Perils of creative compensation

Potential Pitfalls of Creative Compensation Karen Haase Harding & Shultz (402) 434-3000 khaase@hslegalfirm.com H & S School Law @KarenHaase

The basics: 48-818 CIR “shall establish rates of pay and conditions of employment which are comparable to the prevalent wage rates paid and conditions of employment maintained for the same or similar work of workers exhibiting like or similar skills under the same or similar working conditions.�

Basic Principles  Good Faith Bargaining  Mandatory Subjects of Bargaining: wages, hours and other terms and conditions of employment”  Comparability  Prevalence

Creativity is NOT part of 84-818

Health Insurance Creativity

Health Insurance Creativity Three Main Types of Health Ins. Creativity  Cash-in-lieu  Cafeteria Plan/Fringe Stipend  Self Insurance of Deductible

Health Insurance Creativity  Cash-in-lieu • EHA surcharge • Comparability issues

Louisville  Cash Option • Louisville paid $ 4,209 cash option • 7 of 10 array schools had cash option  CIR: • “sufficiently similar” is 50% • If array school doesn’t offer cash option, place teachers as if full benefit • If array school offers cash that is not “sufficiently similar” place teachers as if they got Louisville’s cash

Alliance  Alliance provided 125 plan  Provided cash-in-lieu • Paid retirement and FICA • Wanted credit from CIR: Argued that CIR should consider these costs in determining total compensation

Alliance  FICA/retirement on 125 plan • CIR: “By bringing the retirement contribution percentage and the FICA retirement percentage into the calculation, the Commission is being asked to introduce too many variables into a mathematical calculation known for its predictability”

Alliance  FICA/retirement on 125 plan • CIR: “The Respondent has voluntarily chosen to include the cost of the cash-in-lieu of insurance as part of its calculation of the Section 125 plan to be paid towards the retirement benefits for the employees.”

Health Insurance Creativity  Cash-in-lieu • EHA surcharge • Comparability issues • Tax issues

 Cafeteria Plan/Fringe Stipend • Section 125 plan issues • Comparability issues

 Self Insurance of Deductible • HIPAA or TPA • Comparability issues

Health Insurance Creativity  My Advice: • This may not be the year to be creative • Review your CIL practices • Review your 125 plan with an employee benefits attorney • Consult with your array • Consider HSA option

Contract Days Creativity

Contract Days Creativity  Louisville • How to value Conestoga • Went to 4-day week (159 days) • Local association proposed “contract addendum” • Union: 159 days • District: 185 days • CIR: 159 days

Contributions to Activity Fund

Booster Club Creativity  Suggestions that you solicit donations to increase funds available to pay salaries  State Auditor • Activity Fund = School Funds • Same limitations on spending • Also limitations on use of Tax ID #

TSAs and Deferred Compensation

TSAs and Deferred Compensation  TSAs, 403(b) 457(b) • Employee directed contributions with pretax dollars • Earnings are tax deferred  Pitfalls • No benefit for added complexity • Don’t get to deduct FICA • Do pay retirement

Mileage & Other Allowances

Mileage & Other Allowances  mileage traveled between home and a worksite is nonreimbursable personal commuting, unless the worksite is temporary (used for less than one year)  State Auditor Issues  Tax and Retirement Issues

Mileage & Other Allowances  Cell phone reimbursement  Housing allowance  Providing computer or other items for personal use  Be Aware of • Tax Implications • Limited comparability benefit

Potential Pitfalls of Creative Compensation Karen Haase Harding & Shultz (402) 434-3000 khaase@hslegalfirm.com H & S School Law @KarenHaase