Stakeholder Presentation

Transcription

1 Stakeholder Presentation December 16, 2014 Peggy G. Boykin, CPA Executive Director

2 S.C. Public Employee Benefit Authority Created by the General Assembly on July 1, 2012 Governed by an 11-member Board of Directors (Four representative and seven non-representative see table on next slide) Responsible for the state s employee insurance programs, retirement systems, and deferred compensation program 2

3 Appointing Authority Member Category Appointee Governor NR Arthur M. Bjontegard, Jr. Committee Assignment Represents Governor NR Stephen M. Heisler Health Governor NR Steve A. Matthews FAAC Senate President Pro Tempore Senate President Pro Tempore Senate Finance Committee Chairman Senate Finance Committee Chairman Speaker, House of Representatives Speaker, House of Representatives House Ways & Means Committee Chairman House Ways & Means Committee Chairman NR John A. Sowards Retirement R Leon Lott FAAC Active or Retired PORS Member NR Joe W. Rocky Pierce, Jr. Health R Frank W. Fusco Health Retired SCRS Member NR David J. Tigges Retirement R Stephen C. Osborne Retirement Active SCRS Member NR Audie Penn Health R Stacy Kubu FAAC Public School District Employee Active SCRS Member 3

4 Agency Mission To recommend, offer and administer competitive programs of retirement and insurance benefits for S.C. public employers, employees and retirees 4

5 PEBA s Benefits Programs, Plans Retirement Plans South Carolina Retirement System (SCRS) (defined benefit) State Optional Retirement Program (State ORP) (defined contribution) Police Officers Retirement System (PORS) General Assembly Retirement System (GARS) Judges and Solicitors Retirement System (JSRS) South Carolina National Guard Supplemental Retirement Plan (SCNG) South Carolina Deferred Compensation Program (SCDCP) (401k and 457 plans Roth and non-roth) 5

6 PEBA s Benefits Programs, Plans Self-Insured Programs State Health Plan Standard Plan (PPO)* Medicare Supplement Savings Plan (HDHP)** State Dental Plan Basic Long Term Disability Plan Adoption Assistance Program *PPO stands for Preferred Provider Organization. **HDHP stands for High Deductible Health Plan. Insured Programs MoneyPlus Program Medical Spending Account Dependent Care Spending Account Health Savings Account for HDHP Dental Plus Plan Basic Life Insurance Optional Life Insurance Dependent Life Insurance Supplemental Long Term Disability Program Vision Care Program TriCare Supplement 6

7 Public Trust Funds Retirement Systems Trust Funds State Health Plan Trust Funds Other Post-Employment Benefits Trust Funds S.C. Retiree Health Insurance Trust Fund S.C. Long-Term Disability Insurance Trust Fund 7

8 PEBA Board s Responsibilities Insurance Programs* Acts as trustees of the insurance trust funds, including OPEB Trusts Makes policy and strategic decisions for the insurance benefit plans largely related to maintaining the fiscal soundness of the plans Annually sets and approves a plan of benefits for the insurance programs Annually sets and approves contribution rates or premiums for the insurance programs, within parameters authorized by the budget *Some Board recommendations and/or actions require approval by either the S.C. General Assembly or the S.C. Budget and Control Board. 8

9 PEBA Board s Responsibilities Retirement Benefits* Acts as co-trustees of the retirement trust funds Makes policy and strategic decisions largely related to maintaining the fiscal soundness of the retirement systems Sets actuarial assumptions for the defined benefit plans as recommended by the actuary, except the assumed rate of return on investments Adopts funding policies and annually determines contribution rates for the retirement systems, within the parameters provided by statute Oversees State ORP and the program s investment providers Adopts and oversees the administration of the retirement plans offered under the Deferred Compensation Program *Some Board recommendations and/or actions require approval by either the S.C. General Assembly or the S.C. Budget and Control Board. 9

10 Co-Fiduciary Relationships PEBA believes it is in the best interest of the trust funds to be managed prudently and for everyone to focus on issues and solutions PEBA is committed to working with our co-fiduciaries: the S.C. Retirement System Investment Commission (includes commissioners and agency staff), the State Treasurer, the Budget and Control Board, and the General Assembly to accomplish this 10

11 Co-Fiduciary Relationships S.C. General Assembly Provides statutory framework for state s insurance and retirement benefits Sets the terms of the defined benefit retirement plans by statute, including certain contribution rates Annually appropriates funds for insurance premiums and retirement contributions Sets actuarial assumed rate of return for retirement systems investments by statute 11

12 Defined Benefit Retirement Systems Significant retirement systems reforms in 2012 In 2011, during public hearings, projected employer contribution rate for SCRS for FY 2015 was 13.2 percent, but actual rate is 10.9 percent The 2.3 percent contribution rate difference resulted in an approximate $69 million savings for the General Fund Contribution rates lower than projections because of both retirement reform legislation and actual investment returns in excess of actuarial assumptions Although deferred investment gains/losses continue to be recognized under actuarial smoothing methods, we expect the gap between actuarial and market values to narrow 12

13 Defined Benefit Retirement Systems FY 2014 investment returns percent on net-of-fees basis Actuarial Assumed Rate of Return is 7.50 percent, so investment gains, coupled with legislatively mandated contribution increases will help improve funding and sustainability of plans Similarly, FY 2013 returns were 10 percent Assets at June 30, $29.9 billion Retirement contributions collected - $1.89 billion (244,000 active members) Retirement benefits paid (includes annuities, TERI and refunds) - $2.9 billion (153,000 annuitants) More than 560,000 members 13

14 Impact of Programs - Retirement Projected Cost SCRS Unfunded Liability Amortization Period in Years

15 CEM Highlights - Retirement PEBA s total administration cost per active member and annuitant was $35, $41 below the peer average of $76, and $87 below the all average of $122 PEBA s total service score was 68 out of 100, below the peer median of 76. Note: CEM stands for Cost Effective Measurement, Inc. These highlights are from the June 30, 2013, fiscal year. PEBA recently submitted its FY14 data to CEM. 15

16 SC Deferred Compensation Program Voluntary, Supplemental Defined Contribution plans The SC Deferred Compensation Program s 401(k) and 457 plans collectively had assets held in trust for participants totaling $3.6 billion as of December 31, 2013 (slightly more than 10 percent increase from prior year) 401(k) = $2.651 million 457 = $924 million Empower Retirement is the administrator (formerly Great- West Financial) 16

17 State Health Insurance Program Enrollment Subscribers Subscribers 262,626 Actives 180,158 Retirees 79,000 Others 3,468 Spouses 74,568 Children 122,243 Total Covered Lives 459,437 Total Employer Groups: 678 *State agencies includes quasi-governmental entities like the State Ports Authority. Active Subscribers State Agencies* Higher Education 23,965 School Districts 82,694 Local Subdivisions 31,467 Total Employees 180,158 Retirees Medicare 56,256 Non-Medicare 22,744 Total Retirees 79,000 17

18 Impact of Programs - Insurance Reduced growth in Medical Care CPI necessitated a paring back of approved SHP changes for 2015 Using the enactment date of March 2010 as the baseline, the Affordable Care Act (ACA) limits benefit changes in a grandfathered plan to an amount equal to 15 percentage points plus the cumulative growth in Medical Care CPI The following demonstrates the slowdown in Medical Care CPI: 2010: 3.4% 2012: 3.7% 2014 (YTD): 2.0% 2011: 3.0% 2013: 2.5% 18

19 Impact of Programs - Insurance The following illustrates selected Plan benefits in 2010, current 2014 benefits, approved 2015 benefits, and the pared back benefits for the 2015 Plan based on the September 2014 Medical Care CPI level (published in October 2014): Approved 2015 Annual Deductible $350 $420 $450 Coinsurance Max $2,000 $2,400 $2,600 Outpatient Facility Copay $75 $90 $97 Emergency Room Copay $125 $150 $160 Physician Office Copay $10 $12 $13 Rx Preferred Brand Copay $30 $36 $39 Rx Non-Preferred Copay $50 $60 $65 Max for 15 based on Oct CPI $ 445 $2,540 $ 95 $ 159 $ 12 $ 38 $ 63 19

20 50-State Survey Highlights - Insurance Comparison of 2014 State Health Plan (SHP) composite contribution rates to those of regional state employee health plans: South Carolina Employer: $ Employee: $ Total: $ Southeast Region $ (SC 75.7% of Region) $ (SC 93.8% of Region) $ (SC 79.6% of Region) The Southeast Region is comprised of 14 states including South Carolina. 20

21 50-State Survey Highlights - Insurance Benefits Comparison SHP s benefits compare with 13 other regional plans in the following manner: Deductible: Lower (more favorable) than 7 states, higher (less favorable) than 6 Coinsurance Maximum: Lower than 6, higher than 7 Generic Rx Copay: Lower than 10, higher than 3 Preferred Brand Copay: Lower than 8, higher than 5 21

22 New SHP Preventive Benefits Required by ACA as a Non-Grandfathered Plan The ACA requires health plans to cover certain preventive services, as recommended by the U.S. Preventive Services Task Force (USPSTF), without any patient cost-sharing when they are delivered by a network provider. These recommended preventive services including screenings, counseling, and prescription medications are eligible for coverage without patient cost-sharing. For the SHP, additional expense is accrued in two ways: 1) Inclusion for coverage of a service currently non-covered; and 2) Elimination of patient cost-sharing for a service currently covered, but subject to deductible and coinsurance and/or copayments. 22

23 New SHP Preventive Benefits Required by ACA as a Non-Grandfathered Plan It is estimated that the incremental cost to the Plan from these items required by the ACA is 3.5 percent of claims expense (around $63.3 M annually). If the SHP were not grandfathered, it could fund these services through changes to deductibles, coinsurance, and copayments without limitations based on the ACA guidelines tied to the Medical Care CPI. 23

24 Accountability Highlights In FY14, PEBA disbursed in excess of $2.9 billion in retirement-related benefits and in Plan Year 2013, paid more than $2.15 billion in claims, premiums and expenses for all insurance benefits on behalf of the state s public workforce and their covered family members About 94 percent of the retirement benefit recipients reside in South Carolina Reduced the health plan s liability by about $3.5 million by removing ineligible dependents from coverage through its dependent audit program 24

25 Fiduciary Audit Funston retained by the Office of the Inspector General to conduct fiduciary audit beginning October 1, 2014 As Funston identifies areas for improvement, PEBA will develop an ongoing implementation plan through which to accomplish the recommendations the Board and leadership believe are appropriate 25

26 Operational Assessment Aging infrastructure Current and future skills shortage Opportunities for further insurance and retirement integration Opportunities for increased automation 26

27 Operational Assessment An operational systems assessment will be conducted in 2015 due to an aging information systems infrastructure that will require replacement during the next five years A Request for Proposal is in final stages The costs will be prorated and paid by both the health insurance and retirement trust funds 27

28 Disclaimer THE LANGUAGE USED IN THIS PRESENTATION DOES NOT CREATE ANY CONTRACTUAL RIGHTS OR ENTITLEMENTS AND DOES NOT CREATE A CONTRACT BETWEEN THE MEMBER AND THE SOUTH CAROLINA PUBLIC EMPLOYEE BENEFIT AUTHORITY. THE SOUTH CAROLINA PUBLIC EMPLOYEE BENEFIT AUTHORITY RESERVES THE RIGHT TO REVISE THE CONTENT OF THIS PRESENTATION. This presentation is meant to serve as a guide but does not constitute a binding representation of the South Carolina Public Employee Benefit Authority. Title 9 of the South Carolina Code of Laws contains a complete description of the retirement benefits, their terms and conditions, and governs all retirement benefits offered by the state. State statutes are subject to change by the General Assembly. Employers covered by the South Carolina Public Employee Benefit Authority are not agents of the South Carolina Public Employee Benefit Authority.