Title
Adoption of Resolution Approving a Change in Dental Benefits for Public Safety Retirees Who Currently Receive Dental Benefits Through Memorandas of Understanding with the City of Alameda’s Four Public Safety Bargaining Units (International Association of Firefighters, Alameda Fire Chiefs Association, Alameda Police Officers Association and Alameda Police Management Association) Effective January 1, 2019. (City Manager 2110)
Body
To: Honorable Mayor and Members of the City Council
From: David L. Rudat, Interim City Manager
EXECUTIVE SUMMARY
The City of Alameda (the City) and the four Public Safety bargaining units negotiated an increase in dental benefits in 2000 and again in 2015 for employees. When these enhancements were implemented, the improved dental benefit was not provided to Public Safety retirees. The International Association of Firefighters (IAFF) notified the City about retirees not receiving the enhanced dental benefits in the summer of 2018. The City has reviewed the records related to Public Safety retiree dental benefits and the language in the negotiated labor agreements. Based on the completion of this review, it is recommended that the City provide enhanced dental benefits to all Public Safety retirees effective January 1, 2019. As required by Government Code Section 7507, an actuarial valuation with the cost impact of this change was shared as an informational item at the February 5, 2019 City Council meeting.
BACKGROUND
The City provides retiree medical and dental benefits to its Public Safety employees. These benefits are outlined in the Memorandas of Understanding with the City’s four Public Safety bargaining units:
• International Association of Firefighters (IAFF)
• Alameda Fire Chiefs Association (AFCA)
• Alameda Police Officers Association (APOA)
• Alameda Police Management Association (APMA)
In 1990, the City and Public Safety groups agreed to transfer their 1082 pension members to California Public Employee Retirement System (CalPERS). As part of the transfer, the City agreed to provide Public Safety retirees medical and dental coverage. Section 4(b) of the 1082 Transfer Agreement states that the City will reimburse Public Safety retirees at the one or two party rate for a qualified dental plan on record with the City, and, if the City later provides for a dental plan, retirees may join at the appropriate level - one or two party.
In 1990, when the agreement was signed, the City provided all full-time employees with a dental plan with a yearly maximum of $1,100 with 80% cost coverage, at no expense to the employee. In implementing the 1082 Transfer Agreement, the City interpreted the agreement to mean that the Public Safety retirees would be reimbursed for the cost of purchasing dental benefits at the one or two party rate, as appropriate. However, the City then offered a dental plan to Public Safety retirees matching that of active City employees and ceased the reimbursement.
In 2000, the City entered into an agreement with Public Safety groups to enhance retirement to the 3% @ 50 CalPERS pension formula. Included in this agreement was an increase in the yearly dental maximum to $2,500. In 2015, the Public Safety groups negotiated an improved dental benefit with 90% coverage and a yearly maximum of $2,600. Public Safety retirees’ dental benefits were not increased when these changes were negotiated. Public Safety retirees continued to receive a benefit plan with 80% cost coverage and a $1,100 annual limit.
DISCUSSION
The City has reviewed the records related to Public Safety retiree dental benefits and the language in the negotiated labor agreements. Based on that review, the City is recommending that the City provide the enhanced dental benefits to all Public Safety retirees. This change will result in a dental premium increase from $56.20 a month to $64.85 a month for retirees. This premium is paid by the City.
The City’s actuary, The Howard E. Nyhart Company Inc., completed the valuation as required by law (Exhibit 1). The valuation provides an actuarial analysis of the impact to the City’s Other Post-Employment Benefits (OPEB) liability for the change in retiree dental benefits. The actuary’s valuation estimates the impact of the proposed changes to the City’s total OPEB liability for the four bargaining groups to be $630,177. The actuarial valuation as of June 30, 2018, updated for dental premiums as a composite rate rather than tiered rates and reflecting premium through 2019, estimates the City’s total accrued OPEB liability at $112.7 million. The impact of a proposed increase is approximately half of one percent (0.5%). As required by Government Code Section 7507, the results of the actuarial valuation were provided as an informational item at the City Council’s February 5, 2019 meeting.
FINANCIAL IMPACT
The impact of the proposed change in the safety retiree dental benefit level is estimated at $630,177, which is approximately 0.5% increase to the overall City’s accrued OPEB liability of $112.7 million. With the proposed change in the Dental Plan, if approved, the estimated total OPEB liability for the City will be $113.4 million.
The dental premium will increase from $56.20 per month to $64.85 per month per retiree. This premium is paid by the City. The pay-as-you-go cost of the change for calendar year 2019 is estimated at $25,000, with approximately $13,000 being charged to the Police Department and approximately $12,000 to the Fire Department.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
This action is exempt from the California Environmental Quality Act (CEQA) because it is not a project which has a potential for resulting in a direct physical change to the environment, pursuant to Guideline section 15378.
RECOMMENDATION
Adopt a Resolution approving a change in dental benefits for Public Safety retirees who currently receive dental benefits through Memorandas of Understanding with the City of Alameda’s four public safety bargaining units (International Association of Firefighters, Alameda Fire Chiefs Association, Alameda Police Officers Association and Alameda Police Management Association).
Respectfully submitted,
David L. Rudat, Interim City Manager
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. Actuarial Valuation
2. June 30, 2018 Actuarial Valuation Report
3. Government Code Section 7507 Acknowledgment