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City Council Votes to Tweak City Employee Benefits Packages  

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By Melonie Magruder
Lookout Staff

October 28, 2011 -- In keeping with Governor Brown’s proposal this week to reform public employee benefits packages, Santa Monica is taking steps to tweak its own city contracts.

At Tuesday evening’s regular City Council meeting, two agenda items were recommended by city staff that affected miscellaneous (non-safety) employees’ benefits packages.

The first Memorandum of Understanding (MOU) re-authorizes medical insurance coverage that is due to expire the end of this year, resulting in three changes to existing benefits packages, starting January 1, 2012.

For a three-year “umbrella” term, active employees covered under the agreement will contribute five percent towards the cost of their medical insurance premium, whatever that premium might be, with a cap of 15 percent on any annual increase in premium.

Department of Human Resources Manager Michael Earl told The Lookout that, in the past, employees contributed five percent to a flat rate premium.

With volatile markets and rising health care costs, the MOU clarifies that employee contribution would be a percentage of whatever rate the city can negotiate with its health insurance provider, with a guaranteed limit of 15 percent annually to any increase in premiums.

The city recently negotiated a new, more cost-efficient, contract with health services provider Aetna to cover all city employees, following former carrier CIGNA’s premium increase of nearly 20 percent.

In the MOU, the city also agrees to a one-time lump sum contribution of $250,000 into the Reserve Fund, initially designed to help offset any shortages in the city’s Retiree Medical Trust.

Furthermore, the MOU stipulates that the city’s contribution to the Retiree Medical Trust, currently at $142 per month on behalf of each eligible employee, would increase by two percent annually, beginning in 2012.

Another agenda item that the city negotiated with the Coalition of Santa Monica City Employees established a second tier of retirement benefits for employees eligible for CalPERS membership who are hired after July 1 of next year. These changes are intended to reduce the future impact of retirement benefits costs to the city.

Currently, employees hired before next July remain eligible for the first tier of retirement benefits, which establishes a 2.7 percent at age 55 full formula for local miscellaneous (non-safety) employees.

They will continue to use the 12 highest-paid consecutive months when determining the average monthly pay rate to apply in calculating retirement benefits.

Employees currently share the cost of additional retirement benefits by reimbursing the city 6.7 percent of earnings reportable to CalPERS on a post-tax basis. While this cost sharing will continue, reimbursements will now be made through payroll on a pre-tax basis.

After next July, new hires will be eligible for the second tier of retirement benefits, which establishes a two percent at age 55 full formula, using their 36 highest paid consecutive months to determine the average monthly pay rate. In this case, the city will not contribute the mandatory seven percent employee’s contribution of CalPERS-reportable compensation.

Other optional CalPERS benefits currently in effect would apply to employees in both tiers.

These amendments to the City’s contract with CalPERS will result in a reduction in the cost of retirement benefits in future years, though immediate cost-savings to the City cannot be predicted.

All city employees with five years of service are eligible for CalPERS benefits.

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