Agenda

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Agenda Item 27.

City Council Meeting

Meeting Date:	07/19/2022
FROM:	Bill Gallardo

Subject:

Amend Executive Compensation Plan to Set the Employer Medical Health Benefit Contribution Amount to the Public Employees’ Medical and Hospital Care Act (PEMHCA) Minimum

RECOMMENDATION

Approve resolution amending the Executive Compensation Plan to set the Employer Medical Health Benefit Contribution Amount to the Public Employees’ Medical and Hospital Care Act (PEMHCA) at an equal amount for executives and retired annuitants. This action will reduce the employer medical health benefit contribution to the PEMHCA minimum for Executives and retired annuitants effective September 1, 2022.

BACKGROUND/DISCUSSION

Executive compensation is established by City Council through Resolution No. 92-124 and may be modified from time to time by additional resolutions. This resolution is commonly referred to as the Executive Compensation Plan. In regards to health and welfare benefits, the compensation plan mirrors the City’s Flexible Benefit Plan program in place for City labor associations. The plan includes coverage for Executives and eligible dependents as follows: medical insurance, dental insurance, vision care insurance, and retiree health benefits.

The City’s contribution toward Flexible Benefit Plan options for Executives is currently $1,600 per month, effective January 1, 2012. Of this $1,600 per month, $350 is considered to be the City’s contribution toward the CalPERS Health Insurance Program for medical insurance and shall be reported to CalPERS as such. This $350 is the City’s contribution toward retiree medical insurance coverage.

The City of Brea has an existing agreement with the California Public Employees’ Retirement System (CalPERS) to provide its health program to active Brea Executives and retired annuitants. The CalPERS health program is governed by the Public Employees Medical and Hospital Care Act (PEMHCA), and the California Code of Regulations (CCR) of the California Public Employees Retirement Law (PERL). PEMHCA contains all the rules and regulations that a contracting public agency must adhere to and a CalPERS PEMHCA resolution is the mechanism by which an agency elects to become subject to the PEMHCA minimum.

In recent years, the City Council has expressed interest in reducing the City’s financial exposure associated with retiree medical costs and has negotiated changes accordingly. Based on that direction, on June 21, 2022 City staff recommended and the City Council approved reducing the monthly employer contribution for retirement medical health benefits to the PEMHCA minimum. This amount is set annually by CalPERS and for 2022, the contribution amount is $149 per month. PEMHCA provisions require that any such change to the employer contribution amount for monthly medical health benefits must be approved by resolution. This change will not affect the contribution amount for current employees in the Executive Managers group, which will remain at $350 per month for retiree health benefits. The proposed resolutions memorialized this change in the Executive Compensation Plan resolution.

The goal of adopting the PEMHCA minimum is to reduce the ongoing cost of retirement medical health benefits. Executives hired after September 1, 2022 will only be eligible to receive the PEMHCA minimum, which will be included in their monthly CalPERS pension check. As long as the PEMHCA minimum is less than the current fixed contribution amount, there stands to be some savings realized by the City. Over the last five years, the average annual increase to the PEMHCA minimum has been approximately 3%.

FISCAL IMPACT/SUMMARY

There is no cost associated with amending the Executive Compensation Plan resolution to implement the PEMHCA minimum. Once the change is processed by CalPERS, the immediate fiscal impact of changing all the groups will be the added cost of a $25 per year administrative fee, which the program administrator, MissionSquare, charges for establishing and maintaining each account for retired Executives and other City employees.

This amendment requires all new City Executives hired after September 1, 2022 who retire from the City to be subject to a lower City contribution for retiree health benefits. The City’s medical contribution towards retiree health insurance in the Executive group will be the CalPERS Public Employees’ Medical and Hospital Care Program (PEMHCA) minimum. The PEMHCA minimum is $149 in calendar year 2022 which is less than what the City is currently paying. Current Executives will retain the $350 benefit that presently exists.

RESPECTFULLY SUBMITTED:

William Gallardo, City Manager
Prepared by: Mario E. Maldonado, Human Resources Manager
Concurrence: Kristin Griffith, Administrative Services Director

Attachments
Resolution