Two weeks after school board members wrangled with administrators over the size of the district’s legal budget, district officials learned that the teachers union and paraprofessionals union have filed a joint lawsuit against them in Winona County District Court.
The suit, filed by the local and state teachers unions, seeks to compel District 861 to go to arbitration over a decision made last year regarding staff 403b retirement accounts.
In July of 2008, the school board adopted an administrative recommendation that had been months in the making that reduced the number of allowable 403b financial managers from 23 to five.
In creating the recommendation, district officials formed a committee with two representatives from each union who worked with a consultant from National Insurance Services to formulate a plan.
New laws required the district to take oversight of 403b plans under its umbrella beginning in January of 2009, so the plan was to create a bid process for the accounts in which investment advisors had to apply for consideration by the committee.
The information the committee asked for in proposals included breadth of investment offerings, investment expenses, surrender charges should a client change plans, current level of employee participation, quality of investment offerings and the level of support offered by the company.
To be considered, said Aaron Casper of National Insurance Services, each company was given between three and four weeks to return the Request For Proposal (RFP) detailing all of the fees and services associated with their accounts. “The competitive process creates for the first time a transparency that did not exist,” said Casper.
The move was applauded as a money saving measure for employees, who, in some cases for the first time, could evaluate the fees and other charges associated with their investments.
The reason the list is narrowed to five rather than ten or twenty, Casper said, is that companies have an incentive to bid competitively when they are theoretically competing for one-fifth of the business compared to a much smaller slice when many vendors are included.
While providing greater transparency of fees and more structured oversight of accounts is a benefit to employees in the 403b change, Casper said, the greater benefit will definitely be a reduction in investment fees thanks to the competitive bidding process.
Employees were able to continue contributing to their existing accounts for the remainder of the year, but investments after January 1 of 2009 had to be with one of the five selected providers or the contributions would not be matched or managed by the district under the 403b policy.
The union filed a grievance over the matter, saying it wanted to continue with the option to choose any of the original 23 vendors, even those who did not participate in the bidding process.
District officials replied that because the number and identities of 403b providers is not a contractual matter, it is not a grievable issue.
A new law in August of 2008 states that districts must negotiate with unions over the structure of 403b arrangements, said Gloria Olsen, the district’s legal counsel. District officials will negotiate the matter for the 2009-2011 contract if the teachers bring a proposal forward, she said, but the matter is not subject to negotiation for the current contract.
“The district had a legal, inherent managerial right to choose 403b vendors before August 1,” she said. “The only thing subject to arbitration is the interpretation of the labor contract. The identity and number is not in the contract and therefore there is nothing to grieve.”
In the complaint, however, union officials say that the district must accept a grievance regarding the interpretation of any terms in the contract.
In part, the union’s argument is that the contract says contributions to a 403b plan will continue until the teacher notifies the district that it wishes to alter it.
In the lawsuit, the unions are asking a judge to force the district to go to arbitration over the 403b plan.
Union officials, who had representatives on the original 403b planning committee, do not say in the suit why they are against the bidding process for vendors and filed a grievance.