Consideration and Adoption of Ordinance No. 2015-14:  Amending the Employee Handbook of Regulations and Flagstaff City Code by adopting amendments relating to Retiree Insurance eligibility.

During the first and initial final read the City was proposing to adopt changes to the Employee Handbook and Flagstaff City Code to match retiree insurance eligibility adopted by the Northern Arizona Public Employees Benefits Trust (NAPEBT). 

NAPEBT Trustees determined it was in the best interest of the Trust to adopt a retiree insurance eligibility policy that was equal for all NAPEBT employers.  Initially some NAPEBT employers had 10 years of service required to be eligible for retiree insurance and others had 0 years of service in addition to being eligible to retire under a State or Alternate Retirement System.  NAPEBT adopted a new policy that required employees to work for five consecutive years for a NAPEBT employer and be eligible to retire under the State or Alternate Retirement Systems in order to be eligible for retiree insurance.  

City Council discussed the Ordinance and proposed changes during the July 21, 2015 Council meeting.  As a result of that discussion, the Ordinance was tabled.  Staff, in consultation with the City Attorney's Office determined that the simplest and most clear way to handle the change in policy is to amend the Employee Handbook and Flagstaff City Code to point to the NAPEBT policy adopted in the NAPEBT Administrative Manual. 

Ordinance 2015-14 has been updated to refer employees to the NAPEBT Administrative Manual for information on retiree insurance eligibility.

Limited financial impact. 

The retiree pays 100% of the premium minus any subsidy the employee receives from ASRS or PSPRS.  There is no direct cost to the City.  However, the retiree contributions do not fully support the claims exposure and this generates a GASB liability for each of the NAPEBT employers and it is noted on the City’s CAFR’s.
 

 

Discussion and first reading of this ordinance occurred on July 7, 2015.  The Ordinance was read again during the July 21, 2015 meeting and tabled.
 

Option 1:  Choose to not have a policy in relation to retiree insurance eligibility
Option 2:  Choose different wording or format to link the City's policy to the NAPEBT Administrative Manual

An employee of Coconino Community College presented information to the Northern Arizona Public Employee Benefit Trust (NAPEBT) during the NAPEBT meeting on January 24, 2014.  This employee expressed he was negatively impacted by the difference in retiree insurance language between two different NAPEBT employers.  As a result of this conversation there was another action item later in the same meeting where the NAPEBT Trustees voted on a recommendation to change retiree insurance eligiblity to "five consecutive years of service with a single NAPEBT employer in order to be eligible for retiree health care under NAPEBT."  (Note: Coconino Community College and Coconino County both required an employee to work for them for 10 years in order to be eligible for retirement.  The City and FUSD both had no years of service requirement for employees to be eligible for retirement.  The Board’s discussion was to meet in the middle, so the Trustees agreed to 5 years of service.)

This information was presented to the City's Employee Advisory Committee (EAC) on April 9, 2014 and the EAC suggested the five years of service may be served with any NAPEBT employers.  The information was presented to the City's Leadership Team on May 7, 2014 and Leadership suggested the exclusion of employees who medically retired.  Leadership's suggestion was shared with the EAC on May 14, 2014 and it was approved. 

This information was taken back to the NAPEBT board in July 2014 and the NAPEBT Trustees approved the five years of service with any NAPEBT employer rather than the single employee initially recommended in January 2014. 

Human Resources created a redline version of the Retiree Insurance policy included in the Employee Handbook of Regulations and visited with the EAC on May 27, 2015 and the Leadership Team on July 3, 2015 and both groups unanimously approved the policy changes.

Several questions were brought up by the City Council after the first reading of Ordinance 2014-15 on July 7, 2015 and Human Resources  made additional revisions to the policy to clarify what exceptions apply to the five years of continuous service.  The City Council continued discussion on July 21, 2015, as described in the Executive Summary.
 

 

City Retiree Data
There are currently 88 City retirees on the NAPEBT Retiree Insurance and out of these 88 employees 3 of them appear to have less than 5 years of service.  These retiree's date of retirement were between 1997 and 2006.

NAPEBT IGA
NAPEBT has authority to decide insurance plan eligibility on behalf of its members, including the City.  The City-NAPEBT Intergovernmental Agreement ("IGA") and Declaration of Trust (Amendment No. 2), dated 2006, was adopted for the purpose of jointly purchasing health insurance, among other things. The IGA provides that the Trustees shall:

• “use the premiums, contributions, or other amounts received by the Trust to purchase and maintain in force such policy or policies of insurance as the Trustees in their sole discretion shall determine to be in the best interest of the Participants and the Employees…” 5.8.1 
• “apply for any insurance in its name as policyholder or in the names of the Participants and to use the Trust Funds to pay for and accept and hold as part of the Fund the policy or policies so acquired.” * * *  Trustees may enter into agreements with any insurer of any policy or policies concerning waiting periods, eligibility of Employees, definition of full-time employment ….. “ 5.8.2

NAPEBT has established a uniform policy for eligibility for retirees to continue receiving insurance through their former NAPEBT employer, effective July 1.  NAPEBT may change or clarify its policy in the NAPEBT Administrative Manual from time to time.  The proposed ordinance will simply direct City employees to that Manual.

State Retirement
Ordinance 2014-15 on Retiree Insurance does not impact or affect an employee's retirement benefits under the Arizona State Retirement or Public Safety Personnel Retirement systems.  Below is information about the eligibility for State retirement:

ASRS Eligibility:
Normal Retirement for members who began contributing to ASRS prior to July 1, 2011 is the earliest date of one of the following: Age 65 with any amount of credited service, Age 62 with 10 or more years of credited service or 80 points which is a combination of age and years of credited service (e.g. age 49 + years of credited service 31 = 80 points)
 
Normal Retirement for members who began contributing to ASRS on or after July 1, 2011 is the earliest date of one of the following: Age 65 with any amount of credit service, Age 62 with 10 or more years of credited service, Age 60 with 25 or more years of credited service, or Age 55 with 30 or more years or credited service.
 
Early retirement applies to members at Age 50 with at least 5 years of credited service and the member will receive a reduced monthly benefit.
 
PSPRS Eligibility:
Tier 1: Employees who became members of PSPRS prior to January 1, 2012.  Members are eligible to apply for normal pension benefits at 20 years of service or have 15 years of service and be at least age 62.
 
Tier 2: Employees who became members of PSPRS on or after January 1, 2012.  Members are eligible to apply for normal pension benefits at 25 years of service and be at least age 52.5.

 

Inform.