8-22-2016; Can IL Taxpayers Stop Being GPP'd By State Workers; Can the IWCC Be A Model of Efficiency to Survive?; New IL Law Changes "Mod Rate" and Ratings for Staffing Cos and more

Synopsis: Can IL Taxpayers Stop Being GPP’d by Former State Workers? Can Our IWCC Be A Model of Gov’t Efficiency in Doing So?

Editor’s comment: I wrote an article in last week’s KCB&A Monday Law Update about taking the staffers out of the four “remote” or satellite IL WC Commission offices across our state. The article appears to have hit a chord with attorneys and readers on both sides of the IL WC matrix who want the gov’t staffers to remain in the offices, despite a changing landscape where technology allows for the elimination of brick-and-mortar offices and people to perform tasks that can actually be done on-line.

With respect to these staffers, we don’t consider those tasks to comprise full time work. Their combined salaries are significant. That said, we are even more concerned about the staggeringly high future cost of GPP Former State Workers.

What Is A GPP Former IL State Worker?

Well, GPP stands for “Ghost Pension Payroller.” What is a Ghost Pension Payroller? That is easy to understand—it is an IL state worker that spent enough time working in a state job to become vested in our unconscionably lucrative state pensions to then receive more current tax money not working than they made while working with 3% compounded annual increases and lifetime “free” or taxpayer-paid health care coverage. In our view, becoming a GPP is the equivalent of winning the lottery because the Ghost Pension Payroller puts in so little to then get millions in return later in life. Please note we aren’t blaming the GPP’s in our state, as they didn’t create this mess but we don’t see lots of them calling for changes to end this welfare-like largesse at a staggeringly high cost to taxpayers. Either way, the less state workers we have now, the fewer GPP’s we will have in the future.

Who Are The Worst IL GPP Former State Workers?

I also want to make it clear, the math underlying these statements is immutable—it is simply math. I can back up the math with more details for anyone interested.

• A married IL legislator is fully vested in four years of service and will contribute about $24,000 to the IL Legislative Retirement System. If they remain at base pay (and very few of them do so), their fake pensions start at $57,800 each year, so they go through their entire $24K contribution in about six months of retirement. That means they are not actually getting “pension” payments after about a year because they will have completely exhausted their contributions and the State’s matching contributions during their service. They become “Ghost Pension Payrollers,” as they are back on your and my payroll, even though they are no longer working. After 23 years of retirement, they will be getting $115,000 each year. After 46 years of retirement, they will be getting $230,000 a year. If you note the math, they can receive several million dollars in retirement for their fake gov’t pension contribution of only $24K. I think that is a lot like winning the lottery—it certainly isn’t a “pension.”

• A married IL judge or justice is fully vested in only nine years of service. Their total pension contributions to the Judicial Retirement System will be about $180K over 9 years. A vested IL judge/justice retiring today will receive $174,250.00 in the first year of retirement. Noting the math, that judge will have exhausted their entire fake pension contribution in about a year and will be back on the payroll of folks like you and me and every IL taxpayer on this email chain in two years. With compounded 3% annual increases, a retired judge’s first annual raise will be more than $5K. In just 23 years, they will be receiving $348,500 each year. If they live 46 years into retirement, they will be getting almost $700K a year and their annual raises will be $20K a year. Again, to see a retired judge eventually getting as much as $15 million or more in retirement for an initial contribution of less than $200K is like winning the lottery to me.

All IL State employees can bask in this coming taxpayer-fed benevolence at whatever level—they all get un-funded state pensions that aren’t truly pensions. What I don’t think most folks understand is this “hidden” aspect of GPP’s or Ghost Pension Payrollers on IL State government. There are about 50,000 current State employees. To my understanding, there are about 250,000 folks on IL State fake government pensions. All employers have more retirees than active workers. Only IL State gov’t has literally hundreds of thousands of Ghost Pension Payrollers who get paid but don’t do any current work for their pay.

Actually, being vested and then retiring to become a Ghost Pension Payroller is a better financial deal than actively working for the State. Regular state workers don’t always get raises. In contrast, Ghost Pension Payrollers get annual, guaranteed 3% raises. They get the raises every year for the rest of their lives. Lots of folks are retiring right now from gov’t work to start getting paid more to NOT work.

I don’t feel some folks believe the GPP pension payout will double (and then quadruple) every 23 years. The math isn’t debatable. Try it out: https://www.investor.gov/tools/calculators/compound-interest-calculator. I just don’t think many folks understand how lucrative these fake pensions have become and how they are almost certainly going to bankrupt our State. This same killer math applies to secretaries, cleaning people, anyone with a IL State job that comes with a fake gov’t pension. Does it make sense to eventually pay the admins working at the Collinsville, Rockford, Peoria or Springfield call $100K+ a year in retirement?

What Does This Have to Do With the IWCC And Remote Office Staffing?

The IL WC System is under attack in every direction. At least one source is now calling for IL business to have an “opt-out” choice that would replace the current IWCC with another admittedly inconsistent and confusing approach to injured workers’ needs. I feel one way to quell the attacks and allow the system to remain in place is to start looking at the IWCC and make tough calls on what is needed and what we can live without.

The current budget of the IWCC is paid for entirely—every nickel—comes from IL business. That budget is about $30 million each year. If our IWCC Chairperson and General Counsel Ron Rascia and the many IWCC advisory boards want to show our great Governor and all the business leaders in this state they care about work comp costs, one way to do so would be to cut costs and staff by 10-20-25%. A 25% cut would be an immediate savings to IL business of $7.5 million. The longer term savings could be even greater because you would end the hiring of some GPP’s that are certain to end up costing double or triple or even quadruple what they are paid while working! Either way, such actions are sure to make national WC headlines in the very best way.

It is our hope the IWCC becomes a model for the other 87 IL State agencies in cutting costs by taking the lead and making headlines doing so. Please remember our State government debt is over $200 billion, yes billion. Our State’s unpaid or late-paid bills are nearing $10 billion dollars. I hate being in a state where we laugh at outside vendors who diligently work for taxpayers and then State gov’t laughs at them and is forcing some suppliers into bankruptcy waiting to get paid. One major reason for the unpaid bills are all the GPP’s.

How do we stop this embarrassing situation? Well, it starts with reducing or eliminating staff where possible, especially with the emergence of on-line filing capability at the IWCC, which we understand is in the works. We can also consider eliminating items like the IL WC Second Injury Fund and Rate Adjustment Fund and start to actually notice IL WC claims have dropped dramatically while administrative staffing and budgets keep going up. When e-filing starts, we hope even further cuts can be made as paper forms and libraries go on the cloud.

We appreciate your thoughts and comments. Please post them on our award-winning blog.

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Synopsis: New IL Law Changes WC Rules for IL Staffing Companies.

Editor’s comment: Staffing/Logistics and similar companies are exploding in growth. Governor Rauner just signed a new bill that is required reading for anyone in that part of the WC matrix. If you read the new law below, you may note it appears to block fiddle-fooling with “experience mods” or insurance ratings for staffing agencies.

The new law says: Section 5. The Employee Leasing Company Act is amended by changing Sections 25 and 30 as follows:

Sec. 25. Record keeping and reporting requirement.

    (a) A lessor shall maintain accounting and employment records relating to all employee leasing arrangements for a minimum of 4 calendar years. A lessor shall maintain the address of each office it maintains in this State, at its principal place of business.

    (b) A lessor shall maintain sufficient information in a manner consistent with a licensed rating organization's data submission requirements to permit the rating organization licensed under Section 459 of the Illinois Insurance Code to calculate an experience modification factor for the lessee.

    (c) Upon written request of a lessee with an annual payroll attributed to it in excess of $200,000, the lessor shall provide the lessee's experience modification factor to the lessee within 30 days of the request.

    (d) Upon request of a lessee with an annual payroll attributed to it of less than $200,000, the lessor shall provide the loss information required to be maintained by this Section to the lessee within 30 days of the request.

    (e) Nothing in this Section shall preclude a licensed rating organization from calculating the experience modification factor for each lessee nor an insurer from maintaining and furnishing on behalf of the lessor, such information as required by this Section.

    (f) In the event that a lessee's experience modification factor exceeds the lessor's experience modification factor by 50% at the inception of the employee leasing arrangement, the lessee's experience modification factor shall be utilized to calculate the premium or costs charged to the lessee for workers' compensation coverage for a period of 2 years. Thereafter, the premium charged by the insurer for inclusion of a lessee under a lessor's policy may be calculated on the basis of the lessor's experience modification factor.

    (g) A lessor that does not provide workers' compensation insurance coverage for leased employees of a lessee under an employee leasing arrangement shall not be subject to compliance with subsections (b) through (f) of this Section.

    Sec. 30. Responsibility for policy issuance and continuance.

    (a) Either a lessor or lessee may provide workers' compensation insurance coverage for leased employees under an employee leasing arrangement. When a workers' compensation policy written to cover leased employees is issued to the lessor as the named insured, the lessee shall be identified thereon by the attachment of an appropriate endorsement indicating that the policy provides coverage for leased employees. The endorsement shall, at a minimum, provide for the following:

        (1) Coverage under the endorsement shall be limited to the named insured's employees leased to the lessees.

        (2) The experience of the employees leased to the particular lessee shall be separately maintained by the lessor as provided in Section 25.

    (b) (Blank).

    (c) The lessor shall notify the insurer or a licensed rating organization 30 days prior to the effective date of termination or immediately upon notification of cancellation by the lessor of an employee leasing arrangement with the lessee in order to allow sufficient time to calculate an experience modification factor for the lessee.

    (d) The insurer shall provide proof of workers' compensation insurance to the lessor and to each applicable lessee within 30 days of the coverage being effected or changed.

    (e) Calculation of a lessor's or lessee's premium shall be done in accordance with the insurer's rating manual filed with the Department.

    (f) When the lessee provides workers' compensation coverage for leased employees under an employee leasing arrangement, the lessor shall notify the Department in a manner specified by the Department to ensure proper and timely notification of coverage to the Department.

Effective Date: 1/1/2017

If you are with a staffing company or handle insurance for staffing companies and need assistance with the new law, send a reply. We appreciate your thoughts and comments. Please post them on our award-winning blog.