South Lake may end retiree health care benefits
By Kathryn Reed
Health care benefits for former and current South Lake Tahoe employees may soon look dramatically different.
South Lake Tahoe is about to start negotiations with its six labor unions. Health care will be one of the main subjects. This affects retirees because they get whatever their respective labor group agrees to. Through the years everyone has endured changes in premiums, deductibles and coverage.
The skyrocketing price of health care is making it almost impossible for public and private sector employers to offer a reasonable plan. South Lake Tahoe is trying to be creative with how it does business, with the desire to be equitable to current workers, retirees and taxpayers.
“It is very chaotic in the health care industry. The only way employers can manage those costs is with the continuation of cuts,” City Manager Nancy Kerry told Lake Tahoe News. “Salaries have not kept up with health care for anyone in this country.”
The premium for the city ‘s medical plan is $556.07 per month for retiree only coverage, $1,112.14 for retiree plus one, and $1,573.68 per month for family coverage. This is for those not on Medicare.
On Tuesday the City Council will be presented with an option to revamp retiree health coverage. The approximately 150 retirees, as well as those whose dependents qualify for coverage, may be given the opportunity for a one-time buyout.
Staff is proposing using the $6.5 million in the Other Post Employment Benefits (OPEB) trust fund to pay the retirees. The amount each person would receive depends on years of service, whether they are on Medicare and other criteria. The average compensation would be $68,000 for those who are not on Medicare, and $32,000 for those in the Medicare group.
The OPEB account was created in fiscal year 2008 by then City Manager David Jinkens and the council at the time as a way to begin dealing with the city’s $42 million unfunded liability for retiree health care. That obligation ballooned to $55 million at its highest point. The amount the city contributes to OPEB fluctuates each fiscal year, with $250,000 allocated for 2016-17. During part of the recession zero dollars were earmarked for OPEB.
A step toward curtailing these defined benefits took effect Jan. 1, 2008, with the mandate that no new hires would be eligible for health care upon retirement.
In 2014, the council approved City Manager Kerry’s plan to radically change health care. The main outcome was that all the employee groups agreed to give up their retiree health care effective Oct. 1, 2014. Some opted to retire before that date.
These changes brought the unfunded liability to about $20 million.
In December 2015 South Lake Tahoe was sued by a group calling themselves the South Lake Tahoe Retirees Association. Last August a judge said the group will not receive monetary compensation.
The case is still active. The proposal before council on Feb. 7 is not expected to impact that lawsuit.
Kerry’s rationale for the lump sum is that it provides more security for the retirees than what they have today. Today they are at the whim of what their old bargaining unit decides. Retirees have no voice at the negotiating table. If the city and labor groups agreed to do away with health care coverage, the retirees would have nothing. Or a plan could become cost prohibitive for a retiree. The point is they have no guarantee what their health coverage will be from contract to contract.
The lump sum being proposed would go into a health savings account. This way the individuals would not be subjected to paying income tax.
The ultimate long-term savings to the city will be determined after it is known how many retirees decide to take the offer – assuming the council on Tuesday approves the plan. The retirees would have until May 31 to make a decision. They would then be on their own to come up with health care coverage once all the paperwork is processed.
The City of South Lake Tahoe has just STABBED 150 Retirees in the back. After years of no raises with the PROMISE of paid medical coverage at retirement, Nancy Kerry and the City Council has chosen to take away all medical coverage from the retirees. This means that retirees will now have to pay for what they gave up years of raises for. This will place a great burden on many that retired when salaries were less than half of what employees today make. hope that Ms. Kerry is satisfied with what she has done to many lives that were true dedicated employees and gave up salaries when the City was having financial problems so that the City could continue, so much for the PROMISES of the City Officials.
The City Mgr. and her $200,000 dollar salary should be real proud of what she has done to 150 retirees.
What is being Offered to retirees (not required), is to distribute the entire $6.6 million dollars set aside in a health care fund among the approximately 145 retirees who are still eligible for medical insurance to provide some measure of assurance in an ever-changing environment.
“Early Retirees” (those who retire before Medicare eligibility) are being offered a maximum of $100,000 depending on years of service to the City and number of years in retirement before reaching Medicare. Retirees on Medicare are being offered a maximum of $50,000 for those just entering Medicare eligibility, based on years of service and number of years having already received benefits.
The funds are not from the General Fund, but rather from a fund set up for health care. The distribution was calculated to distribute the entire $6.6 million.
For those who are in a situation in which accepting this offer provides some assurance, they have welcomed the opportunity to opt-out of the ever-changing system. There are others who may not want accept this offer and there is no obligation for them to do however, they will remain subject to changes in medical insurance.
A similar program was brought forward in 2014, but less funds were offered at that time and didn’t include all retirees. This time, the program includes retirees in the Medicare group because more of them asked for the opportunity to opt-out in exchange for compensation.
Nancy Kerry:
Thank you for the clarification.