There is a special DeKalb City Council/Finance Advisory meeting scheduled in the council chamber room (200 S. Fourth Street) at 6pm Monday, December 7. It has a single item agenda (PDF) — Retiree Health Insurance. Citizen comments will be allowed before the item is discussed.
The City of DeKalb’s post-retirement health plan covers a significant amount of the premiums (approximately 87% of the cost) for health and dental insurance for retired employees for life, starting as early as age 50. The plan also covers eligible dependents. According to the EPI report the current post-retirement health plan has a $29.4 million unfunded liability (as of 7-1-08). EPI believes this unfunded liability is likely understated due largely to conservative estimates of future health care inflation.
Currently the City is not making an annual contribution towards any of this unfunded future liability and is only funding the current annual costs, which were approximately $1 million in fiscal year 2009. In March of 2008 the City’s fund balance for this purpose was at a deficit of around $1 million.
By law and by collective bargaining contract, the City must provide its post-retirement health care coverage for bonafide retirees. According to city administrators it is not contractually or legally obligated to provide, at the current funding level, coverage for non-bonafide retirees or for dependents in either group.
The Insurance Committee of the City of DeKalb, which was formed to evaluate and develop logical and ethical solutions to the issue of supplemental health insurance for retirees, has submitted a proposal that would implement a ten-year phase-out of subsidized health care coverage for early retirees and dependents. Their proposal would reconsider a memo sent, reported in June 2009, that informed all current employees the program would end effective 2010.
EPI’s recommendation was to negotiate a change to all collective bargaining contracts as soon as possible and that the plan be terminated for all non-union employees and retirees. EPI suggested the Council consider a phase-out plan for both active employees and retirees. Under that plan retirees would be required to increase their contribution by 17.4% per year over the next five years until they are paying 100% of the premiums. For example, in FY 2010 retirees would pay 30.4%, FY 2011 47.8%, FY 2012 65.2%, FY 2013 82.6%, and FY 2014 100%. This phase-out plan would save the City $3.2 million over the next five years.