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10.A.

City Council Meeting - FINAL

Meeting Date:

03/05/2024

From:

Jennifer Caputo, Human Resources Manager

Information

TITLE:

Consideration and Adoption of Ordinance No. 2024-08: An ordinance amending the Flagstaff City Code, Chapter 1-14, Personnel System by amending the Employee Handbook of Regulations, Section 1-70-030 Retiree Insurance; providing for repeal of conflicting ordinances, severability, authority for clerical correction, and establishing an effective date.

STAFF RECOMMENDED ACTION:

At the March 5, 2024 Council Meeting:
1) Read Ordinance No. 2024-08 by title only for the first time
2) City Clerk reads Ordinance No. 2024-08 by title only (if approved above)
At the March 19, 2024 Council Meeting:
3) Read Ordinance No. 2024-08 by title only for the final time
4) City Clerk reads Ordinance No. 2024-08 by title only (if approved above)
5) Adopt Ordinance No. 2024-08

Executive Summary:

The Northern Arizona Public Employees Benefit Trust (NAPEBT) board voted in favor of phasing out the retiree insurance program. This decision was made due to multiple factors. 1) The Arizona State Retirement System (ASRS) retiree benefit program has become more comparable to the City's retiree insurance program. ASRS currently offers four plans through United Healthcare including a plan for retirees living outside of Arizona. 2) A network disruption analysis was conducted to determine if there is adequate access to providers in and around Flagstaff and showed there would be minimal disruption. 3) When NAPEBT evaluated the true cost of the retiree benefit program (unblended rates) the Arizona State Retirement System plans were between $6,000 and $17,000 less than the NAPEBT contribution rates on an annual basis. 4) The estimated savings in claims and expenses for the first year after implementation was approximately $296,000 and savings would continue to compound each year to over $11.9 million through FY2032. 5) The estimated reduction in Other Post-Employment Benefits (OPEB) liability reported for the NAPEBT's 4 major employers’ June 30, 2022 financial statements was approximately a combined $24 million. This impacts each individual employer and the amount of liability they carry due to subsidizing the retiree benefit program.

Financial Impact:

Eliminating the retiree insurance will help us control benefits costs and will positively impact the GASB liability.

Policy Impact:

The Employee Handbook amendment being considered modifies the language to clarify retiree insurance eligibility, stating "The City offers medical and dental insurance to eligible retirees who began working for the City of Flagstaff on or before June 30, 2024, under certain terms and conditions, all of which are subject to change in part or in whole depending on policy changes made by the Northern Arizona Public Employees Benefit Trust (NAPEBT)." It also removes the reference to the NAPEBT Administrative Manual.

Connection to PBB, Carbon Neutrality Plan, 10-Year Housing Plan & Regional Plan:

Priority Based Budget Key Community Priorities and Objectives
Become an employer of choice and provide employees with the necessary tools, training, and support.

Has There Been Previous Council Decision on This:

No.

Options and Alternatives:

1. Adopt the ordinance.
2. Update the ordinance.
3. Suggest an alternative to the ordinance.

Expanded Options and Alternatives:

Inform.

Attachments

Ord. 2024-08

Addendum 33