PURPOSE

The purpose of this report is to request City Council adoption of a proposed resolution establishing a Post Employment Health Plan (PEHP) for the Burbank Fire Fighters (BFF) Local No. 778 (includes the BFF and BFF Chief Officers Unit � BFF-COU).  Included with this proposed resolution are the PEHP Trust and Plan Documents, as well as a side letter with the BFF Local No.778. 

BACKGROUND

As part of the labor negotiations process with the BFF and the BFF-COU the City agreed to work with these unions to establish some type of a retiree health savings program for their membership.  The BFF and BFF-COU have been reviewing the various plans available and have requested City Council approval of a PEHP from Nationwide Retirement Solutions.  The PEHP is a tax exempt multi-employer trust which was first established in 1996.  Other agencies including the cities of Long Beach and Santa Monica also have a PEHP available to their fire safety employees. 

The PEHP is a unique benefit plan authorized by Internal Revenue Code Section 501(c) (9) (the Code allowing a Voluntary Employee Beneficiary Association/VEBA) which is designed to give employees the ability to set aside money for the payment of post employment qualified medical expenses.  The PEHP plan has two separate sub-accounts which allow different types of reimbursements. 

The first sub-account is called the �Universal Reimbursement Account� which allows for reimbursement for any qualified out of pocket medical expense including health insurance premiums, prescription drugs, eye glasses, hearing aids and doctor co-pays.  The second sub account is called the �Insurance Premium Reimbursement Account� and only allows reimbursements for qualified health insurance premium expenses including health and dental insurance premiums, Medicare Part B premiums and Medicare supplements.

With the rising cost of health related expenses, this type of program is a tremendous benefit to the City�s BFF and BFF-COU members, their spouses and qualified dependents. In addition to providing a vehicle to assist with retiree medical expenses, the PEHP�s main advantage is that all contributions, investments and amounts distributed to the member for the reimbursement of qualified medical expenses, are free from federal and FICA taxes. 

The participants in the PEHP may elect to have their contributions and earnings directed to an investment option of their choice.  There are currently ten investment options available to the participants.   The investment options enable the participants to make selections based on their personal objectives and risk tolerance and are designed to provide diversification, ranging from conservative to aggressive, across several types of investment classes by investing in multiple underlying funds.

ANALYSIS & CONCLUSION

This negotiation process began several years ago as part of an effort by the BFF and the BFF-COU to secure an ongoing method of providing a funding mechanism for retiree medical.  The Council gave authority to negotiate for this benefit provided it was at no cost to the City. This multi-year effort has resulted in this request to authorize, by resolution, the establishment of a PEHP by approving the Employer Participation Agreement. 

The PEHP will be sponsored by the City and administered by the Nationwide Retirement Solutions.  The Trustee for this plan will be the LaSalle National Bank.  The Trust is a multi-employer trust comprised of over 800 public sector entities across the United States.  As the sponsor, the City has the authority to appoint and remove the Trustee and the Administrator; as well as amend the provisions of the Plan, subject to the terms of the BFF and BFF-COU MOU�s.  The City implemented these MOU�s on July 19, 2005 and September 20, 2005 respectively.  It is worth noting that while the PEHP has been requested by the BFF, Local No. 778, this program can be made available to all other represented and unrepresented employees in the City if they so desire. 

The PEHP will be effective December 1, 2005 and the City will begin depositing the balance of each employee�s accumulated leave balance upon retirement or separation into their individual accounts with Nationwide.  (Please note that the member must be at least 50 years of age to have 50 percent of their accumulated sick leave deposited into their account).   The BFF and BFF-COU have determined that annually in October they will take a vote of the membership to ascertain the dollar amount to be deposited into the PEHP by the members who are retiring/separating from service during the next fiscal year.  The proposed resolution provides administrative authority for the contribution amounts to be changed annually if necessary as determined by the unions.

Currently the BFF, Local No.778 has determined that the employees retiring/separating between December 1, 2005 and December 31, 2005, shall designate the City to contribute $12,000 of their accumulated leave balance into the Universal Reimbursement Account, and any remaining balance shall be deposited into the Insurance Reimbursement Premium Account.

FISCAL IMPACT

There is no fiscal impact to the City to establish this PEHP as the monies to be deposited into the PEHP already belong to the employee pursuant to the BFF and BFF-COU MOU�s. Furthermore, all administrative costs and asset fees will be charged to the individual employees account.  The only responsibility the City has is to wire transfer the established contribution amount to Nationwide when BFF and/or BFF-COU members retire/separate their service from the City.   

RECOMMENDATION

Staff recommends that the City Council adopt the proposed resolution adopting an Employer Participation Agreement for the Post Employment Health Plan for the Burbank Fire Fighters Local No. 778.

Respectfully submitted,

Judie Sarquiz

Management Services Director