The Berkeley City Council passed a new police retiree health benefits plan at Tuesday’s meeting that is expected to cut costs for the city.
The new Police Retiree Health Premium Assistance Plan, designed to ensure the sharing of health care costs between the city and retirees, introduces changes to police retiree health benefits for those who have retired after Sept. 19, 2012. The plan is expected to reduce the city’s risk in incurring liabilities by $2.8 million and save the city $14.5 million over the next 30 years.
Under the previous plan, there was no set limit on the amount the city was required to pay, thus forcing the city to cover all payments until the death of the retiree and his or her spouse, said City Auditor Ann-Marie Hogan.
In addition, the city provided retired police employees and their spouses with a cash amount equivalent to the current Kaiser Health Insurance monthly premium, said Tim Kaplan, president of the Berkeley Police Association.
“It becomes very risky and expensive for cities to supply lifetime health benefits,” Hogan said.
Councilmember Gordon Wozniak also criticized the previous system as inefficient due to the fact that the city disbursed cash as taxable income, leaving retirees paying for health premiums after taxes on the city contribution.
According to David Abel, acting director of human resources, the new plan provides a fund for retired police officers to have a portion of health care costs paid by the city. Paying for health care costs directly instead of giving out cash deposits would eliminate this previous tax problem.
“For a single party, the city would pay $600 a month,” Abel said, “and for a two-party plan, they would pay $1,200 per month. Then, police officers are responsible for paying the difference of what the fund would subsidize.”*
Additionally, the new plan will save the city money by capping the amount of money for which the city is liable at 6 percent for any premium rate increases. Increases greater than the 6 percent cap will have the remainder shifted to police retirees.
An additional benefit of the new plan is an agreement that provides for the creation of a voluntary employee beneficiary association, a medical trust that allows employees to allocate sick leave pay toward their medical benefits every year.
This will help employees make up the “gap” between the maximum 6 percent cap in city payments and the escalation of Kaiser costs each year.
Kaplan believes that the new plan is mutually beneficial for the city and the police association.
“The city did a good job of making the plan more predictable for officers that are working 25 to 30 years and then facing extremely high health care,” Kaplan said.
Alyssa Neumann covers city government. Contact her at [email protected].