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SR-6-CC (2) Urt.fyacf4f ff tfl a5 ~c,c, !&so 4f- q (1 ( 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. 'ee" 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. --- - 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 . . 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: I " 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 I Adopted and approved thlS 22nd of July 1997 ( ~1tt C2::/t~f,.. ,- . Pam O'Connor. Mayor I J 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 '- ~~-~ Mana M Stewart. Cny Clerk