Responses for Retiree Medical Benefits
Question:
We are looking to begin capping our outlay(expenses) for retiree medical benefits based on hire dates where current retirees see no change to benefits, existing employees must meet vesting requirements/receive a fixed contribution, and new employees hired after a certain date would have diminished benefits. If you have successfully created a tiered system I would like to give you a call.
- Association of Bay Area Governments
”As part of our negotiated labor contract for CY2009, we negotiated to maintain the legacy OPEB benefit of up to fully paid two-party Kaiser coverage cap, but for new hires as of July 1, 2009, they received a different plan wherein we would provide PEMHCA contribution from us upon retirement (the continued designated benefit) and a 1.5% of salary place into a retirement VEBA account (the designated contribution portion). The latter 1.5% was amended to be a flat $100 per month for full-time employees to placate IRS concerns. Our vendor for the VEBA plan is CALGOVEBA, the only one I found to have a reasonable fee for a small membership.
We also offered the legacy employees a one-time opportunity to opt into the new plan. The benefit to the employee is that if they move on before retirement, they get absolutely nothing for their post-retirement medical benefits. At least with our plan, the VEBA plan is theirs to keep. The PEMHCA was retained so our retirees would have access to our group medical plan; otherwise, they would have to go out and seek entry into a new plan independently. The subsequent passage of the ACA may have ameliorated this concern, but the actual rate structure that would be available is uncertain.
You can see that the designated contribution portion has provides perceived benefits to the younger employees who see retirement as only a distant possibility, especially with the same employer. For the older employees for whom retirement is in sight, they would have been foolish to forego the two-party coverage we were previously offering.“
- Union Sanitary District
“Attached is our old MOU (has recently been updated but not published yet) regarding retiree medical. I’ll have more time to talk tomorrow if you have any questions, or you can email me any follow-up questions.”
23.3 Retiree Medical Reimbursement
23.3(a) For employees who retire from the District after February 28, 2001, a monthly reimbursement, up to Three Hundred Dollars ($300), will be provided for medical coverage (except as described below). This reimbursement shall include any contribution made by the District directly to PERS, including the Minimum Employer Contribution (MEC) for retiree or spouse or registered domestic partner. (In the event of the death of the retiree, the MEC will be made on behalf of the surviving spouse or registered domestic partner.)
23.3(b) For employees who retire from the District after February 28, 2008, the monthly reimbursement for medical coverage shall be as follows:
Employees with less than ten (10) years of service $0
Employees with ten (10) but less than fifteen (15) years of service $300
Employees with fifteen (15) but less than twenty (20) years of service $350
Employees with twenty (20) or more years of service $400
23.3(c) For employees who retire from the District after February 28, 2010, the monthly reimbursement for medical coverage shall be as follows:
Employees with less than ten (10) years of service $0
Employees with ten (10) but less than fifteen (15) years of service $300
Employees with fifteen (15) but less than twenty (20) years of service $400
Employees with twenty (20) or more years of service $500
23.3(d) The District shall not treat the District reimbursement to the medical retirement plan as compensation subject to income tax withholding unless the Internal Revenue Service or the Franchise Tax Board indicates that such reimbursements are taxable income subject to withholding. Each retired employee shall be solely and personally responsible for any federal, state, or local tax liability or penalty that may arise out of the implementation of this section.
23.4 Eligibility for Retiree Medical Reimbursement
23.4(a) To be eligible for the benefit described above, the employee must retire under a regular or disability PERS retirement, must be at least 50 years of age, and must have been employed by the District for at least ten (10) years.
23.4(b) The retiree must maintain enrollment in a medical insurance plan. The retiree must notify the District within thirty (30) days of the retiree's and/or spouse's eligibility for Medicare. The surviving spouse or registered domestic partner of an eligible retiree shall remain eligible until his/her death or remarriage, and the spouse or registered domestic partner must maintain enrollment in a medical insurance plan as described in this paragraph.
23.4(c) The reimbursement amount shall provide for the actual medical premium cost for the retiree and dependent(s). At no time shall the retiree receive in excess of the premium amount.
23.4(d) In the event of the death of an employee prior to retirement who would be qualified for benefits, the surviving spouse or registered domestic partner shall remain eligible until his/her death or remarriage or entrance into a new registered domestic partnership, and the spouse or registered domestic partner must maintain enrollment in a medical insurance plan as described in Section 23.4(b).
23.4(e) The retiree is responsible for maintaining eligibility requirements and for notifying the District of any change in eligibility status. If the retiree fails to report any change in status within thirty (30) days of the change, the retiree shall refund any excess amounts received.
23.4(f) Checks will be issued quarterly to the retiree. The District may require verification of medical plan enrollment and costs.
23.4(g) Employees who separate from the District and do not retire are not eligible to receive any of the retiree health benefits.
23.5 Retiree Medical Benefits Actuarial Study
The District will share with the Union any reports on the status of funds in the interest-bearing reserve account established by the District to be used toward the payment of retiree medical benefits.
- City of Lodi
“Lodi did this back in the mid 1990s. Take a look at the Sick Leave Conversion language in our MOU’s on our website.
Basically, employees hired before a certain date can convert sick leave into dollars that the City will use to pay for post-retirement healthcare if the employee retires from the City. The benefit is lost completely if the employee terminates or resigns without retiring. Employees hired after the certain date have no post-retirement healthcare paid by the City other than what is statutorily required by PERS and Government Code.”
- City of Covina
“The City of Covina is in the middle of negotiations and we are asking that new employees only get the PEMCHA amount (we have PERS medical). Currently an employee after 10 years of employment gets a benefit of $472 per month upon retirement up to Medicare age.”
- City of Salinas
“We have not done this but are would like to.Thanks for doing the survey. Look forward to the results!”
- City of Concord
“We are beginning discussions in this area as well. I would love to share information with you on this process. We are in the data gathering stage and plan to go to Council sometime later this calendar year to discuss our benefits (and related unfunded liabilities) and offer options for the Council. We provide a very nice benefit: two-party retiree coverage for life with no vesting. A couple of years ago we instituted a cost share 50/50 on future increases (applies to current retirees as well) but that is not sufficient to make this benefit sustainable into the future.”
- Bartel Associates llc
“The answer to your question is related to where you get your medical insurance from. If you participate in CalPERS medical (PEMHCA) then what you want to do can be done, it is just complicated and likely requires more legal help than you may want to pay for. If you don’t participate in PEMHCA then it is much easier but may still requires some attorney time. I believe the best pace to get information on this is from your GASB 45/OPEB actuary. They should have quite a bit of knowledge of what is happening around the state.”
- HansonBridgett
“I’ve worked with several public agencies on implementing tiered programs. I’d be happy to share my experiences with you. Feel free to call or email anytime.”
- City of Culver City
“Culver City has done what you mention. Below is a link to the web page of our MOU’s:
px
If you open the MOU for the Management Group and go to page 18, the Retiree Medical Insurance section starts there. We did this for all groups.
If you want to discuss in more detail, we can set a time.”
- City of Alameda
“Can you pass along your results to me, we are looking to implement similar measures in the future.
FYI, we have now limited OPEB for new employees so that it only covers the employee only and not their spouse or dependents and are looking to have them share in the city's cost of providing OPEB.”
- Ventura County Transportation Commission
“If you belong to calpers it is tough. We set up an HRA with the help of Marcus Wu out of San Francisco. We simply kept benefits for current employees the same and new hires only received minimum contribution.”
- Van Iwaarden Associates
“We worked with the City of Palmdale to design a system similar to what you’re considering.
You can hear more details from Betsy St. John, the City’s Director of Finance or, with her permission, from me. I’ve copied Betsy on this message.”
- City of Temple City
“Do you have PERS Health Care? If so, this proposals creates some legal issue. We considered it but ultimately providing a multi-tiered system is against State statues. I have all the gory details if you would like them.”
- Monte Vista Water District
“Will you please forward me any results you may get. I just walked out of a meeting on the same topic.”
- City of Larkspur
Amy: “I know quite a bit about this- did it a year or so ago. 415-927-5019 “
- Monterey Peninsula Water Management District
We are currently in negotiations with our bargaining units where the District has proposed tiered benefits for retiree medical, vacation accrual, and implementing the PEPRA Reform stuff. If you need to talk, I can be reached at 831.521.5644.
- City of Campbell
The City of Campbell does not have a tiered system but the system that has been in place for many years is capped at $325 per month (employee only) for employees who retire from the City with a minimum of 17 years of service. The benefit is subject to collective bargaining.