pages: CityCouncil/2013-07-23.pdf, 11
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CityCouncil | 2013-07-23 | 11 | securities. Councilmember Daysog stated the situation remains the same; the City knows how much has to be set aside for OPEB annually, yet less is being set aside; tough decisions still have to be made. The Finance Director stated Councilmember Daysog is absolutely right; the trust fund is a starting point; the appropriate funding level will have to be discussed; putting $100,000 is into a trust fund is a good starting point; bond agencies would recognize effort has been made, which is positive for the City; a tiered benefit program is another option, which has begun to be addressed under the current Memorandums of Understanding (MOUs); PERS has a tiered program; for each year of PERS experience, employees vest a certain percentage; for example, an employee who retires after 10 years would not receive 100% of the OPEB benefit; instead, with the rate of 5% per year, the employee would receive 50%; other cities have implemented such programs; the system rewards experience; a third option is capping the City's medical contribution rate; each year, the employer contribution goes up the same amount for both retired and current employees; restructuring could be done to have the City contribute $1,000 per month for medical expenses for retirees and current employees; capping the amount at $1,000 stops automatic increases, which could dramatically lower the OPEB liability; the fourth option is to have future employees on a defined contribution plan; instead of paying the benefit as long as an employee lives, the City's liability could end once the employee leaves the City; the employees could invest money in a health saving bank, such as a Voluntary Employees Benefit Association (VEBA); a VEBA is set up under Internal Revenue Services (IRS) regulations allows money to be pulled out tax free; other options include a plan to offer a buyout program similar the plan Beverly Hills started a couple of years ago; current employees receive either a onetime lump sum payment or OPEB upon retiring and new employees receive a defined contribution plan. Mayor Gilmore inquired whether the City of Beverley Hills issued a bond to pay for the program, to which the Finance Director responded in the affirmative. Mayor Gilmore inquired whether the City of Alameda has been dinged by credit agencies because of the OPEB liability, to which the Finance Director responded in the affirmative. Mayor Gilmore inquired whether rating agencies would consider issuing a bond positive or negative since the City would be taking on additional debt. The City Manager responded the City would not ever really know; stated that he believes credit agencies would look at issuing bonds as positive; rating agencies look at OPEB with a jaundice eye because nobody knows how much healthcare rates are going to increase or the potential impacts of Obama care; the Beverly Hills program locks in the present benefit value, which eliminates the danger of runaway premiums and buys out the liability early; the program allows cities to resolve not knowing how big Regular Meeting Alameda City Council 10 July 23, 2013 | CityCouncil/2013-07-23.pdf |