AgdaPkt 2018-10-01 Joint SA PFA - Laserfiche WebLink

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REPORT To the Honorable Mayor and City Council From the City Manager October 1, 2018 SUBJECT Receive and Consider Actuarial Reports Related to Adopting A Second Tier of Retiree Health Benefits for Employees Hired After September 1, 2018 RECOMMENDATION Receive and review the findings in the actuarial reports and consider adopting the proposed changes to retiree health benefits after engaging in the meet and confer process with the applicable bargaining groups. BACKGROUND The City of Redwood City provides health benefits in retirement to employees who have worked for the City for 10 years or more1 and who retire from the City. For certain public safety positions, the retiree health benefits are provided at the family level of coverage if the employee retires due to a work-related disability. For other employees, the retiree health benefit is provided at the employee-only level of coverage. In both cases, the monthly benefit is tied to Kaiser Bay Area premiums negotiated by the California Public Employees’ Retirement System (CalPERS). Retiree health benefits are commonly called Other Post Employment Benefits (OPEB), and the City routinely conducts actuarial studies to determine annual contributions the City must make to fund this long term benefit, and to assesses the gap between total funding required for the benefit and funds currently set aside. At this time, the City has an estimated gap, or unfunded liability, of $58 million for retiree health benefits and has funded approximately 32% of the total cost of this benefit. This is common in cities across the state, however, it is also a concern as the City seeks to fully fund future obligations to employees. 1 Members of Executive Management hired prior to January 1, 2013 and City Councilmembers in office prior to January 1, 2013 must have at least five years of service with the City, prior to retiring from the City, in order to receive retiree health benefits. 8.A. - Page 1