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Changes to retiree benefits off the table for now, Hopson announces

Retired educators attend a forum in Memphis last summer before the Shelby County Board of Education to discuss proposed cost-cutting changes to their retirement plans.
Retired educators attend a forum in Memphis last summer before the Shelby County Board of Education to discuss proposed cost-cutting changes to their retirement plans.
Kayleigh Skinner

Retired educators from Shelby County Schools won’t see their health benefits cut anytime soon, after the district tabled a proposal that would have passed along costs to retirees.

Superintendent Dorsey Hopson announced that he was backing off on the proposal, which had drawn sharp protest from retirees, during a board meeting Tuesday evening. He instead asked the board to find other ways to reduce the district’s ballooning retirement benefits costs.

“I know how passionate you are about our retirees,” Hopson told board members. “We don’t want to place people we’ve made promises to in a bad position.”

Hundreds of retirees complained at a public forum earlier this month that the district was seeking to save money on the backs of sick senior citizens by breaking a promise made to new teachers decades ago.

Daisy Cleaves, the former president of the district’s Retired Teachers Association who has been an outspoken critic of the proposed changes, said she was relieved that cuts in benefits are off the table for now.

“I’m going to go up there and shake [Hopson’s] hand and thank him for giving me peace and love,” Cleaves said. “I’m glad they’re going to slow this process down. There was just so much stress and so much coming at us at once.”

The cash-strapped district is still under pressure to reduce the amount it’s on the hook to spend on retired employees’ health and life insurance, known as Other Post-Employment Benefits, or OPEB costs. The way the district’s insurance plan is structured, the district is not contributing enough to cover retirees’ real costs. Last year, the district faced $1.5 billion in liability, or possible costs, which it could have covered by contributing about $120 million to the insurance pool. But budget cuts because of declining student enrollment limited the district’s contribution to less than $30 million.

That gap has become a significant sticking point in the district’s efforts to manage its budget. After cutting $125 million from its 2015-2016 budget to cover other costs, Hopson asked the county last month for additional funds to support the district’s regular operations. Commissioners said any additional funds would have to go toward the retirement benefits.

Hopson is still recommending that the board not extend benefits after retirement to anyone who joins the district starting in July 2016. And the board could decide to resurrect the benefits cuts for current retirees — who number 8,000 — in the future.

Other options that Hopson has asked the board to consider included cutting retirees a check to shop and pay for their own insurance plan and switching retirees to a state plan whose costs are managed by having more participants. On Tuesday, the board also heard a recommendation that the district start making insurance payments into a trust fund so that interest over time could reduce liability costs.

Several board members have requested that they hire an outside consultant to help them determine the best option.

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