In order to maintain balance between the city’s medical contribution for active employees and retirees, the city’s contribution to the California Public Employees’ Retirement System for retiree medical coverage was recently increased per a CalPERS requirement.
The Sunnyvale City Council on Oct. 14 voted 6-1, with Councilman Pat Meyering dissenting, to up the city’s payments for retirees.
SEA/confidential and management retirees will now receive $721.88, an increase of $34.38 per retiree, per month. Retirees in SEIU will now be getting $397.05, an increase of $18.91 per retiree, per month.
The increases will be effective as of Jan. 1.
Per negotiations with SEA and SEIU, the city’s contribution for medical coverage for active employees increases annually and can’t be less than the highest city contribution for any of the employee groups. To keep things even, the city’s contribution to CalPERS for retiree medical coverage needed to increase.
“Essentially, the city is required to have council adopt a resolution for any adjustments in medical contributions for retirees,” Sunnyvale communications officer Jennifer Garnett said.
Garnett added that the city has taken many actions over the last several years to contain its retiree medical costs, despite ongoing adjustments.
“For example, management employees used to receive 100 percent of medical premiums covered,” Garnett said. “Since 2007, the benefit level has been capped and there is a vesting schedule, where an employee must have 15 years of management service to receive the full benefit.”
In addition, the city’s contribution to medical premium increases is now capped at 5 percent for non-management, non-public safety retired employees.
“Premium increases have historically varied widely, including low double-digit increases in the past, so capping the city contribution for retirees at 5 percent limits the city’s exposure to increases over the long term,” Garnett said. “This has the effect of helping to predict the city’s expenses and maintain fiscal sustainability.”
The city also began funding a retiree medical trust fund in fiscal year 2010-11 to help provide a cushion for future retiree medical benefits.
On a larger scale, the city has done a variety of things to contain personnel costs, including retirement costs. The city has lowered future salary increase assumptions in the long-range financial plan; moved all new employees to a pension plan with reduced defined benefits; and increased the contribution that current employees make for their share of the pension expense as determined by CalPERS.
CalPERS, which reportedly has $64 billion in unfunded liabilities, bumped up the employer contribution rates last year for state and local governments and school districts in the system to pay down its obligations.
Sunnyvale has been contributing more than what CalPERS has required over the past several years, so the city effectively implemented some of the Cal-PERS changes early.
Ongoing changes to its employee contribution rates over the past few years have also helped.
For the public safety plans, the city paid the entire employee contribution of 11.25 percent through fiscal year 2009-10. During 2010-11, both the Sunnyvale Managers Association and the Sunnyvale Public Safety Officers Association agreed to pay 3 percent toward the employee contribution.
The managers association’s contribution began in 2010 and was fully phased in as of July 2011. Meanwhile, the officers association’s contribution began in July 2011 and increased to the agreed-upon 3 percent by January 2013.
For the miscellaneous employees’ plan, the city currently pays 7 percent of the 8 percent employee contribution, with employees paying the other 1 percent.
The Sunnyvale City Council also voted unanimously in August 2012 to increase its CalPERS contribution to the full 8 percent.
