AGENDA MEMORANDUM

 

 

Meeting Date:              September 22, 2008

 

From:                           Edward F. Smyth, Jr., Deputy City Manager

 

Subject:                       Resolution Limiting Membership in the Employee Health Insurance Plan After Retirement

 

 

Staff Recommendation:

Staff recommends adoption of an amendment of Resolutions 4152, 4846, 7538 and 8213 modifying eligibility for health insurance to retirees to those employed by the City before September 30, 2008.

Analysis:

On May 23, 1988 the City Commission adopted Resolution No 4152 which provides that the City will provide health insurance, at the City’s expense, for employees who retire after October 1, 1988 with fifteen or more years of continuous service and who are fifty-eight years or older on their retirement date.  The cost of dependent coverage remained the responsibility of the employee.

On February 27, 1995, the City Commission amended this policy with the adoption of Resolution No 4846.  This amendment provided that an employee who retired at the age of fifty-five or later, but not yet fifty-eight would receive health insurance, at the City’s expense, from and after attaining the age of fifty-eight, provided the employee paid the premiums of the insurance from the date of retirement until the employee reached the age of fifty-eight.

On December 12, 2005, the City Commission again amended the policy with the adoption of Resolution No 7538.  This amendment established a ceiling on costs that will be borne by the City at $400 per month for retiree health insurance premiums.  The adoption of this amendment to the policy quantifies the City’s liability to provide this benefit over time.

Under the current policy, employees are eligible for City-paid health insurance upon the attainment of 58 years of age with a minimum of 15 years of service.  If the employee retires between 55 and 58, and pays the premiums until age 58, the City will pay for the coverage after age 58, to a maximum premium of $400 per month.

The Governmental Accounting Standards Board (GASB) issued Statement No. 45 to set forth rules for how governmental employers should account for Other Post-Employment Benefits (OPEBs).   Until now, the costs of OPEBs have been reflected in governmental financial statements on a pay-as-you-go basis of accounting.  Statement No. 45 views the subsidy for retiree medical benefits as a form of compensation and the subsidy must be accrued on the books of the City during an employee’s working life, rather than wait until the employee’s service to the City has been completed and he or she has retired. Thus, GASB requires the lifetime value of that subsidy to be expensed over the working career of the employees.

Currently, the City’s OPEB benefits are unfunded.  Therefore, the ultimate subsidies which are provided over time are financed directly by general assets of the City, which are invested in very short-term fixed income instruments according to its current investment policy.  While the City has limited its future costs by putting a cap on the amount ($400) of subsidy to retiree coverage, further limits are warranted.  In particular, the subsidy may be only offered to present employees. While this would not be reflected in the current GASB disclosure, it would definitely reduce future costs and liabilities.

State statutes require the City to make health insurance available for retirees if the City provides a group plan for active employees and officers, however there is no requirement for the City to pay the premiums.  One method to reduce the future liabilities on the City’s books is to cap the participants to those currently retired from, or employed by, the City of Leesburg, on or before a date certain.

Options:

1.  Adopt the resolution as presented; or

2.  Such alternative action as the Commission may deem appropriate

Fiscal Impact: 

This will limit the Other Post-Employment Benefits (OPEB) future liabilities.

Submission Date and Time:    9/17/2008 5:44 PM____

 

Department: Administration

Prepared by:  EF Smyth, DCM                     

Attachments:         Yes____   No   X  .

Advertised:   ____Not Required ______                     

Dates:   _________________________

 

Attorney Review :       Yes___  No   X  .

_______________________________

Revised 6/10/04

 

Reviewed by: Dept. Head __EFS___

 

Finance  Dept. __________________                                     

                              

Deputy C.M. ________EFS________                                                                         

 

Submitted by:

City Manager ___________________

 

Account No. _________________

 

Project No. ___________________

 

WF No. ______________________

 

Budget  ______________________

 

Available _____________________

 


RESOLUTION NO._______________

 

A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA, LIMITING PARTICIPATION IN THE HEALTH INSURANCE PLAN AFTER RETIREMENT, AMENDING RESOLUTIONS 4152, 4846, 7537 AND 8213; AND PROVIDING AND EFFECTIVE DATE.

 

BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA:

 

THAT, employees shall have the privilege of remaining in the City’s group health plan after retiring, and that those who are employed by the City of Leesburg as of September 30, 2008 shall have premiums for such insurance paid by the City, up to a maximum monthly cost of $400 per month per employee.

 

THAT, Any employee hired after September 30, 2008 shall pay their own insurance premiums should they elect to remain with the City’s plan during retirement.

 

THAT the payment of premiums for dependent coverage remain the responsibility of the employee and similarly all other provisions of the City’s policy as established in Resolution No 4152 on May 23, 1988, as subsequently amended by Resolutions 4846 on February 27, 1995, 7538 on December 12, 2005, and 8213 on June 23, 2008, remain in full force and effect, including the fact that should the employee become subsequently employed and eligible for group insurance with another employer, the coverage with the City’s group plan shall be terminated permanently.

 

THAT this resolution shall become effective immediately.

 

PASSED AND ADOPTED by the City Commission of the City of Leesburg, Florida, at a regular meeting held the   22nd   day of    September    2008.

 

 

 

 

 

                                                                            __________________________

                                                                             Mayor

 

ATTEST:

 

 

 

__________________________

City Clerk