2006-06-07 Special Called Regular Meeting of the La Porte City Council

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City Council Special Called Regular Meeting - June 7, 2006 Page 5 design changes for the upcoming year, nor did we do any last year. Benefit levels we're pretty consistent on the programs. Worksheets were discussed and one of the important things noted was a new column this year. It is called funds subsidy and the funds subsidy is the amount that the City is paying now each year to make up for the short fall that we experienced last year in our program. The short fall was not from a claims expense standpoint, it was from the standpoint that people sought the lesser cost levels of benefit and employee contributions went down quite a bit. The City reaping some of the benefit of that right now due to claims being relatively flat. Last year I estimate it was 2% increase or 3%, and this year it is estimated to be in the same everything works out through the end of the year. Some of the benefit of those plan cost sharing plan designs are coming back in the form of better claims experience. The fund subsidy is there and staff is trying to determine what to do with the fund subsidy. Is it going to be a City expense, is that going to be an employee retiree expense, or is it going to be shared by both parties? If the City totals the employer contribution at $500 a month down there at the bottom at $2,000,003, the employee and retiree contribution at $556. We need the $433,000 from the fund subsidy to get to the $3,000,002 because as noted in the prior tab, that gets us just up to about our expected costs for our 2006- 2007 year. That issue indicates the City has to figure out what to do with the fund subsidy. The good news is between the three columns, numbers are not too far away from how much is needed for 2006-2007 in contributions. Council will need to determine what to do with that fund subsidy and where it comes from in the future. It was noted the worksheet reads post premium and should read current premium. It should be current premium and contributions and not proposed. It was noted the remaining slides in that section just go on to show expected midpoint and maximum and what the effect of those would be. From a budget perspective the City has to find out where they want to be on contributions and then make the decision on how we fund those by employer and employee. It was noted employee and retiree are considered the same. The next tab discussed focused on the retiree sector. Retiree sector gets a lot of attention just because with the GASB 45 and so forth it demands that we address those issues but at the same time keep in mind that the vast majority of people in the City plan are active employees. Costs are average costs for an active employee, a retiree under 65, and a retiree over 65 and again 65 being synonymous with being Medicare eligible. Units are employees or retiree and members are the "bellybuttons" in the plan. This includes the spouses, children, and so forth. If the City looked at the total claims active, retiree over and under, there is some disparity between the costs of those different classes of people. A bellybutton in our active plan costs us $237 a month in claims. For a bellybutton under 65 but retiree, it's $385 and per member over 65 is $199.50. Why would a retiree over 65 have a lower cost than an active employee? Secondary insurance exactly. Medicare pays primary we pay secondary. Examples were discussed using some very basic math. If active is an x then a retiree under 65 is 63% over x and a retiree over 65 is 16% less than an active. Therefore, the City mayor may not want to consider this. It was talked about it at length in the 172 meeting, whether we ever wanted to separate our retirees into two classes for under 65 and over 65. No recommendation was made, Mr. Welch wanted Council to see the numbers. It was explained to Council the City plan is kind ofa mirror of what the mercer report showed the average cost variance over and under 65.