City of Culver City, California
Agenda Item Report
Meeting Date: 07/02/2012 Item Number: C-8
CITY COUNCIL AGENDA ITEM: Adopt a Resolution Establishing a Retiree Health
Reimbursement Arrangement Plan
Contact Person/Dept.:
Jeff Muir/Finance Department
Phone Number:
(310) 253- 5865
Fiscal Impact: Yes [x] No [] General Fund: Yes [x] No []
Public Hearing: [] Action Item: [x] Attachments: [X]
Commission Action Required: Yes [] No [] Date: _______________
Public Notification: (Email) Meetings and Agendas – City Council (06/28/12)
Department Approval:
Jeff Muir (06/19/12)
City Attorney Approval:
Carol Schwab (by H. Baker) (06/25/12)
Chief Financial Officer Approval:
Jeff Muir (06/19/12)
City Manager Approval:
John M. Nachbar (06/27/12)
RECOMMENDATION:
Staff recommends the City Council take the following actions relative to the
establishment of a Retiree Health Reimbursement Arrangement Plan:
1. Adopt the attached proposed resolution approving and adopting the attached City
of Culver City Retiree Health Reimbursement Arrangement Plan; and,
2. Authorize the City Manager, City Attorney and Chief Financial Officer to finalize
and execute all documents and take all necessary actions to implement the Plan.
BACKGROUND:
On March 12, 2012, the City Council approved the establishment of a Post-
Employment Welfare Benefits Program Trust. The purpose of the Trust was to
provide a mechanism whereby the City may begin to adequately fund its future
liabilities for retiree medical benefits pursuant to Government Accounting Standards
Board Statements 43
i
(GASB 43) and 45
ii
(GASB 45), which required government
entities to begin treating Other Post Employment Benefits (OPEB) in a similar
fashion to pensions. This Trust is a long-term investment program to pay for future
liabilities. It will take many years of funding and annual returns before costs are paid
out of this Trust.
On a monthly basis, the City makes payments to existing retirees for medical
coverage they are entitled to based on their date of retirement. This is referred to as
the “pay-as-you-go” portion of the OPEB liability. Prior to the recently approved
changes to the agreements with the City’s six bargaining units, the City made the
monthly premium payments for retirees directly to CalPERS each month. With the City of Culver City, California
Agenda Item Report
implementation of the new agreements, the City must now make the
reimbursements directly to the retirees, as the premium payments are withheld from
their monthly pension checks.
DISCUSSION:
With the understanding that premium reimbursements would be made from the City
directly to retirees, staff sought legal assistance to establish a Health
Reimbursement Arrangement (HRA) for eligible retirees. An HRA provides a
mechanism to provide these reimbursements directly to retirees and ensure they are
not treated as taxable income. The attached City of Culver City Retiree Health
Reimbursement Arrangement Plan provides the necessary legal framework to permit
retirees or their eligible beneficiaries to receive reimbursements on a nontaxable
basis.
FISCAL ANALYSIS:
There is no direct fiscal impact to the City by approving the HRA. The amount of
monthly reimbursements is not affected. Only the logistics for providing them will
change slightly moving forward. This action will ensure these benefits are not
construed as taxable income.
ATTACHMENTS:
1. Proposed Resolution
MOTION:
That the City Council:
1. Adopt the proposed resolution approving and adopting the City of Culver City
Retiree Health Reimbursement Arrangement Plan; and,
2. Authorize the City Manager, City Attorney and Chief Financial Officer to finalize
and execute all documents and take all necessary actions to implement the Plan.
i
The official title of GASB 43 is Financial Reporting for Postemployment Benefit Plans Other Than Pensions and was
issued in April 2004.
ii
The official title of GASB 45 is Accounting and Financial Reporting for Postemployment Benefits Other than Pensions
and was issued in June 2004.
MEETING DATE: July 2, 2012
AGENDA ITEM :
Adoption of a Resolution Approving and Adopting a Health Reimbursement
Arrangement for Eligible Retirees
ATTACHMENTS
Pages
1. Resolution No. 2012-R-
1-2 RESOLUTION NO. 2012-R
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CULVER CITY, CALIFORNIA, APPROVING AND ADOPTING
A HEALTH REIMBURSEMENT ARRANGEMENT FOR
ELIGIBLE RETIREES OF THE CITY OF CULVER CITY_
5 WHEREAS, the City of Culver City (the "City") provides health insurance
6 benefits to its active employees and eligible retirees under the Public Employees' Medical
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and Hospital Care Act ("CalPERS Health");
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WHEREAS, the City funds such CalPERS Health benefits at rates established
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under City Council resolutions submitted from time to time to the CalPERS Health
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administrator;
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WHEREAS, the City Council has determined it to be in the City's best interests
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to adopt a health reimbursement arrangement ("HRA") within the meaning of IRS Notice
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2002-45 to reimburse eligible retirees and their eligible surviving beneficiaries for all or
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some portion of their CalPERS Health premium costs.
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NOW, THEREFORE, the City Council of the City of Culver City, California,
18 DOES HEREBY RESOLVE as follows:
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1. Effective January 1, 2012, the City hereby adopts the City of Culver City
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Retiree Health Reimbursement Arrangement ("Retiree HRA"), attached hereto as Exhibit
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2. From January 1, 2012 through December 31, 2012, for each eligible
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retiree (or eligible beneficiary), the City will contribute the amounts set forth in Appendix A of
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the attached HRA as reimbursements of payments made by the eligible retiree (or eligible
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beneficiary) for CalPERS Health coverage. These contributions are in addition to, not in lieu
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of, the amount the City contributes to CalPERS Health for that retiree's (or eligible
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4 ANDREW WEISSMAN, Mayor
City of Culver City, California
APPROVED AS TO FORM:
OL A. SCHWAB, City Attorney
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beneficiary's) coverage. The contribution rates will remain the same for each subsequent
calendar year, unless the City Council adopts different rates by resolution.
3. The City may make contributions to a trust in order to prefund benefits
under the Retiree HRA.
4. The City is hereby designated as the Plan Administrator for the Retiree
HRA.
5. The City Manager is authorized to, at any time, amend the Retiree HRA
as necessary or desirable to conform it with applicable laws; no amendment, however, will
be effective without the City Council's prior written approval if the amendment increases the
City's costs or adversely affects any participant.
6. The City Manager is further authorized, and directed, for and on behalf
of the City, to take such further action and execute such additional documents as he or she
deems necessary or appropriate to carry out the provisions of the above resolutions and
administration of the Plan, including execution of the Retiree HRA plan document, as
effective January 1, 2012.
APPROVED and ADOPTED this
day of , 2012.
Al2-00512
ATTEST:
MARTIN R. COLE, City Clerk