You asked for information about the effect of the FY 10-11 state budget on retired public school teachers' health insurance and cost of living adjustments (COLAs) for retired teachers.

The state budget act (PA 09-3, June Special Session, § 64) suspends state General Fund contributions for retired teachers' health insurance premiums for FY 10 and FY 11. However, because the act also allows the Other Post Employment Benefits (OPEB) Teachers' Fund to pay the state's share of the cost for the next two fiscal years, the suspension will not affect retired teachers' costs.

The state budget does not affect COLAs for retired teachers. Teacher COLAs are governed by state statute, which ties annual teachers' COLAs to the annual federal Social Security COLA. For teachers who retired before September 1, 1992, state law mandates a COLA equal to the Social Security COLA but no less than 3% nor more than 5%. For teachers who retire on or after that date, the statutory COLA is the Social Security COLA up to maximum of 6%.

The Social Security Administration currently estimates that there will be a zero Social Security COLA for 2010 because there has been no increase in the annual Consumer Price Index. If the Social Security COLA for 2010 is zero, Connecticut teachers who retired before September 1, 1992 will, by law, receive a COLA of 3%, while teachers who retired on or after that date will receive zero, because the law does not give them a minimum COLA.

The state budget act suspends General Fund contributions for retired teachers' health insurance premiums for FY 10 and FY 11.

Health insurance for retired teachers is provided (1) by the Teachers' Retirement Board (TRB) for those retirees and spouses who are participating in Medicare Part A or (2) by the retiree's last employing board of education for those that are not. The TRB plan is a Medigap plan and the local board plans are the same plans that the boards provide for their active teachers. The cost of the retired teacher coverage is shared by the state, the retirees, and active teachers, who contribute 1.25% of annual salary to help fund retiree health insurance. The active teachers' contributions go into a separate health insurance fund under the TRB's jurisdiction called the Other Post Employment Benefits (OPEB) Teachers' Fund. The OPEB Teachers' Fund consists of total health contributions in excess of $500,000 per year by active teachers, plus investment earnings on the fund balance.

By law, for the TRB plan, retired teachers pay one-third of the basic plan premium, the OPEB Teachers' Fund (active teachers) pays one-third, and the General Fund pays one-third. If a retiree chooses a plan that exceeds the basic benefits, the retiree pays the difference in the premium. The basic TRB plan includes hospital, medical, major medical, and prescription drug benefits. For retirees covered by local plans, the state pays local boards a premium subsidy of $110 per participant, per month, with the remainder of the cost generally paid by the retiree, although sometimes a local board also makes a contribution, depending on collective bargaining agreements. In most cases, the retiree pays the difference between the cost of the premium and the state subsidy. Two-thirds of the subsidy is paid from the OPEB Teacher's Fund and one-third from the General Fund. If there is not enough money in the OPEB Teachers' Fund to pay its full share, the General Fund must make up the difference.

PA 09-3, June Special Session, suspends the statutory requirement that the state General Fund pay one-third of the cost of premiums for the basic TRB plan and one-third of the cost of the state subsidy for local board of education health plans covering retired teachers. Instead, for FY 10 and FY 11, it requires the OPEB Teachers' Fund to pay two-thirds of the cost of the basic TRB plan and the full cost of the health subsidy to local boards.

According to Christina Gellman in the Office of Fiscal Analysis, the OPEB Teachers' Fund is projected to have enough money to pay the General Fund's share for retired teachers' health insurance for the next two fiscal years without increasing the cost to either retirees or active teachers.

By law, retired teachers are eligible for annual COLAs starting nine months after they retire and start receiving benefits from the Teachers' Retirement Fund. State law provides for three different mandatory COLAs. All teacher COLAs are tied to annual increases in the federal Social Security benefits and all are subject to certain limits. The COLAs to which a retired teacher is entitled depends on when the teacher retires or when he or she became a member of the Teachers' Retirement System (TRS) (CGS 10-183g (j)-(l)).

1. Teachers who retired before September 1, 1992 receive a percentage COLA equal to the Social Security COLA but not less than 3% nor more than 5%.

2. Teachers who retired on or after September 1, 1992 also receive the Social Security COLA, up to a maximum of 6% or a maximum of 1.5% if the TRF does not earn at least an 8.5% annual return for the year. Unlike the pre-1992 retirees, later retirees are not guaranteed any minimum COLA. 

3. Teachers who become members of the TRS on or after July 1, 2007 will, when they retire, receive a COLA equal to the Social Security COLA with limits related the TRF's investment performance for the past year. If the fund earns less than 8.5%, the maximum COLA is 1%; if it earns between 8.5% and 11.5%, the maximum is 3%; and if it earns more than 11.5%, the maximum COLA is 5%.

The Social Security COLA for 2010 has not been calculated. However, the Social Security Administration estimates that it will be zero for 2010 because there has been no increase in the Consumer Price Index. The Social Security COLA estimates for the next three years can be found here: http://www.socialsecurity.gov/cgi-bin/bri.cgi. If the 2010 Social Security COLA is zero, then teachers who retired on or after January 1, 1992 will also receive a 2010 COLA of zero while pre-1992 retirees will receive their statutory minimum COLA of 3%.

Source: Teachers' Retirement Board

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