HomeMy WebLinkAboutMINUTES - 07212009 - D.12RECOMMENDATION(S):
1. ACCEPT report from the County Administrator regarding recommendations on health
care changes for employees of the In-Home Supportive Services Public Authority; and
2. ADOPT Resolution 2009/350 (Attached) regarding compensation and benefits for
In-Home Supportive Services Public Authority employees to reflect changes as
recommended by the County Administrator.
FISCAL IMPACT:
While providing sound health care coverage for employees, these recommended changes to
the health plan will result in significant reductions in the Public Authority’s long term
liabilities and will significantly add to the Public Authority’s overall fiscal stability and
ability to deliver services.
BACKGROUND:
In March 2007, the County’s Finance Committee received the County’s actuarial report
based upon 2006 data as required by the Governmental Accounting Standards Board
APPROVE OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
Action of Board On: 07/21/2009 APPROVED AS RECOMMENDED OTHER
Clerks Notes:
VOTE OF SUPERVISORS
AYE:John Gioia, District I Supervisor
Gayle B. Uilkema, District II
Supervisor
Mary N. Piepho, District III Supervisor
Susan A. Bonilla, District IV
Supervisor
Federal D. Glover, District V
Supervisor
Contact: Lisa Driscoll, County Finance
Director, 335-1023
I hereby certify that this is a true and correct copy of an action taken and entered on the minutes
of the Board of Supervisors on the date shown.
ATTESTED: July 21, 2009
David J. Twa, County Administrator and Clerk of the Board of Supervisors
By: June McHuen, Deputy
cc: County Administrator, County Administrator, Human Resources, County Counsel, Auditor-Controller, In-Home Supportive Services Public Authority,
Contra Costa County Employees' Retirement Association
D. 12
To:In-Home Supportive Services Public Authority
From:David Twa, County Administrator
Date:July 21, 2009
Contra
Costa
County
Subject:Revised IHSS Public Authority Management Resolution - No. 2009/350
(GASB) statements 43 and 45. The purpose of GASB 45 is, through planning and
awareness, to properly account for costs for retiree health benefits. The original actuary
report valued the County’s unfunded liability for retiree medical insurance costs at $2.6
billion based upon a cash discount rate. This liability, if fully amortized over the following
30 years, would necessitate an Annual Required Contribution (ARC) of $216 million. At
that point in time, $216 million would have been six times the amount that the County was
paying toward retiree health care premiums on a “pay-as-you-go” basis. In addition, the
report showed that, absent timely intervention; the dollar amount of the ARC for retiree
medical would triple over the next ten years; resulting in a very real threat to the
sustainability of the entire program itself and to vital County services that compete for the
same funding.
BACKGROUND: (CONT'D)
Actions to Date
At the Board of Supervisor’s request, County staff hired a benefit design consultant and
began working on a plan to address the County’s Other Post Employment Benefits
unfunded liability for retiree medical insurance costs. Since March 2007, the County has
taken significant actions to address GASB 45:
Specific Goals and Objectives. The Board of Supervisors has set four specific goals:
1) to fully comply with GASB Statement 45; 2) to adopt and follow an OPEB
financing plan, which balances our requirement to provide public services with our
desire to provide competitive health care benefits for our employees both now and
when they retire; 3) to minimize collateral detrimental impact to the provision of
indigent health care in our County; and 4) pursue and support Federal and State
legislation.
Economic Census Assumptions and Rationales . Prior to ordering the first formal
OPEB liability valuation, the OPEB task force met with actuaries from Buck
Consultants and developed economic census assumptions and rationales for the
actuarial valuation.
Funding Strategy. While the County has paid for health care costs on a
Pay-As-You-Go (“Pay-Go”) basis for over forty years, the Board has publicly
acknowledged the need to begin to partially pre-fund the benefit. Due to the size of
the liability it is almost impossible for the County to fully pre-fund the liability;
rather partial pre-funding will be phased in over thirty years. It is the Board’s intent
to fully pre-fund OPEB benefits over time.
Funding Levels. The Board established an initial pre-funding target for the County
of 100% of its retirees, which currently translates to approximately 40% of the total
OPEB liability. This means that during the next 30 years, we will need to
incorporate updated demographics and cost information into our financing plan in
order to fully fund our OPEB benefits. In establishing this target level, a variety of
things were considered: 1) specific funding guidelines for financial long-term
obligations; 2) the Government-wide balance sheet impact of various funding levels;
3) the liability impact of various funding levels; 4) the volatility of the
assumptions/risk of funding; and 5) the ability to fund/affordability (for more
information see the June 26, 2007 report to the Board).
Pre-funding resources. As an initial step towards funding the OPEB liability, the
Board of Supervisors adopted the allocation of resources (and the future investment
income earned) totaling $588 million (plus interest) reserved by the end of fiscal
year 2022/23, and $100 million added annually thereafter.
Employee Communication Forums and Information Sessions . The County
Administrator scheduled OPEB informational sessions throughout the County for
our employees. The purpose of the presentations was to provide information
regarding OPEB, to answer employees’ questions, and to seek employees input and
suggestions on solutions.
Establishment of a Trust Fund . The Board approved an irrevocable trust (Internal
Revenue Code Section 115) for OPEB funding for Contra Costa County (1/15/08).
The purpose of establishing the Trust is to comply with GASB to establish a
mechanism for 1) saving OPEB funds, 2) earning interest, and 3) discounting our
liability.
Selection of a Benefit Design Consultant. County selected and contracted with a
Benefit Design consultant – Buck Consultants to help in identifying cost control
options.
Pre-funding Allocations. In the 2008/09 fiscal year, the County partially pre-funded
the OPEB liability by placing $20 million in the OPEB trust. The County has
budgeted an additional $20 million to the trust for FY 2009/10.
Health Care Changes. In the summer and fall of 2008, the Board approved changes
to health care benefits that for unrepresented employees, appointed and elected
officials and for persons who retired from classifications that were unrepresented,
appointed or elected. The changes, in combination with the actions listed above,
reduced the County’s total liability to $1.7 million and the County’s gap to $54
million. The County’s gap is defined as the amount of annual funding required to
reach a 40% liability funding level at the end of 30 years.
Detailed information on the Board’s actions, including all of the County’s OPEB reports
is available on the County’s web-site at www.cccounty.us.
County Administrator’s Recommendations
The County has recently completed negotiations with its Coalition Bargaining Group
(CBG), which consists of employees represented by unions in: AFSCME Local 512,
Professional and Technical Employees; AFSCME Local 2700, United Clerical,
Technical and Specialized Employees; Public Employees Union Local One, FACS Site
Supervisor Unit; Public Employees Union Local One; SEIU Local 1021, Rank and File
Unit; SEIU Local 1021, Service Line Supervisors Unit; Western Council of Engineers.
Among other things, the collective bargaining resulted in active and post retirement
health plan changes that result in significant reductions in long term liabilities and annual
health care expenses.
In order to align health care coverage for both safety and non-safety unrepresented
employees, and elected and appointed officials with the CBG’s negotiated changes, the
County Administrator is recommending adoption of the attached resolution (2009/350),
which applies health plan modifications (summarized below) to these employees and
appointed and elected officials:
Dual Coverage. Provide as of 01/01/10, that employees and retirees and dependents
Dual Coverage. Provide as of 01/01/10, that employees and retirees and dependents
of employees and retirees can no longer have dual coverage in two
County/District/IHSS health or dental plans. This provision will apply to County,
District, and IHSS employees and retirees who have spouses or partners who are
either County, District, or IHSS employees or retirees.
Premium Cost Sharing (Other Than CalPERS Plans)
Contra Costa Health Plan and Coordinated Dental Plans – Currently shared
98% County, 2% Participant for Plan A and 90% County, 10% Participant for
Plan B.
Effective 01/01/10, cost sharing for Plan A to change to 93% County and
7% Participant. Cost sharing for Plan B to change to 87% County and 13%
Participant.
Effective 01/01/11, increases in Plan A and Plan B to be shared 50% by
the County and 50% by the Participant, up to a maximum of 11%; portion
of increase above 11% to be paid by the County.
Kaiser and Health Net HMO and dental plans – Increases 01/01/10 and
01/01/11 to be shared 50% by the County and 50% by the Participant, up to a
maximum of 11%; portion of increase above 11% to be paid by the County.
Health Net PPO- Increases 01/01/10 and 01/01/11 to be shared 50% by the
County and 50% by the Participant.
Fixed Premium. Effective 06/29/11, fix the County monthly premium subsidy
for all of these plans at the May 2011 dollar amount.
Premium Cost Sharing (CalPERS Plans)
All plans currently shared based on Bay Area/Sacramento Kaiser premium rate
at 87% County, 13% Participant.
Based on that rate, increases 01/01/10 and 01/01/11 to be shared 50% by the
County and 50% by the Participant, up to 11%; portion of increase above 11%
to be paid by the County.
Fixed Premium. Effective 06/29/11, fix the County monthly premium subsidy
for all CalPERS plans at the May 2011 amount County pays for the Bay Area
Kaiser premium.
For Dental, County premium same as non-CalPERS plans.
Dental Plan Benefit. Increase to $1800, from $1600, the annual maximum benefit
available in the Delta Dental Insurance plan effective 01/01/10.
One Rate Pool. Eliminate provision applicable to management and unrepresented
employees that would have established separate rate pools during employment and
upon retirement for new employees hired on or after 01/01/09.
New Hires and Medicare Parts A and B. The changes implemented in 2008 remain
in effect. Among other things, persons hired after December 31, 2008 will not
receive an employer subsidized retiree health care benefit and persons who turn 65
on or after January 1, 2009 are required to enroll in Medicare Parts A and B.
These recommendations will continue the process of reducing our OPEB liability,
reducing overall health care cost growth, and reducing health care cost growth for the
County. The recommendations have little immediate impact, in order to allow the County
and individuals time to plan for the future. The County’s goal continues to be to reduce
the overall cost growth of benefits prior to 2010 through Benefit Plan design changes that
counteract medical cost growth in order to preserve a balance between providing sound
health care coverage for our employees and retirees and maintaining vital County,
District and Public authority programs and services.
Actuarial Analysis/Assumptions
As a reminder, the 2006 valuation projected a $2.6 billion total liability/accumulated
postretirement benefit obligation (APBO), and a $216 million annually required
contribution (ARC) based upon a cash discount rate (4.5%).
PAYGO
Total APBO $2,571,650,000
Assets 0
Unfunded Actuarial Accrued Liability $2,571,650,000
Annual Required Contribution
Normal Cost 130,604,000
30 Year Amortization of UAAL 85,721,000
ARC $216,325,000
Impact of Previous Actions on Liability
After the Board of Supervisors adopted changes to unrepresented employees and
appointed and elected officials and persons who retired from classifications that were
unrepresented, appointed, or elected AND the FY 2008/09 recommended budget which
included $20 million in partial pre-funding, the 2008 valuation projected a $1.7 billion
total liability, and a $130 million annually required contribution.
Partial Pre-Funding
Total APBO $1,736,915,000
Assets 0
Unfunded Actuarial Accrued Liability $1,736,915,000
Annual Required Contribution
Normal Cost 71,741,000
30 Year Amortization of UAAL 57,897,000
ARC $129,638,000
Summary of OPEB Liability Changes
The OPEB changes recommended in the Coalition Bargaining Group MOU’s and the
Resolutions presented today (2009/341, 2009/342, 2009/343, 2009/350), compared to the
County’s 2006 actuarial valuation represent a $1.1 billion or 44% reduction to total
liability and an $115 million or 53% reduction in the annually required contribution. At
the Board’s adopted 40% funding target, these changes reduce the County’s original
$139 million ‘gap’ to approximately $15 million – an 89% reduction. Continued
negotiation towards Countywide health care cost containment strategies and the
redirection of designated future resources are key to resolving the remaining OPEB gap.
As is obvious from the information presented, the County in collaboration with its
employees continues to make progress towards a solution for one of the biggest fiscal
challenges the County has ever faced. The County will continue meeting & conferring as
labor contracts expire; and continue community education and outreach on our efforts to
achieve our goals.
Partial Pre-Funding
Total APBO $1,436,875,000
Assets 0
Unfunded Actuarial Accrued Liability $1,436,875,000
Annual Required Contribution
Normal Cost 53,285,000
30 Year Amortization of UAAL 47,896,000
ARC $101,181,000
Other Changes Included in the Resolution
Section 11. Special Benefit for Permanent Employees Hired on and after January 1, 2009
has been added.
ATTACHMENTS
Resolution No. 2009/350
Full Text of Resolution 2009-350