SPANISH FORK — Nebo school officials hope that recent changes to the district's early retirement benefit plan will not cause a rapid departure in retirement-aged employees.
Nebo's Board of Education on Wednesday approved the change in benefits to the early retirement plan to create a "separation payment plan" that will be put into effect July 1.
Employees who retire before July 1 can still take advantage of the district's old retirement plan. If they remain in their jobs after that date, however, they must abide by the separation-payment plan rules.
People hired after July 1 won't be eligible for either.
Under the early retirement plan that will be phased out this summer, workers will be covered by Nebo's medical insurance for five years. Under the new separation plan, though, employees will receive $50,000 they can use to buy into the district's medical insurance or another policy until Medicare kicks in at age 65.
The change was prompted by a state legislative audit last summer that found that with rising medical insurance costs, districts in Utah will struggle paying for employees' health care after they retire.
State law also requires school districts to follow guidelines established by the Governmental Accounting Standards Board. New GASB guidelines require government agencies to report future liabilities on financial statements.
Five years of health insurance for every retired Nebo employee — plus possible spouses and dependents — would have to be reported, said Clark Merkley, human resources coordinator for the district.
Such liabilities could put Nebo in the red.
But cash payouts for medical insurance such as ones offered in the separation plan are not legally considered liabilities, Merkley said, and don't need to be reported.
Medical insurance is increasing 8 to 15 percent a year. The $50,000 cash payment will remain flat through the future. Yet the specific amount of money the district will save under the separation plan will be determined sometime this summer when a study is completed, Merkley said.
Nebo's school board also changed how much retirees will receive annually. Under the new retirement plan, the payout of an employee's last year of income will decrease about 1 percent a year.
For instance, employees who retire in 2007 will receive 100 percent of their income. Employees who retire in 2008 will receive 99 percent of their last year's income, Merkley said.
However, he does not believe there will be a "panic" among employees to retire. Yearly decreases in retirement payouts will be counter-balanced with pay raises employees receive for sticking with their jobs.
Twenty-one employees have announced their retirements this year. The district has 3,000 employees.
In a typical year, 40 employees retire, Merkley said.
Merkley expects about 25 additional employees to announce their retirements by July 1 as the district discusses options with 200 employees eligible for early retirement.
The separation plan was hammered out by a committee of 23 people representing the administration, teachers and staff.
Lynette Wyler, president of the Nebo Classified Employees Association, said she's heard few complaints among workers. They believe the separation plan is more fair than the current early retirement in which "the working bees are actually paying retirement and health insurance for the retirees, you know, and that's not cool."
E-mail: lhancock@desnews.com