13 - 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 ITEM NO. ____
To: Board of Directors
Via: Scott Carroll, General Manager
From: Anna Sanchez, Administrative Service Manager
Date: August 29, 2013
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. The Board has now directed
staff to bring this item back to the Board for discussion and consideration of maintaining
the health benefit plan for the Board of Directors or begin the process of terminating the
plan participation .
Staff Recommendation
That the Board of Directors provide s direction to staff.
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 -Cal PERS health agreement between the District
and CalPERS. This agreement allows Non -Cal PERS members, such as the Board of
Directors, the option to participate in the Distri ct’s group health insurance plans, as
administered through CalPERS. C alPERS, by la w, requires that the employer pay a
ITEM NO. 13
Board of Directors
August 29 , 2013
Page 2 of 4 ITEM NO. ___
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 $115 for 2013) for both active employees and retirees . The u nequal method
allows the employ er to initially contribute a lesser amount toward h ealth 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 retiree c ontribution 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. For example, the contribution under the unequal
method for 2013 would be as follows:
Years of
Participation
Percentage Current Employer
Contribution for
Active Employees
Employer
Contribution for
Retirees
1 x
5%
$115.00 =
$5.75
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 annual 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 p lans, 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
manda ted to enroll 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 in cur any penalties nor does it incur any
maintenance costs to the District, with the exception of the required deferred
compensation retirement plan contribution.
Board Health Plan Elimination: The contractual requirements of the Non -CalPERS
Agreement for health benefits would take several years to eliminate, should the Board
choose to eliminate those benefits.
Board of Directors
August 29, 2013
Page 3 of 4
Section 599.515 of Title 2 of the California Code of Regulations addresses contract
termination requirements and provides that a resolution to term inate PEMHCA
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 t hat the election 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 announced the new health premiums for 2014 o n June
18, 2013, with open enrollment beginning September 16, 2013. The 60 day “window” to
elect to terminate has passed. 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 complies 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.
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.
In the future, if a Board member elects to enroll in the health plan, the District would incur
a cost established by the formula set by state statute. In 2014 , the required employer
contribution for one Board member who enrolls in health benefits will be $11.90 per month
or $142.80 annually.
Board of Directors
August 29 , 2013
Page 4 of 4 ITEM NO. ___
Public Notice Process
Copies of this report are on file and will be included with the entire agenda packet for the
August 29, 2013 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:
Stacey Cuevas
Finance Manager