COUNTY OF SACRAMENTO CALIFORNIA Attachment VA For the Agenda of: June 6, 2011 To: From: Subject: Supervisorial District(s): Board of Supervisors County Executive Approve The Retiree Medical And Dental Insurance Program Administrative Policy For All Contact: David Devine, Director of Department of Personnel Services (874-6398) Ann Marie Meyer, Employee Benefits Manager (874-1627) Overview A retiree medical and dental insurance program is considered each calendar year by the Board of Supervisors. This item requests approval of recommended program eligibility guidelines and program administration. Program costs for Fiscal Year 2011-12 were originally projected at $2,436,362; however, costs are now projected to be $1,911,184, resulting in a cost reduction of $525,178 from the original estimate. It is recommended that the Office of Budget and Debt Management allocate the cost reductions to all customer departments. Recommendations A. Approve the attached resolution to: 1) Approve: (a) access to medical insurance for retirees; (b) retiree medical and dental insurance offset payments for County retirees in accordance with Calendar Year 2010 labor settlement subject to the actuarial report required by Government Code 7507, and (c) elimination of retiree medical insurance offset payments for all other retirees not subject to the Calendar Year 2010 labor settlement; and 2) Direct staff to obtain an actuarial analysis of the expected cost of the Retiree Health Insurance Program for, and to return and present it to the Board for approval prior to open enrollment in October; and 3) Authorize the Director of Personnel Services, subject to County Counsel s review, to enter into an agreement for the actuarial study with a not-to-exceed amount of $15,000; and 4) Adopt the Retiree Medical and Dental Insurance Administrative Policy consistent with the group insurance contracts. B. Direct staff to notify all participating Special Districts of the Board s action and encourage the independent districts to adopt a similar policy regarding access to medical insurance, eligibility and amount of medical offset and premium payment guidelines for their eligible retirees. C. Authorize the Office of Budget and Debt Management to allocate the $525,178 cost
Page 2 reductions to county departments. Fiscal Impact The recommendations will impact the 2 nd half of Fiscal Year 2011-12, (January through June 2012), and therefore approval of these recommendations will have an impact on the upcoming fiscal year budget. Based upon this recommendation, the County cost of the Retiree Medical and Dental Insurance Program for Fiscal Year 2011-12 is $1,911,184. The County cost for the first half of Fiscal Year 2011-12 (July through December 2011) is estimated at $1,299,084 and the cost for the second half of Fiscal Year 2011-12 (January through June 2012) is estimated at $612,101. The original estimated costs included in the Fiscal Year 2011-12 Allocated Cost Package were $2,436,362 and the departments included these costs in their respective Fiscal Year 11-12 Recommended Budgets. Costs are now projected to be $525,178 lower than originally projected. The Office of Budget and Debt Management will allocate the cost reductions to county departments and will reflect these changes in the recommended Adopted Budget. Retirees are not guaranteed medical or dental insurance cost subsidization at a particular level or at all. The Board may elect not to provide future subsidies at any time. BACKGROUND The County has never vested retirees with a medical or dental insurance benefit. However, since 1980, based upon annual determinations of the Board, County retirees have been provided a medical insurance and dental insurance offset to assist them with the purchase of medical and dental insurance. On June 8 and June 10, 1993, the Board of Supervisors and the Sacramento County Employees Retirement System (SCERS) Board adopted Resolution No. 93-0778, which made California Government Code Section 31592.4 operative in Sacramento County. That Resolution provided that, by action of the SCERS Board and the Board of Supervisors, excess earnings from the SCERS system could be used as a funding source for retiree medical and dental insurance benefits. Subsequently, annually, the Board has adopted similar resolutions establishing retiree medical and dental care benefit programs for SCERS retirees. This program provided benefits to both County and participating Special District retirees who were drawing a pension check from SCERS. The program was designed at the outset to provide a subsidy amount that was indexed to the participant s SCERS service credits with the maximum subsidy amount equaling the highest County sponsored HMO health plan premium for a non-medicare retiree. In Fiscal Year 2002-2003 the subsidy was tied to the highest County sponsored HMO health plan premium for a non- Medicare retiree that had greater than 10% of County enrollment. In Fiscal Year 2003-2004, faced with the economic potential that excess earnings from the SCERS system may not be available to fund the program, the subsidy amounts were frozen and the maximum benefit was fixed at $244 for a participant with 25 or more years of SCERS service. Beginning with Fiscal Year 2004-05, SCERS funding ceased to be available and the County began to fund the program via allocated charges to all County departments. Similarly, SCERS-participating Special Districts made independent determinations regarding funding medical and dental offset payments for their retirees. On June 5, 2007 the Board eliminated the medical and dental insurance offset to anyone who retired after May 31, 2007. In June 2008 the Board approved the Calendar Year 2009
Page 3 program and funding of that program at the existing subsidy amounts. In June 2009 the Board approved the Calendar Year 2010 program and the funding of that program at a rate of approximately 50% of the 2009 subsidy levels. In June 2010, the Board approved the Calendar Year 2011 program with a further reduction in the County subsidy levels but was able to utilize funds from the Sacramento County Employees Retirement System (SCERS) on a one time basis. It is expected that the SCERS funds will be exhausted by the end of Calendar Year 2011 and will not be available in. Since September 2003, the Board has formally adopted a Retiree Medical and Dental Insurance Policy to govern eligibility for, and access to the medical and dental insurance plans and subsidies (if any) for the subsequent year. This year, the continuation of unprecedented revenue shortfalls in the County s anticipated Fiscal Year 2011-2012 budget have resulted in an urgent need to review the County s retiree medical insurance and dental insurance subsidies. Representatives from the Sacramento County Retired Employee Association (SCREA) have met with staff and members of the Executive team to explore options for the medical insurance and dental insurance offset program in light of the magnitude of the fiscal shortfalls. SCREA has been informed of the recommendation contained in this report and all County retirees have been notified of the budget hearing regarding this recommendation. DISCUSSION The Calendar Year 2011 Retiree Medical and Dental Insurance Program currently provides access to group medical and dental insurance and medical and dental offset payments to those eligible County retirees who retired before June 1, 2007, and those individuals that were members of a Recognized Employee Organization that has a labor settlement in place. These benefits are not vested benefits and are subject to determination and appropriation each year by the Board of Supervisors. The Board can end this program at any time. The recommendation provided herein would make the following changes to the Calendar Year 2011 Retiree Health Insurance Program Administration Policy for the 2012 calendar year: IX. ELIGIBILITY FOR SUBSIDY/OFFSET PAYMENTS The following categories of Annuitants are eligible to receive a County-paid medical or dental insurance offset payment during : 1. Annuitants who retired for any reason on or before December 31, 2004; 2. Annuitants who retired on or after January 1, 2005 but before May 31, 2007, 1) under any form of disability retirement, or 2) having worked for at least 10 years in SCERS-covered employment; 3. Annuitants who retired after May 31, 2007 1) under any form of disability retirement, or 2) having worked for at least 10 years in SCERS-covered employment from the following Recognized Employee Organizations: 001 General Supervisory Unit, Teamsters Local 150; 003 Law Enforcement, Non-Supervisory, Sacramento County Deputy Sheriffs Association;
Page 4 005 Office Technical, United Public Employees Local; 007 Health Services, American Federation of State, County and Municipal Employees; 008 Welfare Non Supervisory, United Public Employees Local 1; 010 Accountants Non Supervisory, Sacramento County Professional Accountants Association; 020 Attorneys Non Supervisory, Sacramento County Attorney s Association; 021 Attorneys Supervisory, Sacramento County Attorney s Association; 025 Welfare Supervisory, Service Employees International Union 1021. The medical insurance subsidy/offset payment, if any, will be provided to a continuing beneficiary who is a spouse or a registered domestic partner or a Survivor on the same basis as it was, or would have been made available to a retiree. The subsidy/offset cannot be split among multiple continuing beneficiaries. The subsidy will sunset for the following groups on June 30, 2013 in accordance with recently negotiated agreements: 001 General Supervisory Unit, Teamsters Local 150; 005 Office Technical, United Public Employees Local; 008 Welfare Non Supervisory, United Public Employees Local 1; 010 Accountants Non Supervisory, Sacramento County Professional Accountants Association; 025 Welfare Supervisory, Service Employees International Union 1021. The amount of subsidy described in Section X of the attached Policy would be as follows: Years of Service for Medical Eligible under Section IX of Policy All other eligible participants 2011 2012 2011 2012 <10 $122 $122 $40.32 0 10-15 $152 $152 $50.40 0 15-20 $182 $182 $60.48 0 20-25 $212 $212 $70.56 0 25+ $244 $244 $80.64 0 Dental $25 $25 0 0
Page 5 This recommendation continues access to group medical and dental insurance for retirees not receiving a subsidy under a labor settlement on a retiree-pay-all basis. An example of the proposed self-pay premiums for are: Non-Medicare Monthly Carrier Premium* Kaiser HMO Retiree Only $562 Health Net HMO Retiree Only $645 Blue Shield HMO Retiree Only $853 * The final rates will be brought to the Board in August for adoption. For many retirees, the County-sponsored plans are their only avenue to purchase quality, affordable medical insurance coverage without concern for health or pre-existing condition limitations. While access to coverage will still be available in the 2012 calendar year, there can be no guarantees for the future, especially for the individuals who retire without being eligible for Medicare (generally those between the ages of 50 and 65). Retirees not eligible for the offset payment will continue to be provided the option to enroll in a County-sponsored retiree medical plan on a self-pay basis. Government Code Section 7507 requires that the future costs, as determined by an enrolled actuary, shall be made public at a public meeting at least two weeks prior to the adoption of any changes in public retirement plan benefits. Because the retiree health insurance program is not a vested benefit and must be adopted each year, we treat this as a benefit change. Therefore, there is a requirement for action to be taken on two separate dates with regards to this matter. The requirements for Government Code Section 7507 include: If the future costs of the changes exceed one-half of 1 percent of the future annual costs, as defined, of the existing benefits for the legislative body an actuary shall be present to provide information as needed at the public meeting at which the adoption of a benefit change shall be considered. The adoption of any benefit to which this section applies shall not be placed on a consent calendar. Upon the adoption of any benefit change to which this section applies, the person with the responsibilities of a chief executive officer in an entity providing the benefit, however that person is denominated, shall acknowledge in writing that he or she understands the current and future cost of the benefit as determined by the actuary. The also recommend staff work with the independent districts currently participating in the program to encourage them to adopt a similar program. The purpose of this recommendation is to continue to provide access to all retirees, provide offset payments to those that retired prior to a date specific and to maintain some level of administrative consistency.
Page 6 FINANCIAL ANALYSIS The recommendations will impact the 2 nd half of Fiscal Year 2011-12, (January through June 2012), and therefore approval of these recommendations will have an impact on the upcoming fiscal year budget. Based upon this recommendation, the County cost of the Retiree Medical and Dental Insurance Program for Fiscal Year 2011-12 is $1,911,184. The County cost for the first half of Fiscal Year 2011-12 (July through December 2011) is estimated at $1,299,084 and the cost for the second half of Fiscal Year 2011-12 (January through June 2012) is estimated at $612,101. The original estimated costs included in the Fiscal Year 2011-12 Allocated Cost Package were $2,436,362 and the departments included these costs in their respective Fiscal Year 11-12 Recommended Budgets. Costs are now projected to be $525,178 lower than originally projected. The Office of Budget and Debt Management will allocate the cost reductions to county departments and will reflect these changes in the recommended Adopted Budget. Retirees are not guaranteed medical or dental insurance cost subsidization at a particular level or at all. The Board may elect not to provide future subsidies at any time. Respectfully submitted, Steven C. Szalay, Interim County Executive Attachments: Resolution Retiree Medical And Dental Insurance Program Policy For cc: County Counsel, Retirement Administrator, Internal Services Agency Administrator, Director of Finance; County Benefits Manager; Recognized Employee Organizations; Sacramento County Retired Employees Association