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Home My WebLink About2003-11-24 City Council (9)7 City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: HUMAN RESOURCES DATE:NOVEMBER 24, 2003 CMR: 518:03 SUBJECT:APPROVAL OF RESOLUTION ELECTING TO ESTABLISH A HEALTH BENEFIT VESTING REQUIREMENT FOR FUTURE RETIREES UNDER THE PUBLIC EMPLOYEES’ MEDICAL AND HOSPITAL CARE ACT (PEMHCA) FOR IAFF, LOCAL 1319, INTERNATIONAL ASSOCIATION OF FIREFIGHTERS AND FIRE CHIEFS ASSOCIATION RECOMMENDATION Staff recommends Council approve the attached resolution to amend the City’s contract with the California Public Employee’s Retirement System (CalPERS) to establish a 10/20-year vesting requirement for eligibility for Local 1319, International Association of Firefighters (IAFF) and Fire Chiefs Association retiree health insurance. This change will apply to future employees in IAFF and Fire Chiefs Association hired after January 1, 2004. BACKGROUND In May 2003, a citywide Healthcare Committee was formed. Representatives from each of the City’s bargaining groups and Human Resources Department staff met to explore ways to address the escalating costs of employee benefits. The issue of the City’s unfunded retiree health liability was one of the major items of discussion. Numerous options to reduce this liability were considered and it was determined that the best option is the 20-year vesting requirement program through PEMCHA. This option was discussed with IAFF and Fire Chiefs Association and negotiated. The vesting requirement will reduce the number of employees who are eligible for retiree health coverage and, thus, result in significant future savings to the City. This program will effect employees in IAFF and Fire Chiefs Association hired after January 1, 2004 and will provide for retiree medical coverage only after 10 years of service or credit (including at least five years at the City of Palo Alto) and full City contribution only after 20 years of PERS service credit. CMR: 518:03 Page 1 of 3 DISCUSSION Implementing this health benefit vesting requirement for furore hires is another cost containment measures component staff is recommending. The PERS law vesting schedule as set forth in Government Code section 22825.5 will apply. Under this law, an employee is eligible for 50% of the specified employer health benefit contribution after ten years of service credit, provided at least five of those years were performed at the City of Palo Alto. After ten years of service credit, each additional service credit increases the employer contribution percentage by 5% until, at 20 years’ service credit, the employee is eligible upon retirement for 100% of the specified employer contribution and 90% of the dependent coverage. The City of Palo Alto’s health premium contribution for eligible furore retirees shall be the minimum contribution set by PERS based on a weighted average of available health plan premiums. RESOURCE IMPACT The City will realize a cost avoidance as a result of the 20-year vesting program. At this time there is no way to know how many employees will be hired in future years. It is difficult to determine the amount of this avoidance due to the uncertainty of future health costs and the number of future retirees. POLICY IMPLICATIONS This request does not represent any change to existing City policy. ENVIRONMENTAL REVIEW This is not a project under the California Environmental Quality Act (CEQA). CMR: 518:03 Page 2 of 3 ATTACHMENTS Attachment 1 -Resolution of the Council of the City of Palo Alto electing to establish a health benefit vesting requirement for furore retirees in Local 1319, International Association of Firefighters and the Fire Chiefs Association PREPARED BY Sandra T.R. Blanch, Risk and Benefits Manager DEPARTMENT HEAD: LESLIE LOOMIS Director of Human Resources CITY MANAGER APPROVAL: HARRISON Assistant City Manager CMR: 518:03 Page 3 of 3 NOT YET APPROVED RESOLUTION NO. RESOLUTION OF THE CO~CIL OF THE CITY OF PALO ALTO ELECTING TO ESTABLISH A HEALTH BENEFIT VESTING REQUIREMENT FOR FUTURE RETIREES FROM THE PALO ALTO FIRE CHIEFS’ ASSOCIATION ~ER THE PUBLIC EMPLOYEES’MEDICAL AND HOSPITAL CARE ACT WHEREAS, Government Code Section 22825.5 provides that a local agency contracting under the Public Employees’ Medical and Hospital Care Act may amend its resolution to provide a post retirement vesting requirement to employees who retire for service; and WHEREAS, the City of Palo Alto is a local agency contracting under the Act for participation by members of the Palo Alto Fire Chiefs’ Association; and WHEREAS, the City of Palo Alto certifies, employees are represented by a bargaining unit and subject to a memorandum of understanding; and WHEREAS, the credited service for purposes of determining the percentage of employer contributions shall mean service as defined in Section 20069, except that not less than five (5) years of that service shall be performed entirely with the City of Palo Alto. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION I. That the employer’s contribution for each retired employee first hired on or after the effective date of this resolution shall be the amount necessary to pay the full cost of his/her enrollment, including the enrollment of family members, in a health benefits plan or plans up to a maximum of $399.00 with respect to employees enrolled for self alone, $733.00 for an employee enrolled for self and one family member, and $931.00 for an employee enrolled for self and two or more family members plus administrative fees and Contingency Reserve Fund, but not more than i00 percent of the premium applicable to him or her, nor less than the i00 ~ercent of the weighted average of the health benefits plan premiums for employees or annuitants enrolled for self alone plan premiums for employees or annuitants enrolled for self alone plus 90 percent of the weighted average of the additional premiums required for 031118 sm 8120417 1 NOT YET APPROVED enrollment of family members in the four health benefits plans that have the largest number of enrollments. SECTION 2. That the percentage of employer contribution payable for post retirement health benefits for each retired employee shall be based on the employee’s completed years of credited service based upon Government Code Section 22825.5; plus administrative fees and Contingency Reserve Fund assessments. SECTION 3. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: Senior Asst. City Attorney City Manager Director of Human Resources Director of Administrative Services 031118 sm 8120417 2 NOT YET APPROVED RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO ELECTING TO ESTABLISH A HEALTH BENEFIT VESTING REQUIREMENT FOR FUTURE RETIREES FROM LOCAL 1319,INTERNATIONAL ASSOCIATION OF FIRE FIGHTERS UNDER THE PUBLIC EMPLOYEES’MEDICAL AND HOSPITAL CARE ACT WHEREAS, Government Code Section 22825.5 provides that a local agency contracting under the Public Employees’ Medical and Hospital Care Act may amend its resolution to provide a post retirement vesting requirement to employees who retire for service; and WHEREAS, the City of Palo Alto is a local agency contracting under the Act for participation by members of Local 1319, International Association of Fire Fighters (IAFF); and WHEREAS, the City of Palo Alto certifies, employees are represented by a bargaining unit and subject to a memorandum of understanding; and WHEREAS, the credited service for purposes of determining the percentage of employer contributions shall mean service as defined in Section 20069, except that not less than five (5) years of that service shall be performed entirely with the City of Palo Alto. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION i. That the employer’s contribution for each retired employee first hired on or after the effective date of this resolution shall be the amount necessary to pay the full cost of his/her enrollment, including the enrollment of family members, in a health benefits plan or plans up to a maximum of $399 with respect to employees enrolled for self alone, $733 for an employee enrolled for self and one family member, and $931 for an employee enrolled for self and two or more family members plus administrative fees and Contingency Reserve Fund, but not more than I00 percent of the premium applicable to him or her, nor less than the i00 percent of the weighted average of the health benefits plan premiums for employees or annuitants enrolled for self alone plan premiums for employees or annuitants enrolled for self alone plus 90 percent of the weighted average of the additional premiums required for enrollment of family members in the four health benefits plans that have the largest number of enrollments. 031118 sm 8120416 ! NOT YET APPROVED SECTION 2. That the percentage of employer contribution payable for post retirement health benefits for each retired employee shall be based on the employee’s completed years of credited service based upon Government Code Section 22825.5; plus administrative fees and Contingency Reserve Fund assessments. SECTION 3. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: Senior Asst. City Attorney City Manager Director of Human Resources Director of Administrative Services 031118 srn 8120416 2