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Home My WebLink About09/29/2010• �AKERSFIELD �� Citv Council members: Ken Weir, Chair Staff: Steve eglia ^ Irma Carson Assistant to the City Manager Zack Scrivner SPECIAL IMEETING OF THE PERSONNEL COMMITfEE V'�ednesday, September 29, 2010 1;00 p.m. City Hall North - Conference Room A 1600 Truxtun Avenue Bakersfield, CA 93301 AGENDA SUMMARY REPORT Meeting called to order at :_z f' _ 1. ROLL CALL Committee members: Councilmember Ken Weir, Chair Councilmember Zack Scrivner Councilmember Irma Carson City staff: Alan Tandy, City Manager Steven Teglia, Assistant to the City Manager Nelson Smith, Finance Director Virginia Gennaro, City Attorney Rhonda Barnhard, Assistant Economic Development Director Ginger Rubin, Benefits Technician Kevin Stokes, Captain - Police Department Brian West, Police Detective / BPOA Tyler Hartley, Deputy Fire Chief Robert Melton, Engineer - Fire Department / BFLO James Adams, Captain - Fire Department Retired employees: Margaret Ursin Others present: Chris Kim and Tom Morrison - Segal Company Chuck Waide and Marlene Valdez, SEIU Members of the media S:\Council Commiitees\2010\Personnel\September\September 29 Agenda Summary Report.Docx Page 1 ST:aI 2. ADOPTIOIV OF JULY 20, 2CI10 AGENDA SUMMARY REPORT Adopted as submitted 3. PUBLIC STATEMENTS None 4. DEFERRED BUSINESS A, Update and Committee Recommendation reclardinq Health Insurance Renewal Proposals Assistant to the City Manager Teglia reminded the Committee that at the last meeting, the consultant, Segal, presented renewal rates for the 2011 plan year. Sor�e information w�s not available at the time due to continuing negotiations with providers. Those rates that had been approved at the last meeting were forwarded to the full City Council, and subsequently approved for next year. The outstanding rates involve the Em�loy2e Assistant Program (EAP) and the Met Life Dental plan. He stated that Segal would also give a report on the current actuarial study of unfunded liability for retiree healthcare, and provide recommendations. 1) Emplovee Assistance Proqram (EAP) Request for Proposals (RFP); Tom Morrison with the Segal Company, distributed material and gave an overview of the contents. The results of the RFP indicated that the current provider, United Healthcare, lowered their rate from 2010 by $0.29 per employee per month, which is a 15.3% decrease. There is a guaranteed maximum cap on increases for years two and three of 5%. Mr. Teglia reported that the Insurance Commiitee recommended to renew the contract with United Healthcare, and recommended that the Commiitee do the same. 2) Dental plan rates; Mr. Morrison reported that the City is in the second year of the contract with Met Life for dental coverage, which provides for a rate increase of 7%. As a result of the recent Healthcare Reform Bill signed into law by Congress, Segal asked Met Life to provide the cost to include dependents up to the age of 26, Although it will be automatically included in all medical plans as of January l, 201 l, it is not part of dental or vision plans. Met Life indicated that there would be an additional cost of 1°io to cover dependents up to the age of 26. S:\Council Committees\2010\Personnel\September\September 29 Agenda Summary Report.Docx Page 2 ST:aI The Insurance Commiitee voted to recommend acceptance of the 7% increase, but denial of the additic�nal 1% coverage, which equated to $8,453 annually for both the employee and the City. Mr. Morrison stated that the City can expect a significant increase next year, City Manager Tandy stated that staff agrees to the proposal. The Committee unanimously approved the recommendations. B. Report on the current unfunded liability actuarial study, Mr. Morrison provided an overview of the material related to the unfunded liability, and also addressed some suggestions to reduce the liability. Some key points include: • The Government Accounting Standards Board's (GASB) guidelines require a valuation every two years from which the liability is calculated. The calculation has three components: 1) Determination of the Actual Accrued Liability (AAL), which is the present value of tV�e benefit to be paid for eligible active employees when they retire, and for existing retirees based on service they already provided; 2) Market value of the investments as of the date of the valuation; and 3) The Annual Required Contribution (ARC) that would be necessary for the City to make into the irrevocable trust in order to fund the liability over a declining 30-year period, plus pay for the liability for the current year's service. • Because this benefit was eliminated for employees hired from 2006 forward, the trust contribution is calculated on a declining basis, meaning the liability will eventually be paid off. • The liability is calculated, using two formulas: 1) Years of service at retirement multiplied by 3% of the cost of the lowest cost active HMO; and 2) For Anthem PPO participants, an additional 42% of the cost of the Anthem Retiree PP�O plan. • The total current liability is $1 13,609,000, which is apportioned as follows: 1) Years of service formula: $47,715,780; and 2) Anthem Pf'O calculation: $65,893,220. S:\Council Committees\2010\Personnel\September\September 29 Agenda Summary Report.Docx Page 3 ST:aI • The net obligation is calculated by subtracting the amount of payment made the prior year from tr�e ARC and then adding the interest accrued on the balance. • According to Finance Director Nelson, partial payments to the trust were made over the past two years. � City Manager Tandy reported that a$1.3 million payment was made last year from one-time monies received as a refund from Anthem consisting of unused premiums paid by the City to Anthem in previous years. � The rate of return on investments in the trust as assumed by the actuary is 5.75%, which is a moderately conservative option provided by the Public Agency Retirement Services (PARS). The trust fund has earned approximately 1%, • Between 2007 and 2009, the actuarial value of assets increased by slightly more than $7 million. The market value of the assets was $4.8 million as of June 30, 2007, and $12.1 million as of June 30, 2009. • Options to reduce the cost and liability include changing the way the adjustment is calculated, modifying the plan by freezing increases, and taking steps to reduce the cost of the PPO plans. Some options are subject to negotiations. Coammittee member Scrivner confirmed with staff that the Insurance Commiitee had met and seen the presentation. Commiitee Chair Weir asked for staff to continue to develop the strategy and report back in �he future. 5. NEW BUSINESS 6. COMMITfEE COMMENTS None 7. ADJOURNMENT The meeting was adjourned at i:25:53 F'f� S:\Council Commiitees\2010\Personnel\September�September 29 Agenda Summary Report.Docx Page 4 ST:aI