St. Paul Public Schools and the unions representing teachers and educational assistants have resolved a health-insurance dispute that threatened to put a $4 million hit on the district’s budget.

The St. Paul Federation of Educators (SPFE) and Teamsters Local 320 have agreed to delay until January 2021 their move from HealthPartners to the state-run Public Employees Insurance Program (PEIP).

In return, the district has promised to be neutral in all communications regarding employee enrollment in PEIP.

The initial stakes were a lot higher: SPFE and the Teamsters had proposed to make the switch in January 2020, a move that would have triggered a $4 million early termination fee for leaving HealthPartners in the middle of a contract.

“We all appreciate the parties’ willingness to work together in reaching a solution avoiding any early termination fees,” district and union leaders said in a joint statement signed Aug. 30.

Union members voted this spring to switch health insurers, and while a formal notice had yet to be filed with the state about the plan to join PEIP in January, news of the potential penalty opened the unions to criticism — including from other labor groups.

District employees represented by other unions faced premium increases of up to 22% if SPFE and the Teamsters followed through with a 2020 exit, district and union officials said. That led to emotional statements at recent school board meetings, including one from a custodial engineer who accused SPFE and the Teamsters of spitting in the faces of other employees.

The district and SPFE both tried unsuccessfully to persuade HealthPartners to waive the termination fee, and the district and union then exchanged legal threats in recent weeks.

The Aug. 30 memorandum of agreement includes a letter notifying the state of the new 2021 switch.

“The school district, SPFE and Teamsters all desire a smooth transition for school district employees entering into PEIP,” the letter states. “To that end, the parties would like to begin planning meetings in the spring of 2020 and hold an open enrollment in the fall of 2020.”

The district and SPFE also are in early talks on a new two-year contract. Bargaining sessions are set for Thursday and Sept. 26.