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Home My WebLink About07/20/2010� � � � , .,..,., ��......' � . .,� _. �° ��;..� �� . • � • � � ° City Council members: �� Ken Weir, Chair Staff: Stev.�Teglia lrma Carson Administrative Analyst III Zack Scrivner SPECIAL MEETING OF THE PERSONNEL COMMITTEE Tuesday, July 20, 2010 2:00 p.m. City Hall North - Conference Room A 1600 Truxtun Avenue Bakersfieid, CA 93301 AGENDA SUMMARY REPORT Meeting called to order at 2:34:47 PM 1. ROLL CALL Committee members: Councilmember Ken Weir, Chair Councilmember Zack Scrivner Councilmember Irma Carson City staff: Alan Tandy, City Manager John W. Stinson, Assistant City Manager Steven Tegiia, Administrative Analyst - City Manager's Office 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 and Todd Dickson, Police Detectives / BPOA Mark Cohen, Engineer - Fire Department / BFLO Nick Koskie, Firefighter - Fire Department Retired employees: Margaret Ursin, Greg Klimko, Patti Phoenix, William Descary, Ralph Wenzinger Others present: Chris Kim and Tom Morrison - Segal Company Marlene Valdez, SEIU Members of the media S:\Council Committees\2010\Personnel�July\July 20 ASR - Admin.Docx Page 1 ST:aI 2. ADOPTION OF APRIL 22, 2010 AGENDA SUMMARY REPORT 2:35:30 PM Adopted as submitted 3. PUBLIC STATEMENTS 2:35:41 PM None 4. DEFERRED BUSINESS A. Update and Committee Recommendation regarding Health Insurance Renewal Proposals - Teglia 2:35:49 PM Tom Morrison with Segal distributed an updated informational booklet and gave an overview of the contents. Inc�uded was historical data reflecting the rate percentage increases dating back to 2007. The Kaiser Active Pian averaged a 9.5% increase, Anthem PPO had an average increase of 6%, and the Anthem HMO plan averaged a 3.4% increase during that time period. For the retiree heaith care plans, the Anthem HMO plan had an average rate increase of 35.2%; Kaiser, 22.3%; and Anthem PPO, 0.9%. Consideration is being given to discontinuing the Anthem HMO retiree plan, due to low enrollment. A summary of proposed rate renewals was covered. • No increase is proposed for the Anthem HMO plans for retirees both over and under 65, and the Anthem PPO plan for active employees. The Anthem Senior Secure plan has yet to be approved by the Federal Government. • A 13.4% reduction is proposed for the Kaiser HMO plan for active employees, and a 14.5% increase is proposed for the Kaiser plan for retirees who are not MediCare eligible. The Kaiser Senior Advantage Plan has yet to be approved by the Federal Government. • No increase is proposed for either the vision or dentai plans other than MetLife, beca�se multiple year arrangements were negotiated last year. MetLife proposes a 7% increase; however, sufficient data is not availabie to substantiate the request, so negotiations will continue to further reduce the rate. • This will be the second year of a contract that calis for a reduction in life insurance rates. • A 2.9�o reduction is proposed for the Anthem Behavioral Health Program, and a 3.2% reduction in the Optum EAP plan. The data reflects that these S:\Council Committees\2010\Personnel\July\July 20 ASR - Admin.Docx Page 2 ST:aI programs are underutilized, so negotiations wiil continue with the purpose of further reducing the rates. • There was no increase proposed for the flexible benefits program, which is administered through Heaith Comp. Administrative Analyst Teglia reported that the Insurance Committee, that had met earlier this same day, unanimously recommended approval for the proposed rates that were presented, with the following exceptions: • The Anthem Senior Secure and Senior Advantage plans, which are pending before the Federal Government; • The 7% decrease of the MetLife dental plan, to allow Segal more time to negotiate a lower rate; and • The Optum EAP plan, to allow Segal to proceed with an RFP. The Personnel Committee unanimously voted to accept the proposals, with the noted exceptions. Mr. Morrison made a request to negotiate with Anthem to develop programs that would promote better use of diet, exercise and overall health awareness. Mr. Morrison informed the Committee that there are two categories of plans that are impacted by the new health care reform plan, and they are treated differently. A plan is considered grandfathered if it was in effect on March 23, 2010, when the Affordable Care Act became law. It will remain grandfathered if it is utilized by employees and if there are collective bargaining agreements in place at the time Act was signed. The status is preserved until 2014, when the full impact of the Act actually goes into effect. New plans, those that made significant changes, or self- insurance plans are not grandfathered. Some highlights of the Act include: • The parent of any child m�st be given the option to include that child in their coverage until the child reaches the age of 26, regardless if the child is married, lives with the parent, or the parent is financially responsible for the child. It is unclear as to whether retirees under the age of 65 shouid be offered this option; • There are to be no lifetime or annual dollar limits; • Coverage can only be rescinded upon proof of fraud; and • None of the provisions apply to retiree-only plans. S:\Council Committees\2010\Personnel�July\July 20 ASR - Admin.Docx Page 3 ST:aI All changes are only temporary until 2014 According to Mr. Teglia, the insurance Committee could not reach a majority consensus on whether or not to offer the child care option to retirees under the age of 65. City Manager Tandy indicated that staff's recommendation is not to offer the option to retirees under the age of 65. 5. NEW BUSINESS A. Discussion regarding Retiree Medical Liability Program - Tandy 3:07:58 PM Finance Director Smith gave brief summary and background of the topic, referring to a memorandum that was included in the packet. In 2007, the first valuation reflected an estimated long-term liability of $113 million, $4.8 million of which was funded. The 2007-08 annual required contribution covered normal costs and a thirty (30) year amortization of the unfunded measurement, estimated at $7.7 miilion. In 2010-1 1, the annual required contribution was $8.8 miliion, $5.8 million of which was funded. The Enterprise Fund portion was fully funded. Changes have been made that will result in a decreased contribution over time. In 1985, the subsidy of 2% per year of service was limited to only those employees who had a minimum of fifteen (15) years of service. In 1990, the 2% per year of service was revised to 3% per year of service, but capped at 90%. In 1996, for miscellaneous employees, and in 1998 for safety employees, the subsidy was further limited to those employees who had a minimum of 20 years of service. In 2006, the subsidy was eliminated for miscellaneous employees hired after Febr�ary and safety employees hired after May of that year. While this action terminated the escalation of those benefits going forward, it will still take a few years to see the costs decrease. As of June 30, 2010, there is $16 million set aside in the Irrevocable Trust Fund. An actuarial report is compiled every two (2) years, with the next one due at the end of July. It will reflect what the unfunded liability is, and project the annual required contribution for next two (2) years. City Manager Tandy reported that the item was called by the City Council to bring attention to the fact the City is not funding the trust fund each year as it should, and to solicit ideas as to what may be done to correct the lack of funding. The probability is that the new actuarial report is not likely to show a s�bstantial decrease in the total amount of unfunded liability, even though the benefit has been capped. It will be a number of years before costs start to descend. It is possible that a contribution could be made to the fund if a surplus exists in the Anthem account, as S:\Council Committees\2010\Personnel\July\July 20 ASR - Admin.Docx Page 4 ST:aI it did last year. Segal has been asked to provide ideas that might reduce the annualized expense and unfunded liability. While the issue can be hidden in the short term, if it is not corrected, the expense will consume a greater percentage of General Fund budget in the long term. Finance Director Smith reported that PARS (Public Agency Retirement Services) was hired to manage the trust fund. City staff has input into the management decisions, and meets with the investment advisor on a regular basis. Committee Chair Weir reiterated the need to address the problem in the near future. The item will be brought back to a future Committee meeting. 6. COMMITTEE COMMENTS None .3:26:25 PM 7. ADJOURNMENT The meeting was adjourned at 3:26:32 PM S:\Council Committees\2010\Personnel\July�July 20 ASR - Admin.Docx Page 5 ST:aI