TRENTON — New Jersey school insurance premiums are helping a private employer pay its retirees $500 a month for lifetime health care — even as public teachers confront layoffs and increasing pressure to reduce salaries and benefits. The "post-employment benefit plan" for former employees of the New Jersey School Boards Association Insurance Group cost nearly $29,000 in fiscal 2009. That...
TRENTON — New Jersey school insurance premiums are helping a private employer pay its retirees $500 a month for lifetime health care — even as public teachers confront layoffs and increasing pressure to reduce salaries and benefits.
The "post-employment benefit plan" for former employees of the New Jersey School Boards Association Insurance Group cost nearly $29,000 in fiscal 2009. That figure is projected to reach $504,991 over the lifetimes of the beneficiaries, internal documents show.
The $500-a-month payments are offered to those who have reached age 60 with 25 years of service, according to annual audits.
Public records show that in 2009, one insurance group retiree — among eight — had reached the age and service threshold. The other seven retirees were 60 to 64 years old, with service ranging from one to 20 years.
However, Martin Kalbach, the group’s executive director, said no one is collecting the payments.
“No NJSBAIG retiree has ever met the requirements of this policy, so no individual has received or been eligible to receive any payment under this policy,” he wrote in an e-mail in response to repeated e-mails and phones calls from The Record to answer questions about the retirement plan.
Kalbach did not provide any other information about the program, nor explain how it incurred more than $80,000 in expenditures over three years. None of the eight trustees — who are all school board members or superintendents from various districts — acknowledged e-mailed questions.
The organization is a nonprofit group founded in 1983 to pool workers’ compensation for 38 school districts, according to its website. Five years later it split from its sponsor, the New Jersey School Boards Association, a lobbying group, and the two have no affiliation. Today the pool calls itself New Jersey’s “first and largest school insurance pool.”
About 370 public school districts were billed more than $98 million in premiums for general liability, property damage, automobile, theft and other coverage in fiscal 2009, the most recent year for which audit figures were available.
Public school administrators, meanwhile, are confronting flat state aid, teacher layoffs and curriculum cuts in addition to rising political and public criticism of compensation and the cost of pensions and health insurance. Financial pressures also are squeezing New Jersey’s 78,000 government employees, plus police and firefighters.
Unions representing public workers have demonstrated outside the State House in recent weeks, demanding that Gov. Chris Christie and legislators back off promises to reign in their salaries and force them to pay a larger share of their benefits.
The need to find savings is both immediate and long-term. New Jersey is short $10.7 billion heading into fiscal 2012. The taxpayer-funded public workers’ benefits systems, meanwhile, are some of the worst-off in the country: The pensions fund is $54 billion in the red and the medical-care fund is $67 billion below the level where analysts say it should stand.
The government retirement pot could go broke by 2020, Christie tells audiences who attend his “town hall”-style meetings around the state.
Amid the crisis, the taxpayer-financed pension and health-care systems accommodate staffs that aren’t public employees.
The New Jersey School Boards Association Insurance Group is a private employer, not a government one. It is among several private New Jersey businesses whose staffs are eligible for public pensions and health plans, including post-employment medical care, as a result of a 1955 law that determined their work was valuable to the public.
A series of stories in The Record about the benefits led lawmakers and Governor Christie to call for repeal of the 1956 law as a step to help ensure the funds’ futures.
The insurance group responded to one of the stories with an e-mail to The Record stating that although former employees do collect public pensions, they do not take part in state-run health plans.
“Employees … do not get health benefits in retirement no matter how much service time they accrue or age they work to,” said the e-mail, from Shannon L. Balken, a member services manager.
The letter made no mention of the $500-a-month expenditures. Some details of that policy are contained in financial reports posted on the New Jersey School Boards Association Insurance Group website.
“The group has established a post-employment benefit plan to assist retirees in paying for medical coverage,” the reports state. “The plan will provide a monthly payment of $500 to all eligible employees with full vesting occurring on retirement age 60 with 25 years of service.”
The reports do not disclose when the practice began, whether any individuals get the monthly checks or whether each beneficiary would get the full $500.
Expenses for the coverage show an increase each year: $25,440 in fiscal 2007; $26,966 in fiscal 2008; and $28,584.38 in fiscal 2009, the most recent year for which records are available. The “present value,” or lifetime cost based on actuarial calculations, rose 12 percent in two years: to $504,991 in 2009, from $449,440 in 2007.
The insurance pool employs 54 people. Their collective medical retirement payouts, at $500 a month, would amount to $324,000 a year for the rest of their lives.
Legislation passed in the Senate last year would ban future hires of private employers — including the Association of Counties, the League of Municipalities and the School Boards Association and the New Jersey School Boards Association Insurance Group — from joining the public systems. Right now, New Jersey taxpayers are giving $1.3 million a year in pensions to 62 retirees of those organizations.
The bill was referred to the Assembly State Government Committee, where it has not been scheduled for a vote.
Kalbach, of the insurance pool, sent a memo to its board of directors arguing against an early version of the legislation, which would have banned new hires from the systems, force those with fewer than five years’ service from the pension pool and remove all private employees from the health plans.
“Needless to say, [the bill] would force NJSBAIG to change the way it conducts its business,” Kalbach wrote in a letter dated March 26, 2010. “A new retirement and medical-benefit system would have to be developed. Currently the state-sponsored programs are a significant portion of the employee benefit package. These state-sponsored benefits are crucial to attracting and retaining employees.”
The law was amended to apply only to new hires. It would not affect the insurance group’s $500-a-month arrangement because retirees pay for their health care with their former employer’s money rather than automatically enroll in the state-run plan.