling Bee
- Overnight closure of Highway 45 at I-41/US 45 split
- "TJ Walkers" bid farewell to Thomas Jefferson as their winter walking destination (2)