Aid for Teachers : Tax Plan Wins Contest to Find Benefit Funds
The winning idea in a Culver City teacher’s contest to find money to pay for lifetime health benefits for retirees in the Culver City Unified School District sounds simple: reduce the district’s payroll tax liability and use the savings to pay for the increased health coverage.
But the amount of potential tax savings is in question, and implementing the idea could be difficult.
Howard Bennett, a Culver City High School English teacher who launched a successful campaign last spring to bring in a new teachers union, initiated the contest after the new union promised but failed to get lifetime health benefits in a contract teachers ratified in October.
Union and district officials have said the $200,000 to $300,000 needed annually for the additional health coverage is not available.
The winning idea in Bennett’s contest involves allowing employees to take advantage of a 1978 Internal Revenue Code change that allows employers to redirect a portion of an employee’s salary before deductions are made for taxes. The money would be put into a trust account that can be used by employees to pay for child care and certain medical expenses throughout the year.
With smaller taxable incomes, employees pay less in income taxes and employers pay less in payroll taxes, such as Social Security, unemployment and worker’s compensation. In the case of the school district, there may also be a savings in the district’s contribution to the teacher’s retirement fund, which is critical to the success of the winning proposal.
Employment Benefit Systems, a Beverly Hills-based company that manages the so-called IRC 125 Plan for private and public employers, submitted the winning idea. EBS estimated that the district could save at least $200,000 annually. But to achieve that savings, 70% of the district’s 600 employees would have to redirect an average of $350 a month.
It is not clear whether that estimate includes a reduction in the district’s contribution to the teacher’s retirement fund. Toni Castellucci, the EBS partner who calculated the estimate and who won a trip to Las Vegas donated by a local travel agency as the contest grand prize, could not be reached for comment last week.
Ralph Vallani, the assistant superintendent who handles negotiations for the district, said that if the district’s contribution to the teachers’ retirement fund is not reduced, the district would not realize a significant savings in Social Security and unemployment taxes.
“We are aware of the program, but I don’t think that the thinking is clear on the estimates,” Vallani said. “It seems to me the only savings is to the employee.”
Bess Doerr, president of the Culver City Teachers Assn., the union representing the teachers, said that she was unfamiliar with the proposal but that union leaders will discuss it at a future meeting.
“We are willing to cooperate if we can find the money,” she said.
But Bennett remains optimistic that one of the ideas entered in his contest can produce enough money to pay for lifetime health benefits. Under the current contract, health benefits end at 65.
Other contest ideas included selling the district’s four vacant elementary school sites or the district warehouse. Bennett said money from the sale could be placed in 30-year U.S. Treasury notes at 10% interest, producing as much as $1.7 million annually.
Other proposals were having administrators teach one class a day (an estimated savings of $160,000); eliminating an administrative position ($40,000), or having school board members pay for their own business trips ($18,647 last year).
Vallani, who did not attend Bennett’s announcement of his contest winner last week, dismissed the other proposals, saying the vacant schools sites are being leased and providing revenue for the district’s general fund. He said that selling the warehouse is not practical and that the district is already understaffed administratively.
Bennett had invited other district officials and school board members to the announcement ceremony, but none showed up.
“I find it terrible that after personal invitations, that the board members would be so indifferent to the employees that not one had the courtesy to come,” he said. “We have found the way; now it is up to the board to find the will.”
Bennett hinted that if the board does not provide lifetime health benefits, his group, School Employees’ Assn. for Lifetime Health Coverage, may run a slate of candidates to oppose three of the five board members who are up for reelection in November.
The members whose terms end this fall are Julie Cerra, Robert Knopf and Kay Lyou. They could not be reached for comment.