I {Egg} gx. cb Introduced by Council Bill No. 280-07 A RESOLUTION $3 gg adopting a five year (2008-2012) active and retiree premium mj rate structure strategy for the City of Columbia. ra BE IT RESOLVED sv THE COUNCIL or= THE CITY OF COLUMBIA, AS r=oLLows; SECTION 1. The City Council hereby adopts the attached five year (2008-2012) g_ active and retiree premium rate structure strategy for the City of Columbia. ADOPTED this 5:16 day or zoo?. ATTEST: City Clerk Mayor and Presiding Officer APPROVED AS TO FORM: (Lam City Counselor Agenda Item No. 72 2 yd 4 7 Source: TO: City Council Human Resources FROM: City Manager and Staff DATE: November 12, 2007 SUBJECT: Active and Retiree Premium Rate Structure Strategy for City of Columbia Adoption of tive year (2008 -- 2012) active and retiree premium rate structure strategy for the F. I I City of` Columbia. The strategy addresses the OPEB (other post employment benefits) liability ma concerns that are as ociated with the requirements of GASB 45. YES NO The proposed five year trategy for addressing the City's OPEB (other post employment benefits) liability associated with the requirements of GASB 45 is attached. Human Resources and Finance staff worked with the City's benefits consultant, Gallagher Benefit Services, to Other info. develop the strategy. The strategy addresses the implementation of` "self`--supporting" premium rates for all participants in the City Health Care Plan (actives and pre>>?Medicare retirees), provision of subsidies for the rate tiers to phase in the rate realignment, and movement of Medicare eligible retirees to a firlly insured City sponsored group Medicare Supplement and Group Medicare Prescription Drug Program. The City is providing subsidies for the rate tiers in order to moderate the impact to the tier gr?oups that are experiencing rate changes. Retiree subsidies have been proposed for plan year 2008, and those subsidy amounts will remain f'rxed in fixture plan years. Active subsidies, adopted in September 2007, are expected to decrease in firture plan years. Adoption ofthe strategy is necessary to limit the City's liability under GASB 45 and maintain the City's favorable credit rating. CQUNCIL ACTION: Adoption of this Council Resolution. Exhibit: A Gallagher Benefit Services, Inc. October, 2007 Clty of Columbia, Missouri Active and Retiree Premium Rate Structure Strategy 2008 - 2012 Issue: The City is addressing the OPEB (other post employment benefits) concerns that are associated with the requirements of GASB 45. Implicit or explicit retiree subsidies the roup benefit programs negatively impact the City's GASB liability, and require municipalities (and other publlc entities) to take action to limit this booked liability. By having retirees share In their health care cost more proportionately, the Clty's GASB ls reduced Current Plan Year (ganuagg 2007): Rates that the City currently charges both Its pre-65 and post-65 retirees are heavily subsidized . by the active rates. Healthcare actuarial analysis indicates the current 4?tier rate structure would require increases (for example, estimates ranging from +17% for single pre-65 retiree rates, to +67% for retiree famlly rates) to appropriately align the rates with the clalms cost associated with this population. Rate realignment within the four Active tier groups Is also needed to better align the cost associated with each rate tier. Next Plan Year (Januagg 2008) The City is Introducing new premium rates, for Actives and Retirees, that are progressing toward rates that more closely reflect the cost associated with each rate . tier). While the 2008 rates are not fully self-supporting, the Clty's plan Is to gradually phase--in the rate realignment so that by 2012, the rates are proportionate to the cost, both for actlves and for retirees. The City is providing subsidies for the rate tlers, to ensure a gradual phase-in process, and to moderate the Impact to the tler groups that are experiencing a rate change. Retiree subsidies are fixed, and remain fixed In future plan years. Active subsidies are expected to decrease in future plan years. Specific to post-65 Retirees, the City ls replacing the current program with a group Medicare Supplement and group Medicare Prescription Drug Program. This program will also receive from the City to the Impact to retirees during the transition. - Januagg 2009 - 20] 2: - The City will re-evaluate its GASB liability position each year, and continue to annually monitor the plan's performance and modify (if needed) the rate relationships to ensure the plans are . effective for Actives and Retirees, and that the rate relationships are moving toward "self- (to be fully self-supporting by 2012), so that the Clty's GASB posltlon will remain stable. I iam I si twat, M063t31 :n4scs.4:us m;s14.a2i.irsa I