PURPOSE:

The purpose of this report is to request City Council approval of four resolutions that will do the following: provide for the participation of the elected and appointed officials, department managers and mid-management employees in the Burbank Employee�s Retiree Medical Trust; approve a side-letter with the International Brotherhood of Electrical Workers (IBEW) and the City to allow for participation of the IBEW represented employees in the Trust; and, amend the budget to authorize the transfer of $2.4 million from the City into the Trust Fund.

BACKGROUND:

As part of the collective bargaining process for the 2002-03 fiscal year, the Burbank City Employees (BCEA), Burbank Management Association (BMA) and International Brotherhood of Electrical Workers (IBEW) employee associations and the City came to agreement on the establishment of a Retiree Medical Trust.  This Trust was created to address the increasing medical insurance costs that have occurred and are projected to continue occurring.  Although the increasing costs affect both active and retired employees, the impact on retirees is significantly more severe.  In an attempt to assist retirees from the City, the Medical Trust will serve as a supplemental resource to reimburse post retirement medical benefits and other qualified medical expenses for health coverage.

The Retiree Medical Trust is an ERISA controlled defined contribution Trust under the direction of the Union appointed Trustees (the Trustees include members of the BCEA, BMA, and IBEW). All employees with the exception of those represented by the Burbank Police Officers Association, the Burbank Fire Fighters Association and the BFF Chief Officers Unit, are participants in the Medical Trust.  However, when the Trust was approved as part of the 2002-03 negotiation process, although  it was the intent that the elected, appointed, department managers, and mid-manager positions would be included, it was not formally approved by resolution; thus, resolutions to formally approve that action are presented to the Council for approval.  In addition, since the IBEW was not in negotiations during the 2002-03 fiscal year, a side-letter agreement was never presented to the Council to provide for the IBEW�s participation in the Trust.  The IBEW has approved of the side letter (attached for reference) and as such, it is being presented to the Council for approval.  The Retiree Medical Trust agreement language was however included in the Memorandum of Understandings for the BMA and BCEA.

The Trust was established with a one-time $20,000 contribution from the City for the initial set-up costs.  Additionally, the City agreed to set-aside $2.4 million to pay for three years worth of payments for the prospective retirees.  In addition to the employer contribution, the employees agreed to make individual contributions and beginning April 1, 2003, $20 per paycheck ($40 per month) was deposited to a separate Burbank City Employees Credit Union account.  The establishment of this account was approved by the Council on April 22, 2003, as a temporary depository until a permanent Trust Agreement was approved by the Trustees and presented to the City for review.  It is important to note that although the City does not have any authority or approval over this Trust, the City does have one non-voting member and does contain certain rights including: assurance that the Trust cannot be converted to any purpose other than reimbursement for retiree medical expenses; the ability to call for an audit of the Trust, at the City�s expense, when it deems necessary; the right to review any actuarial being used to support any change in benefit levels; and, limitations on the City�s contribution to the set-up costs.

ANALYSIS AND CONCLUSION:

Following several months of discussion between the City and the Trustees regarding the formation of the Trust, the Trustees have presented an approved Trust Agreement (attached for reference).  The City is satisfied that all requested conditions have been included in the Trust documents.  Although it is not necessary or permitted for the City to approve the Trust Agreement, it has been provided to the Council for review purposes (document attached to the report).

As part of the process in establishing a permanent Employee Medical Trust, the City needs to approve the following: resolutions to formally recognize the participation of the elected and appointed officials, department managers and mid-management employees in the Burbank Employee�s Retiree Medical Trust; and, the transfer of the City�s three years worth of contributions in the amount of $2.4 million to the Trust Fund.  In addition, as stipulated in Resolution No. 26,467 approved by the Council on April 22, 2203, staff will authorize the Burbank City Employees Federal Credit Union to transfer the funds from the temporary account established for the employee payroll deductions to the Trust Fund.

FISCAL IMPACT:

The $2.4 million which covers three years worth of City contributions to the Employee Medical Trust Fund were set-aside in a holding account in fiscal year 2002-03.  Although there is no real impact on the budget since the funds were previously set-aside, the transfer of the funds will impact the City�s interest earnings.  However, the benefits of transferring the dollars outweigh the projected annual loss of $65,000 in interest because the $2.4 million, combined with the employee contributions, will provide the Trustees with the ability to maximize the potential growth of the Trust and better ensure its success when in five years distributions to retirees can begin being made.

RECOMMENDATION:

It is recommended that the City Council approve the proposed resolutions which will: provide for the participation of the elected and appointed officials, department managers and mid-management employees in the Burbank Employee�s Retiree Medical Trust; approve the side-letter between the IBEW and the City to allow for IBEW represented employees to participate in the Trust; and, amend the budget to authorize the transfer of $2.4 million from the City into the Trust Fund. 

Respectfully submitted,

Judie Sarquiz

Management Services Director

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