Title
Adoption of Resolution Electing to be Subject to the Public Employees’ Medical and Hospital Care Act at an Equal Amount for Employees and Annuitants to Include Non-Represented, Part-Time Employees into the CalPERS Public Employees Medical and Hospital Care Act (PEMHCA) Health Program Due to the Employer Shared Responsibility Provision “Pay or Play” Rule of the Affordable Care Act “ACA”. (Human Resources 2510)
Body
To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Interim City Manager
Re: Adoption of Resolution Electing to be Subject to the Public Employees’ Medical and Hospital Care Act at an Equal Amount for Employees and Annuitants to Include Non-Represented, Part-Time Employees into the CalPERS Public Employees Medical and Hospital Care Act (PEMHCA) Health Program Due to the Employer Shared Responsibility Provision “Pay or Play” Rule of the Affordable Care Act “ACA”
BACKGROUND
The 2010 Federal Patient Protection and Affordable Care Act, (“ACA”) requires employers to offer minimum essential medical coverage that is affordable to all full time and qualifying part-time employees who work 30 or more hours per week and their dependents, or risk penalties. On April 15, 2014, the City Council approved the adoption of a Resolution stating the City’s intent to comply with the legal requirements under ACA.
The City offers medical coverage to eligible employees under the Public Employees Medical and Hospital Care Act (PEMHCA), which is administered through a contract by the California Public Employees Retirement System (CalPERS). In order to avoid compliance violations, the City is now required to make modifications to the CalPERS contract to create a new medical benefit group for certain Non-Represented, Part-Time Employees. Failure to modify the contract will prevent the City from offering medical coverage to qualifying part-time employees. The City’s only part-time employees currently working 30 or more hours per week are Police Officer Recruits.
DISCUSSION
Under the ACA, the City is required to comply with the Employer Shared Responsibility Provision, the so called “Pay or Play” rule of the ACA. An employee who works an average of 30 or more hours per week must be offered medical benefits in order to avoid any penalties including the most costly penalty (Penalty A) of the ACA. If it fails to provide medical coverage, the City is likely to be penalized up to $2,000, for every full-time and qualifying part-time employee in the City. Based on the City’s current number of employees, it is estimated that the City could risk paying $1,000,000 = ($2,000 x 500 employees) per month, for every month out of compliance.
This resolution will make the required offer of medical coverage available beginning October 1, 2015 for impacted newly enrolled Police Officer Recruits. Recruits attend the Police Academy 40 hours per week and are classified as part-time employees until they complete the Academy and are sworn in as regular Police Officers. Therefore, they are eligible to receive medical coverage.
FINANCIAL IMPACT
Funding to provide medical benefits to any qualifying Police Recruit is included in the Fiscal Year 2015/2016 budget. There is currently no financial impact for part-time employees, other than qualifying Police Recruits.
ENVIRONMENTAL REVIEW
Adoption of this resolution is not subject to environmental review in that it is not a “project” as defined by CEQA. A “project” does not include continuing administrative activities such as general policy and procedure making. CEQA Guidelines, section 15378(b)(2).
RECOMMENDATION
Adopt a Resolution to include non-represented, part-time employees into the CalPERS PEMHCA Health Program due to the Employer shared responsibility provision “Pay or Play” Rule of the Affordable Care Act “ACA”
Respectfully submitted,
Jill Kovacs, Human Resources Manager
By,
Monica Alvarez-Selles, Human Resources Analyst
Financial Impact section reviewed,
Elena Adair, Finance Director