Employee Benefit Trust Minutes - 03/05/2007 CITY OF WICHITA FALLS
EMPLOYEE BENEFITS TRUST BOARD MEETING
March 5,2007
Present: Bill Sullivan, Chair
Darron Leiker, City Manager •
Jim Dockery, Finance Director
David Winney, Director of Human Resources
Gail Gannon,Employee Benefits Coordinator
The meeting was called to order at 10:00 a.m.
Agenda Items:
Hearing and Possible Action on Employee Appeal
David Winney presented information on an employee who had failed to be notified of the
New Employee Orientation,therefore making him ineligible for his Health benefits until
open enrollment in October, 2007. After some discussion, it was decided that the
employee was not at fault and that he should be allowed onto the Plan. Jim Dockery
made a motion that the employee be allowed to go onto the Health plan after satisfying
the normal 60 day waiting period as other eligible employees. Darron Leiker seconded
the motion. Motion carried.
Approval of Minutes
Darron Leiker made a motion to approve the minutes of the December 5 meeting with
one correction to the last line of the "Discussion of Actuarial Study". It should read:
"The purpose being to determine the City's current and future liability with regard to
retirees, other than retirement. Jim Dockery seconded the motion. Motion carried.
Financial Statement
Jim Dockery presented a financial history of the Trust from 2004 through February,
2007. He reported that current revenues to the Trust are projected to generate between
$7,880,780 and $7,945,480 by the end of September,2007. With current increases in
claims and administration fees, it is expected that expenditures will total between
$7,595,213 and $7,291,715, leaving a surplus of between$285,567 and$653,765.
Jim further stated that City's contributions were increased this year, bringing the total
City contributions 5.5 million and employee contributions 1.4 million.
•
In other business, Bill Sullivan inquired about the status of the GASB report. Jim
Dockery stated that he had presented the data to the actuary two weeks prior and
expected to hear from them within 6 weeks. They will provide us with options that can
be used to offset the liability. He stated they should be able to take the findings to the
City Council by sometime in May.
Darron Leiker inquired as to when the Board would know the outcome of the FSA
account. Jim Dockery felt that those results should be known around April or May. He
stated that he felt the City would not lose any money on this benefit.
The meeting was adjourned at 10:50 a.m.
Respectfully submitted,
Gail Garmon
Employee Benefits Coordinator
r
CD00 �D L M if)
cti
cn o1-4
•• � Ln
T�
((W"-i
,,
rr^^ n!
VJ
O
O ,•_if:)
Oel , N Om0 \
W CDCD
00 ...f.
L .
N
N .44
":3
, ct,
Z].) , ..,,,
cr) 4
›...1 0
.,..,
rn ,. .., .4_,
- /s.4.:> 7,, . _,...,
,..e.„ ,..c) ,..,
CU
47
U a
CU
E
a) 0,
( ) U
U
o Cr tj
ai IIU
kF-
', N'.
r 0 4
N
cn
ccI I c
r: T 0
U II__
1 1 el
Ct I
N
CD
-+.� I N
" I °b�0 c -h
''rr CO_ I e
OC. 's) co
W (2) o �
I o z �
O O
4 N
Z oo
O oo
O oo
O oo
jjo1irJ Jo aV1lualiaJ
4 N,w
• CO
r oiiig,4
EMINIMEMIIMMOMMIll■U
IIMMIIIMEMI. III Ma
VINRIOL 1 w-i■
'M■l en
inr■■i■.I■ O
_,
miimmolsinommorm Ira
lommolimminsw _di■iti
all ops'
CD
massimmiwn El m•
6
1 MI
• I 1 ■�. CD U
0
VI. h .,
•1-4 im el as
;-4 miiimil I N
rt rig
0m ;• N
isI N
E.- n Z
v3 (i) rd O
1- 4
r.Q 0O
■ N jz GC
C) U . .....mmi ILI 0 W
4.1
� N W 0
PO W a� N o
o IN
n z
w — O
� 1 � N
Z -...._ --........ -......._ -....._ ---, -...., -....._ -.....,
O O O O O O O O
L O L O lin O L
M C ) N N 1-I 1--1
'jai/Cud Jo age4uaaJad
N 0r 0..Hoxiv4
o411.101/
0
��, ,_ o O
NV
I
en U
w �- �• I
N
v)
� 0
,,�,,..M�++
`V 1I w N
L _ 0
��, N Z
E
0 , ray_ ,
(No) I \
`�
„rct. 0
V
N O
o p, L t N et .c
�? I N. 0....., „,,, I 2
cn
4 _
cz
ce 0
C!I) �O �° �° N `t CD
el II a.
O O O O O v C
UN O O > O ccr)
iio,lAe j ;o age}uaUaad E
w•
on
4i,
N
N (i)
Cel
^I�, - N
Q45
ti
^ , a
W O - N
LL U �-
V/ N
co')
-I4 _ O
, N
�J -
- ti
'"�i _ N
O
a - N
N
of _ - N
> 0)
c, Q O
C^^/D " _ _ N
W U ti Li- -
C
. � _ O
-'-'el
N _ N N
O
03
L
4
a) O - N _o a-
-� O -
^ , ..
, ..
0
a�i `- 1 - N 0
W0
CU
} -
u) N
I
/
U = Q -
' O
U in
o 0 U
/
0 0 0� N O
Nin a
L
cu
co
lloiAed Jo lue3Jed
o
r
r M
SUMMARY OF DRAFT REPORT
1. Our Current Benefit Package for Retirees is a fairly "RICH" plan for
Retirees.
2. Ratio of Active Employees to Retirees is approximately 3 to 1.
3. Plans with Older Age Participants Cost More
4. Retirees are Paying about 25% vs. City at 75%.
5. Medicare Eligible Members are paying about 20% to 80%
6. Our Plan is "Rich" is for Medicare Eligible Retirees
7. No Service Eligibility (i.e. Rule of 75 or 80) Causes Significant Costs
8. Need Data Collection on Three Categories (Actives, Retirees, Medicare
Eligible). BC/BS and PharmaCare.
_ •
0A),..09
OLIA OU.) (),Ai 6,)04 eALIA 41(
Subject: Decreasing OPEB Liabilities
( -� -' °V) i r
This letter describes several of the ways employers can reduce their retiree medical
liabilities using plan design. This letter does not address the issues of finance or funding
for the liabilities. In addition, we emphasize the actual OPEB plan design alternatives
instead of the underlying health care costs. The first part of the letter describes several of
the alternatives employers are using and the attached exhibit provides the advantages and
disadvantages.
*Restricting Eligibility W011,
This alternative limits the number of retirees who are eligible for the benefits. Examples
include increasing the number of years of service for participation from 10 years to 20
years or eliminating eligibility for members who terminate service before retirement.
This type of change has less impact on the career employee but significantly reduces the
benefits for shorter service employees.
A:: Increasing of Retiree Share of Costs
This alternative,as described, increases the portion of the costs borne by the retiree. For
example, many retiree health programs allow the retirees to stay on as long as the retiree
pays the same premium as an active employee. The employer could begin to charge the
retiree a portion of the employer premium. However, as the retiree share increases, the
participation will tend to decrease due to the loss of purchasing power and anti-selection
by healthy retirees.
Gradual Accrual
This alternative provides for the accrual of benefits in a manner similar to how a pension
benefit is accrued. For example,the employer provided benefit could be stated as $10
per month per year of service. For a member with 20 years of service,the employer
would provide $200 a month for retiree medical benefits. Members with 10 years or 30
years would likewise receive $100 or$300 respectively. This type of structure has less
impact on the career employee, but can provide some benefit for the shorter service
employee in comparison to the first alternative `Restricting Eligibility'.
Limiting Future Commitments
The current Municipal Association proposal falls under this alternative. This approach
includes either setting a fixed dollar amount that the employer will provide or setting
cap/limit that the employer portion of the cost will not go beyond. This cap can either be
fixed or expected to increase at some set rate (for example based on CPI).
Increasing retiree out-of-pocket costs 7 1" � - p
This alternative attempts to lower liabilities by decreasing the cost of the underlying
health plan. This could include requiring the retirees to pay higher deductibles, increased
Gabriel Roeder Smith & Company
coinsurance, and increased co-payments. Another example would be the limitation or
elimination of coverage for certain types of drugs. This alternative can have a very
significant impact on a retiree medical plan's liabilities, not only in the projected future
but also the current fiscal year costs.
Tiering
This alternative provides different levels of benefits for separate sections of the
population. The tier can be based on a date so that all members who were hired before a
given date are provided one level of benefits and all hired after are provided another. Or
the tier could be based on service so that members with more service are provided more
benefits than the shorter service members. The current proposal in SB 462 falls into this
alternative for future members.
Eliminating Participation for Future Members
If the employer feels that the benefits.are not sustainable but feels responsible to meet the
promises that have already been made to the current members, the group eligible for
participation could be closed. This would have no affect on the current benefits or GASB
45 liabilities, but over time would decrease both.
Eliminating Program
Obviously,this alternative is the most drastic measure. This alternative would likely lead
to litigation and would be devastating to current retirees. The workforce would also age
over time because employees could not afford to retire at earlier ages. This alternative
would immediately eliminate current costs and GASB 45 liabilities.
Defined Contribution Approach
This alternative is similar to a employer sponsored 401k or 457 plan in which the
employer contribution into an individual's account is set and then the accumulation of
that account can be used by the member to purchase health insurance at retirement. This
type of arrangement completely separates the employer from healthcare trend risk and
investment risk. This type of arrangement would typically be combined with eliminating
the current program or eliminating participation for future members.
If you have any questions concerning this analysis or if you need additional information,
please give us a call.
•
L � ,
C.ahri,I Pnrrior Cmit}i Rr rnrnnanir
Strategy Description Advantages Disadvantages
Restricting Only provides benefits for Continues to provide for Lower benefits for members who
Eligibility members who meet certain career employees begin working later in their career
criteria
Increasing Increase portion of Lowers overall plan liabilities Higher cost could lead to lower
Retiree Share premium borne by retiree and shifts more inflation risk to participation,anti-selection
of Costs retirees
Gradual Benefits accrue gradually Gradual accrual may lower Gradual accrual would mean lower
Accrual based on years of service overall plan liabilities. benefits to employees who begin
rather than immediately working later in their career.
upon retirement.
Benefits Caps Benefits allowed to Cap can be set to exceed Cap might be reached quickly,
increase up to a stated current premium and so result limiting benefits. (This might be
dollar cap. in no immediate reduction in mitigated by allowing additional cost
benefits. Cap would limit increases based on CPI.)
projected heath trend
increases,lowering the
liability.
Tiering Separate levels of benefits Can lower liabilities for May take extended amount of time
for segments of the members affected by change before savings are realized based
population on size of group affected
Elimination of Most dramatic change, Eliminates liabilities and risk Retirees left to fend for themselves,
Program may be in accordance with for employer may not be able to get coverage
defined contribution based on pre-existing conditions,
approach may lead to litigation
Defined Accumulation of money in Removes risk and liabilities The accounts may not accumulate
Contribution an account throughout the from employer. Annual costs enough to provide adequate
career of the employee that are fixed similar to a 401k or benefits. Will cause members to
can be used to purchase 457 plan. extend career.
health insurance during
retirement
C:a}hrip1 Rnprinr Smith Rr Cnmr»rnr