Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Rocio Kiryczun, Human Resources Director
Michelle Kuka, Deputy Director, Human Resources
Subject: Actuarial impact upon future annual costs if the board were to adopt a resolution changing retiree health benefits for two classifications newly represented by the Law Enforcement Unit
RECOMMENDATION:
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Accept an analysis on the actuarial impact upon future costs if the board were to adopt a resolution changing retiree health benefits for two classifications newly represented by the Law Enforcement Unit.
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BACKGROUND:
The Law Enforcement Unit (LEU) has a current Memorandum of Understanding (MOU), which is valid until December 18, 2027. LEU requested, and was approved, to be the official recognized employee organization for two additional classifications, Community Services Officers and Forensic Autopsy Technicians. These classifications were previously represented by the American Federation of State, County and Municipal Employees (AFSCME).
The County and LEU have been negotiating a side letter to incorporate these two new classifications into their existing MOU. As part of those negotiations, the County and LEU are exploring changes to the employee’s current retiree health benefits which are currently different than the employee’s existing retiree health benefits under their former AFSCME MOU.
DISCUSSION:
The actuarial report analyzes proposed changes to the employee’s current retiree health benefit and the financial impacts of implementing the following changes to retirement benefits or other post-employment benefits for employees in the classifications of Community Services Officer and Forensic Autopsy Technician:
1) Retiree Health Benefits will still be based on hire date and years of service at time of retirement, but these employees will now receive the following benefits if they retire concurrently with separating from the County.
a. Employees hired before the transition date of February 18, 2024, with less than ten years of service at the time of retirement will have frozen sick leave hours plus any of the unused 192 hours of old sick leave at time of retirement will be deposited into the employee’s RHSA using the current conversion rate.
b. Employees hired before the transition date of February 18, 2024, with between ten and fifteen years of service at the time of retirement to age 65 will receive a County contribution up to $500 per month for purchase of medical, dental and vision through the County health plans. When the retiree reaches the age of 65, the County contribution will cease. In addition, 50% of frozen sick leave hours plus any of the unused 192 hours of old sick leave at time of retirement will be deposited into the employee’s RHSA at the employee’s base hourly rate of pay at time of retirement.
c. Employees hired before the transition date of February 18, 2024, with between fifteen and twenty years of service at the time of retirement to age 65 will receive a County contribution up to $891.95 per month for purchase of medical, dental and vision through the County health plans. When the retiree reaches the age of 65, the County contribution will cease. In addition, 50% of frozen sick leave hours plus any of the unused 192 hours of old sick leave at time of retirement will be deposited into the employee’s RHSA at the employee’s base hourly rate of pay at time of retirement.
d. Employees hired before the transition date of February 18, 2024, with between twenty and twenty-five years of service at the time of retirement to age 65 will receive a County contribution up to $1,189.27 per month for purchase of medical, dental and vision through the County health plans. When the retiree reaches the age of 65, the County contribution will cease. In addition, 50% of frozen sick leave hours plus any of the unused 192 hours of old sick leave at time of retirement will be deposited into the employee’s RHSA at the employee’s base hourly rate of pay at time of retirement.
e. Employees hired before the transition date of February 18, 2024, with twenty-five or more years of service at the time of retirement to age 65 will receive a County contribution up to $1,300 per month for purchase of medical, dental and vision through the County health plans. When the retiree reaches the age of 65, the County contribution will cease. In addition, 50% of frozen sick leave hours plus any of the unused 192 hours of old sick leave at time of retirement will be deposited into the employee’s RHSA at the employee’s base hourly rate of pay at time of retirement.
f. Employees hired before the transition date of February 18, 2024, who retire with 15 or more years of service at retirement would be eligible for monthly contributions payable by the County for 10 years. After the retiree turns age 65 and becomes eligible for Medicare, the proposed benefit amounts would be $166.22 per person in 2023. There would be no post-65 benefit paid for those with less than 15 years of service. The benefits would be payable for 10 years. For someone retiring prior to age 65, this benefit would first be payable at age 65 and continue for 10 years (until age 75). For eligible members retiring after age 65, the benefits would be payable for 10 years after retirement.
g. New employees hired after the transition date of February 18, 2024, the County will contribute $50.00 per month to the PORAC Trust for a retiree health savings account and the employee will contribute $100.00 per month to the PORAC Trust for a retiree health savings account.
Financial Impact on County’s Future Annual Costs
Government Code 7507 requires the County to provide the estimated financial impact that proposed changes in retirement benefits or other postemployment benefits would have on the future annual costs including but not limited to the annual dollar changes, or the total dollar changes involved as well as normal cost and any change to accrued liability.
As reflected in the attached letter from the County’s actuary, Milliman, the retiree health benefit reflected in this analysis is projected to increase the actuarial present value of benefits from $752,000 to $909,000, which is an increase of $157,000. The service cost represents the value of benefits earned during the year on an on-going basis and will decrease over time as new hires will only receive the $50.00 monthly contribution toward a retiree health savings account through the PORAC Trust and not incur service costs.
FISCAL IMPACT:
Active existing employees hired before February 18, 2024, and covered by this side letter, would contribute 0.85% of salary which would offset the increase in the actuarial present value of employee contributions such that it would be equal to the change in the actuarial present value of benefits associated with the retiree health benefit.