DEPARTMENT OF FIRE AND POLICE PENSIONS

Transcription

1 DEPARTMENT OF FIRE AND POLICE PENSIONS 360 East Second Street, Suite 400 Los Angeles, CA90012 (213) REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS FEBRUARY 16, 2006 ITEM: 2A-l FROM: SUBJECT: Benefits Committee George Aliano, Chair Mike Carter Sam Diannitto Don Keith RETIREE HEALTH INSURANCE SUBSIDY FOR MEMBERS WITH LESS THAN TEN YEARS OF SERVICE RECOMMENDATION That the Board: 1. Find the lack of a health subsidy for members on a disability pension with less than ten years of service is a gross inequity; and 2. Direct staff to obtain an actuary report on the fiscal impact of this improved benefit on the Plan; and 3. Request the actuary report compare the cost to the fund for the following scenarios: A. Grant the subsidy on a prospective basis only or retroactively; and B. Grant the subsidy on a case-by-case basis or to all disability applicants with less than 10 years of service. DISCUSSION On February 2, 2006, the Benefits Committee met to discuss the lack of a retiree health insurance subsidy for members with less than ten years of service. This issue was referred back to the Benefits Committee at the January 19, 2006 Board meeting for possible further action. (See attached Board and Benefits Committee reports.) The City Administrative Officer (CAO) has indicated that now would not be the best time to pursue this issue, and the sworn unions have not expressed recent interest in improving this benefit. Staff believed the issue was worth pursuing and, taking into account the CAO opinion and sworn union interest, would bring the issue back to the Board at the beginning of the coming fiscal year. The Benefits Committee reviewed prior Board and committee reports and an August 29, 2003 actuary report and decided that now is an appropriate time to pursue this issue. The committee adopted the General Manager's recommendation to seek a current actuary report with expanded parameters as outlined in the recommendation above.

2 BUDGET r- The fund actuary has indicated this report would cost no more than $3,250. ita Payne Sr. Management Analyst II GADEG:LP Attachments Board Report Page 2 February 16, 2006

3 " /, ~.> <'...1 ' -, 1. } j "- ::-,:<,.. <, il ~ -..1 "1).,.>. '. -;,\\>~,. FIlii-: "," \ DEPARTMENTOFFIREAND POLICEPENSIONS 360 East Second Street, Suite 400 Los Angeles, CA90012 (213) REPORTTOTHE BENEFITSCOMMllTEE FEBRUARY 2, 2006 ITEM: 2 FROM~ Sus:iECT;' Michael A. Perez, General Manager RETIREE HEALTH INSURANCE SUBSIDY FOR MEMBERS WITH LESS THAN TEN YEARS OF SERVICE RECOMMENDATION That the Benefits Committee recommend that the Board: 1. Find the lack of a health subsidy for members on a disability pension with less than ten years of service is a gross inequity; and, 2. Direct staff to obtain an actuary report on the fiscal impact of this improved benefit on the Plan; and, 3. Request the actuary report compare the cost to the fund for the following scenarios: A. Grant the subsidy on a prospective basis only or retroactively; and, B. Grant the subsidy on a case-by-case basis or to all disability applicants with less than 10 years of service. DISCUSSION In accordance with Administrative Code provisions, disabled retirees who have less than ten years of service are not eligible for any health insurance subsidy or premium reimbursement. Staff reported on this subject to the Board on January 19, 2006, with a recommendation to receive and file the report. The CAD indicated that now would not be the best time to pursue this issue, and the sworn unions have not expressed recent interest in improving this benefit. Staff believed the issue was worth pursuing and, taking into account the CAD opinion and sworn union interest, would bring the issue back to the Board at the beginning of the next fiscal year. (See attached report.) The Board referred this issue back to the Benefits Committee for possible further action. The City Attorney has advised that if the Board determines that a gross inequity exists in the administration of benefits, they may act by ordering an actuary report to determine the cost to the Plan to resolve the inequity. The last time an actuary report was done on the effect of an expansion of this benefit was August 29, 2003 (attached). The report found an estimated annual increase in contribution of $1.527 million. This amount was based on granting disability pensioners the same subsidy percentage as currently applies to members with the minimum required ten years of service. This would result in

4 ." 40% of the monthly maximum for members not on Medicare Parts A and Band 75% of the ltionthly maximum for members enrolled in both Medicare A and B. For comparisonpurposes, Staff recommendsthat the actuary report address the four alternative forms the expanded benefit could take. This would allow the Board some control over the cost impactofthisexpandedbenefitonthefundandstilladdressthisinequity.. BUDGET The last actuaryreporton this issuecost $3, ~ Uta PaynE(,Manager.~ \.- Medical and Dental Plans Section MAP:DEG:LP Attachments Benefits Committee Page2 February 2, 2006

5 ". ',.', l'y LU,.\.\r,'/;- -,",~,,:'-:\,~~ ~ Ii 'S ~! i 1.'7 '~\,',. If.~ ~/.,/,. """,-,,'-' ()l'i:'!:i-: '" \,l)" DEPARTMENTOFFIREAND POLICEPENSIONS 360 East Second Street, Suite 400 Los Angeles, CA90012 (213) REPORTTOTHEBOARDOF FIREAND POLICEPENSIONCOMMISSIONERS JANUARY 19, 2006 ITEM: 13,:~9.N1:/'O SUBJECT: MichaelA. Perez, ~eneral Manager HEALTHINSURANCESUBSIDYFORMEMBERSWITHLESS THANTEN YEARSOF SERVICE RECOMMENDATION Receive and file. DISCUSSION In accordance with Administrative Code provisions, disabled retirees who have less than ten years of service are not eligible for any health insurance subsidy or premium reimbursement. The last time staff reported on this subject to the Benefits Committee was May At that time the City Administrative Officer (CAD) was consideringthis issue in relation to civilian retirees. Since then, further consideration on behalf of civilian retirees was deferred based on cost. In addition, the sworn unions have not recently expressed to the CAD an interest in improving this benefit. The CAD's current position is that based on recent discussions in the Executive Employee Relations Committee (EERC) on pension matters in general, and the significant increase in City contributions to the Pension fundnext fiscal year, it is not the best time to pursue this issue. While staff agrees with the CAD's opinion based on the reasons stated, it is noted that medical insurance costs continue to increase. Members on a disability pension with less than ten years of service who do not receive a subsidy and those with less than twenty years of service who receive a decreased subsidy are experiencing increasing out-ot-pocket costs. Staff believes it is an issue worth pursuing on behalf of the members in these situations. At present, there are 423 members with less than ten years of service and 885 with ten to lessthan-twenty years of service on a disability pension. The average monthly out-at-pocket amount these members pay toward their premium is $645 tor members with less than ten years ot service and $361 for members with ten to less-than-twentyyears ot service. Staff will continue to monitor this situation and report back to the Board at the beginning of fiscal year 2006/2007. ita Payne Sr. Management Analyst II MAP/DEG/LP:my - ---

6 .. '/"'f! r ", 1,\' \",,",',',' ITiliTIJJ,J;.L,<.J GABRIEL, ROEDER, SMITH & COMPANY Consultant$ & Actuaries 9171 Towne Centre Drive. Suite 440. San Diego, California FAX August 29,2003 Ms. Carmelita Payne City of Los Angeles Department of Fire and Police Pensions 360 East Second Street; Suite 400 Los Angeles, CA Receivedby AccountingSection SEP Pension Department Dear Uta, RE: Expansion of Eligibility for Medical Benefits For Disability Retirees We have prepared the cost of providing' expanded po~t-retirement medical benefits for disabled retirees who did not have ten years of service at time of disability. For this study we have primarily used data, plan provisions, and assumptions were generally used in the June 2002 retirement subsidy valuation. Also, you provided us with information for affectedcurrentretirees. ' There have been some premium increases used in this study that were not reflected in the 2002valuation." ' Medicare formula maximum Surviving spouse / Domestic Partner $ per month (from $289.63) $ per month (from $338.99) Increase Estimate Normal Cost Amortization of Li~bility Increase +0.05% ' +0.10% Total +0.15% Increase in Accrued Liability $.18,700,378 Estimated Increase in,contribution if in effect for Fiscal Year End 2004: $1.527 million The study assumes that the same vested percent ~d treatment apply as currently pertains to disabled members with ten years of service. Currently, Medicare-eligible recipients with ten years of service receive 75% of the applicable maximum. For rion-medicare eligible recipients, 40% of the maximum is paid. ~--

7 -2- August 29, 2003 Virtually all of the accrued liability increase pertains to current retirees. Based on data provided, 429 current retirees would be affected. The present value of the added benefit estimate payable to each current affected retiree is roughly $44,000. We assumed the increase in accrued liability is amortized over 30 years. Please contact us if you have any questions. Sincerely, ~~ ~jj~ Rick A. Roeder, EA, FSA, MAAA Rebekah D. Bayram, EA, AS A, MAAA GABRIEL,ROEDER,SMITH & COMPANY