10 - Board of Directors Health Insurance Costa Mesa Sanitary District …an Independent Special District Protecting our community’s health and the environment by providing solid waste and sewer collection services. www.cmsdca.gov Memorandum To: Board of Directors Via: Scott Carroll, General Manager From: Anna Sanchez, Administrative Service Manager Date: May 22, 2014 Subject: Board of Directors Health Insurance Summary On November 30, 2011, staff presented information to the Board of Directors regarding the Public Employees’ Medical and Hospital Care Act (PEMHCA) and the option for Board members to participate in the District’s health insurance plan. In August 2013, t he Board discuss ed and consider ed maintaining the health benefit plan or begins the process of terminating the plan participation. At that time, the Board directed staff to bring back the item in 2014 for re-consideratio n. Staff Recommendation That the Board of Directors decides on one of the following: 1. Direct staff to file a termination resolution for non-CalPERS members to be filed in July 2014 that will take effect in January of 2015; or 2. Direct staff to do nothing whereby the District will maintain a health insurance plan for non-CalPERS members. Analysis Board Health Plan Background: The Board of Directors elected to participate in the District’s health plan starting January 1, 2012. At that time, the Board adopted resolution number 2011-806, which created a Non-CalPERS health agreement between the District and CalPERS. This agreement allows Non-CalPERS members, such as the Board of ITEM NO. 10
Board of Directors May 22, 2014 Page 2 of 4 Directors, the option to participate in the District’s group health insurance plans, as administered through CalPERS. C alPERS, by la w, requires that the employer pay a portion of both the active employees and retirees health premiums and offers two options to facilitate this requirement, the equal method and the unequal method. The equal method requires the emplo y er provide the PEMHCA minimum each month (currently $11 9 for 201 4 ) for both active employees and retirees . The u nequal method allows the employ er to initially contribute a lesser amount to ward health coverage for retirees than active e mployees and is calculated based on a formula stipulated by statute. Under the unequal method, the employer’s contribution for the first year of each retiree is $1.00 per month. Each year thereafter, the ret iree contribution will be calculated by the number of years the agency has participated in the CalPE RS Health Program, multip lied by at least five percent (5%), and multiplied by the current PEMHCA minimum employer contribution toward active employees. Fo r example, the contribution under the unequal method for 201 4 would be as follows: Years of Participation Percentage Current Employer Contribution for Active Employees Employer Contribution for Retirees 2 x 5% $11 9 .00 = $11.90 As set forth in statute, adjustments to the mandatory PEMHCA minimum employer contribution toward health premiums will be made annually as illustrated above until the employer contributions for active employees and retirees are equal. On an an nual basis, CalPERS sends out a circular to all PEMHCA participating agencies informing them of the new PEMHCA required employer contribution. At the time of adoption of the resolution allowing Board members to participate in the CalPERS health plans, the District selected the unequal method of contribution for employer retiree contributions towards health premiums. Additionally, per state statute, at the time of adoption of the Non -CalPERS participation in the health plan, the District was mandated to enr oll Board members into a deferred compensation retirement account, at the cost of $1.00 per Board member per month. Board Health Plan Status: Currently, there are no members of the Board participating in the health plan. This status does not incur any pe nalties nor does it incur any maintenance costs to the District, with the exception of the required deferred compensation retirement plan contribution.
Board of Directors May 22, 2014 Page 3 of 4 Board Health Plan Elimination: The contractual requirements of the Non -CalPERS Agreement for health ben efits would take several years to eliminate, should the Board choose to eliminate those benefits. Section 599.515 of Title 2 of the California Code of Regulations addresses contract termination requirements and provides that a resolution to terminate PEMH CA participation must be filed with the Health Benefits Division of CalPERS no later than 60 days after the CalPERS Board of Administration approves and announces the health premium rates for the following year. The regulation further provides that the el ection to terminate is irrevocable after its filing with the Health Benefits Division and any future election to again become subject to PEMHCA cannot be filed thereafter for a period of five years. CalPERS Board of Administration has not announced the new health premiums for 2015 . For this year, t he 60 day “window” to elect to terminate has not occurred yet, which gives the Board time to consider the Health Plan status . If the Board elects to file a termination resolution, staff would need to file it in July of 2014 for it to take effect on January 1, 2015 . The reentry to PEMHCA is five years from the date of termination. Strategic Plan Element & Goal This item compli es with the objective and strategy of Strategic Element 5.0., Administrative Management , which states: “Objective: To create, maintain and implement policies and procedures to ensure sound management of the District.” “Strategy: We will conduct periodic reviews, refine and implement policies and procedures, and assure the General Manager has the direction and tools necessary for successful District operations.” Legal Review Not applicable. Environmental Review The consideration of health coverag e for directors is not a disturbance of the environment similar to grading or construction and is not a project under CEQA or the District’s CEQA Guidelines . Financial Review At this time, the minimum annual cost to continue the PEMHCA agreement with CalPERS to allow Board members to enroll in the District’s health plan is $60.00 due to the mandatory retirement plan enrollment requirement mentioned above.
Board of Directors May 22, 2014 Page 4 of 4 In the future, if a Board member elects to enroll in the health plan, the District would incur a c ost established by the formula set by state statute. In 201 5 , the required employer contribution for one Board member who enrolls in health benefits will be $18.30 per month or $219.60 annually. The individual Board member would be responsible for the r emainder of the health insurance premium, which ranges between $237.57 per month to $418.62 per month, depending upon which health plan is chosen. These premium rates only reflect covera ge for the Board member and do not reflect family coverage, which wou ld be the responsibility of the Board member. Public Notice Process Copies of this report are on file and will be included with the entire agenda packet for the May 22, 2014 Board of Directors regular meeting at District Headquarters and on the District’s website. Alternative Actions 1. Refer the matter back to staff. Reviewed by: Wendy Davis Interim Finance Manager