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480 South Allison Parkway
Lakewood, Colorado 80226
Telephone: 303-987-7700
TDD: 303-987-7716
Fax: 303-987-7711
To: City Council
From: Ken Milano
Date: April 20, 2009
Subject: Retiree Health Study Session
In preparation for our study session Monday evening, we have attached a history of the creation and implementation of the City’s Retiree Health Plan.
The following outline will provide additional context for our discussion:
From 1985-1989, the City studied the pros and cons of transitioning from their association with the Public Employee Retirement Association (PERA) and its Defined Benefit Plan to an Employee Money Purchase Defined Contribution Retirement Plan.
In 1989, based on a 98% affirmative vote of City employees who were PERA participants, that transition occurred. This transition eliminated the option of PERA Retiree Health for all employees who transferred their assets to the Employee Money Purchase Plan. Retirees were allowed to participate in the City’s health insurance plan by paying 100% of the premium. **
In 1998, the City was notified by PacifiCare and Kaiser, the City’s medical insurance companies at the time, that they would no longer permit the City to allow retirees to participate in our plan(s) unless the City contributed toward the premium. We do not believe that insurance providers in our market would take this position today.
The combination of these events lead to the genesis of the current Retiree Health Plan. The documents used to construct the attached historical summary clearly points out that the ultimate objective in creating the Retiree Health Plan was to provide retirees access if no other insurance option was available.
** As a side note, early in the 1970’s Police employees voted to leave the Fire and Police Pension Association (FPPA), a defined benefit pension plan, and move to an Employee Money Purchase Pension Plan.
Over the span of the past 20 years, the City has funded a reserve for the Retiree Health Plan with general fund dollars. Over time, actuarial evaluations of that reserve have been completed. The most recent study identifies a sizable unfunded liability.
The objectives of our study session are:
From an Employee Relations perspective, we clearly understand the overwhelming value that our employees place in maintaining a Retiree Health Plan. We also understand the great need to provide a plan that is both fiscally responsible today and one that can be maintained in the future. The underlying premise remains access to health care not subsidized premiums.
You will also find attached a recent survey of Retiree Health Insurance. If you have any questions prior to Monday evening, please do not hesitate to call me.
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