SR-6-CC (2)
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JUL 2 2 1997
f \person mlsc\councll\counCI25 Santa MOnica, California
Council Meeting' July 22, 1997
TO: Mayor and City CounCil
FROM: CIty Staff
SUBJECT: Recommendation to Establish Post Employment Health Plan (PEHPl tor
Public Employees and Authorize the CIty Manager to Execute a Contract
with the Public Employees Benefits Services Corporation to Administer
the PEHP Program
INTRODUCTION
This report requests that City CounCil authorize the City Manager to execute a contract
with the Public Employees Benefits ServIces CorporatIon (PEBSCO) to administer a
Post Employment Health Plan (PEHP) for the City.
BACKGROUND
PEBSCO, the CIty of Santa MOnica's deterred compensation plan admInistrator, offers
a Post Employment Health Plan (PEHP) to public employers. The PEHP program
complements the eXlstmg deferred compensation plan. The program provides the
means by which funds can be placed on a non~tax baSIS In trust accounts for CIty
employees. These funds can then be used by employees, on a non-tax baSIS, to cover
the cost of qualified medIcal expenses for themselves and their eligible dependents
once they leave City employment. Qualified health care expenses would Include
premiums, co-payments, deduct.bles and, In those cases where the former employee
does not have Insurance coverage, the cost of the health care services.
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JUL 2 2 1997
Implementation of the PEHP program IS done on a bargaining Unit basIs. A City
bargaining umt must negotiate thiS benefit with the City Since, under the Internal
Revenue Code, only the employer can make contnbutlons Into the PEHP. Bargaining
Units can negotiate various mechanisms for the funding of the PEHP program City
contributions into the PEHP program In lieu of salary IS one means of funding the
program. Bargaining units could also elect to have the City contribute Into the PEHP
program the cash-outs for accrued leave time (e.g., sick leave) which IS currently paid
directly to employees.
Under the PEHP program, a separate trust account IS established for each employee
who participates In the program. Employer contributions to the program, the earnings
on those contributions and the benefits paid from the plan are non-taxable. Several
Investment options are available, with each partiCipant selecting the Investment
optlon(s) for hIs/her account. The annual program administratIon fees are paId by each
account holder (I e., the employee). As such, the employee IS responsible for any
gains and losses to his/her account Once the employee leaves City employment,
claims for qualified health care expenses are submitted directly to PEBSCO for
processing
The Santa Monica Firefighters, Local 11 09 IAFF, negotiated a prOVISion In their current
Memorandum of Understanding (MOU) which prOVides for the Implementation of the
PEHP program for Local 1109 employees retroactive to July 1, 1996 (FY1996-1997).
Per the terms of the MOU, the difference between the City'S medical Insurance
premium contnbutlon cap (currently $475/month) and the monthly composite medical
Insurance premium for Firefighters will be contributed by the City on behalf of each
Firefighter Into the PEHP program.
The PEHP program proVides employees wIth a means to cover their post-employment
health care expenses on a non-taxed baSIS. The program IS also an incentive to retIre
for those employees who have delayed retirement because of health Insurance
premium Issues. To date, the Santa Monica Firefighters, Local 1109 IAFF, IS the only
bargaining Unit which has negotiated thiS benefit. Participation In the PEHP program
IS an option WhiCh, subject to City Council approval, other City bargaining units can
negotiate.
FINANCIAL IMPACT
Funds Included In the FY 1996-97 and FY 1997-98 budgets are suffiCient to cover the
costs of adopting the attached resolution with regard to Implementing a PEHP program
for the Santa MOnica Firefighters, Local 1109 IAFF. ThiS Includes approximately
$70,000 to Implement the program for FY 1996-97. It IS not pOSSible at thiS time to
calculate the cost of the PEHP for the Firefighters for FY 1997-98, but It IS anticipated
to be less than the $70,000 contribution for FY 1996-97. If other employee
bargaining Units should negotiate the Implementation of a PEHP program, City CounCil
review and approval would be reqUired.
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RECOMMENDA TION
It IS recommended that City Council adopt the attached resolution establishing a Post
Employment Health Plan (PEHP) for City employees and authorizing the City Manager
to execute a contract wIth the Public Employees Benefits Services CorporatIOn
(PEBSCQ) to administer the PEHP program
Prepared By: Karen Bancroft, Director of Personnel
Attachment: Resolution
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RESOLUTION # 9171 eGCS)
(CITY COUNCIL SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA
AUTHORIZING THE CITY OF SANTA MONICA TO ADOPT AND IMPLEMENT THE
POST EMPLOYMENT HEALTH PLAN FOR PUBLIC EMPLOYEES (PEHP) PURSUANT
TO SECTION 501 (C)(9) OF THE INTERNAL REVENUE CODE
WHEREAS, a Post Employment Health Plan for Public Employees (PEHP) has
been established for ehglble public employees, pursuant to section 501 (c)(9) of the
Internal Revenue Code permitting such plans; and
WHEREAS, the City of Santa MOnica wishes to contribute, on behalf of Its
eligible employees, portions of Its employees' salary and/or accumulated compensated
absences to meet Its employees' post employment health care needs and expenses;
and
WHEREAS, under this PEHP program, the Public Employees BenefIt Services
Corporation (PEBSCQ) Will proVide administrative services In exchange for a fee as
agreed upon by the City of Santa Monica and PEBSCO;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES
RESOLVE AS FOLLOWS:
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Section 1 The CIty Council of the City of Santa MOnica hereby adopts this
PEHP program on behalf of the elIgIble employees of the City of Santa MOnica.
Section 2. The CIty Manager of the City of Santa Monica IS hereby authorized
to execute, on behalf of the eligible employees of the City of Santa MOnica, a
partiCipatIon agreement with PEBSCO I authorizing PEBSCO to act as the AdminIstrator
of the Plan and the agent of the City of Santa Mamca, and other such agreements and
contracts as are necessary to Implement the program
Section 3. The CIty Clerk shall certify to t~e adoption of this Resolution and
thenceforth and thereafter the same shall be In full force and effect.
APPROVED AS TO FORM:
Jub-H/u~ffJ
MARSHA '}6r(g1s Mo'UTRIE
City Attorney
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Adopted and approved thlS 22nd of July 1997
(
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Pam O'Connor. Mayor
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1. Mana M Stewart, CIty Clerk of the CIty of Santa MOnIca. do hereby cemf)- that the
foregomg ResolutIOn 9171(CC5) was duly adopted at a meetmg of the Clty Councd held on the
22nd of July, 1997 by the follo\\'lng vote
Ayes Councllrnernbers Femstem, Genser. Mayor Pro Tern Holbrook. Mayor
0' Connor. Rosenstem
Noes Councllrnernbers None
Abstam Councllrnembers ~one
Absent Councdmernbers Ebner, Greenberg
ATTEST
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Mana M Stewart. Cny Clerk