HomeMy WebLinkAboutResolution 2011-8 Social Security Agreement Medicare-Only Coverage - July 1, 2011CITY OF PALM DESERT
HUMAN RESOURCES DEPARTMENT
STAFF REPORT
REQUEST: Adopt Resolution No. 2011-8 , allowing the City to remove the
Medicare exclusion from certain employees hired before April 1,
1986.
SUBMITTED BY: Lori Carney, Human Resources Manager
DATE: February 10, 2011
CONTENTS: Resolution No. 2011-8
Recommendation:
Waive further reading and adopt Resolution No.2011-8
Executive Summary:
Adoption of this Resolution will allow certain employees, hired before April 1,
1986, to contribute to Medicare and thereby earn credits in the Medicare system.
These employees are currently "grandfathered" and not contributing to the
Medicare system.
Background:
In 1986 the Federal government required all new public employees to contribute
to Medicare. At that time current employees were "grandfathered" and not
required to make contributions. The effect of this "grandfathering" is that these
employees (hired prior to April 1, 1986) do not earn credits in the Medicare
system and therefore may not be eligible for Medicare at age 65.
There are six employees remaining who were hired prior to April 1, 1986, and so
are not contributing to Medicare. Some of these employees will be eligible for
Medicare through a spouse's employment history or through their own private
sector employment prior to or in conjunction with their City employment, however
some will not. These are by definition long term employees, many of whom
began their careers with the City while they were relatively young and had little
outside work experience.
Staff Report
Medicare Eligibility
February 10, 2011
Page 2 of 2
There is a mutual benefit to the employee and employer for these individuals to
acquire Medicare eligibility. It significantly reduces future retiree medical costs
because Medicare becomes a primary insurer and any other plan is supplement
with a reduced premium. For example — in 2011 the premium difference for the
PersChoice PPO between the basic plan and the Medicare coordinated plan is
$1,915 per year. This results in a savings for the retiree and the City.
The current contribution is 1.45% of salary for both the employee and the
employer (a total of 2.9% shared equally.) One employee has expressed interest
in enrolling.
Fiscal Analysis:
Depending upon the employees who opt in, the employer contribution is
between $2,000 and $5,000 annually. However, the future retiree health
liability will also be reduced.
Submitted by:
OTY COUNCTLA�ON
APPROVED DENTED
REEIV1.ED 1. _ OTHER '
Lori CaVfey, Human Resources Manager MEETTiG D�ATI, - G!
AYES:Y7/l��C
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ABSENT: Akvf
ABSTAIN: �E/M/eWU
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Paul S. Gibson, Director of Finance VERIFIED BY -
Original on File with City 6 erk's Office
Approval:
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. Wohlmuth, Cit a ager
RESOLUTION NO. 2011-8
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM
DESERT, CALIFORNIA, ESTABLISHING A DIVISION OF THE
PRESENT RETIREMENT SYSTEM AND ALLOWING EACH
ELIGIBLE MEMBER TO ELECT WHETHER OR NOT HIS SERVICES
SHOULD BE EXCLUDED FROM OR INCLUDED UNDER THE SAID
CALIFORNIA STATE SOCIAL SECURITY AGREEMENT AS
HEREINBEFORE PROVIDED; WITH SUCH "MEDICARE -ONLY"'
COVERAGE EFFECTIVE AS A SERVICE PERFORMED ON AND
AFTER JULY 1, 2011;
WHEREAS, the City of Palm Desert, hereinafter designated as "Public Agency",
desires to establish a "deemed" retirement system pursuant to Section 218(d)(6) of the
Federal Social Security Act composed of positions of members of the CalPERS
Retirement System, hereinafter designated "Present Retirement System", desiring
"Medicare -Only" coverage, and to include services performed by individuals employed
by the Public Agency in positions covered by said "deemed" retirement system, as
members of a coverage group established by Section 218(d)(4) of said Act, in the
California State Social Security Agreement of March 9, 1951, providing for the coverage
of public employees under the insurance system established by said Act as amended;
and
WHEREAS, State and Federal law and regulations require, as a condition of
such coverage, that a division be authorized by the Board of Administration, California
Public Employees' Retirement System; and
WHEREAS, It is necessary that the "Public Agency" now designate any services
which it desires to exclude from coverage with respect to such coverage group under
said insurance system; and
WHEREAS, it is necessary for the Public Agency to set forth the modification, if
any, of the benefits and contributions under the Present Retirement System that may
result from coverage under the said insurance system with respect to such coverage
group;
NOW, THEREFORE, BE IT RESOLVED that the Board of Administration,
California Public Employees' Retirement System, be and hereby is requested to
authorize the foregoing division; and
BE IT FURTHER RESOLVED, that upon receipt of authorization from the Board
of Administration a division shall be conducted in accordance with the requirements of
Section 218(d) of the Social Security Act, and applicable State and Federal laws and
regulations; that each eligible member of the Present Retirement System at the time of
the division shall be furnished a form to permit the member to elect whether or not his
services should be excluded from or included under the said California State Social
Security Agreement as hereinbefore provided; with such "Medicare -Only"' coverage
effective as a service performed on and after July 1, 2011; and
BE IF FURTHER RESOLVED, that the following services with respect to said
coverage group of the Public Agency shall be excluded from coverage under said
agreement:
1. All services from coverage under the agreement by Section 218 of the
Social Security Act; and
2. Services excluded by option of the Public Agency:
a. No optional exclusions desired.
BE IT FURTHER RESOLVED, that with respect to the said coverage group the
benefits and contributions of the Present Retirement System shall not be modified in
any way; and
BE IT FURTHER RESOLVED, that notice of the division shall be given to
members of the Present System not less than ninety days prior to the date of the
division; provided however, that notice shall be given to employees becoming members
of the Present Retirement System after the date of such notice up to and including the
date of the division on the date on which they attain membership in the system, and that
Lori Carney, Human Resources Manager is hereby designated and appointed to
conduct such division on behalf o the Public Agency in Accordance with Law,
regulations, and this resolution, including the fixing of the date and the giving of proper
notice thereof to members of the Present Retirement System and to all such eligible
employees; and
BE IT FURTHER RESOLVED, that the public agency will pay and reimburse the
State at such time and in such amounts as may be determined by the State the
approximate cost of any and all work and services relating to such division.
PASSED, APPROVED AND ADOPTED at the regular meeting of the Palm
Desert City Council, held on this 10th day of February, 2011 by the following vote, to
wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
JEAN BENSON, MAYOR
ATTEST:
RACHELLE KLASSEN, CITY CLERK
City of Palm Desert, California