HomeMy WebLinkAboutCC AG PKT 2007-08-13 #P
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AGENDA REPORT
DATE:
August 13, 2007
TO:
Honorable Mayor and Members of the City Council
TIiRU:
David Carmany, City Manager
FROM:
June Yotsuya, Assistant City Manager
SUBJECT:
Developing Health Care Solutions to GASB 45 and AB 2544
SUMMARY OF REOUEST:
City Council is requested to receive and file a study on possible health care solutions to GASB
45 and AB 2544 regarding how to address the unfunded liability for post employee health
benefits.
e DISCUSSION:
State and local governments are grappling with how to implement a ruling by the Governmental
Accounting Standards Board (GASB) regarding the financial valuation and disclosure of post-
employment benefits other than pensions. The purpose of this new rule, GASB 45, is to require
the accrual of the liabilities and expenses associated with retiree benefits (primarily retiree
healthcare) over the working career of plan members, rather than on a pay-as-you go basis,
which is the current practice of the City of Seal Beach sponsored plan.
In addition, the California Legislature recently passed AB 2544 on Public Employee Health
Benefits that will become effective January 1, 2008. Under the new provisions, agencies will
have to annually increase the total monthly annuitant health care contribution to equal an amount
not less than the number of years the agency has been in the Public Employees' Medical and
Hospital Care Act (pEMHCA) program, multiplied by 5 percent of the current monthly employer
contribution for employees, until the time that the employer contribution for annuitants equals
the employer contribution paid for employees.
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These new rulings have caused great concern for governmental agencies as they consider how to
fully fund post-employment benefits to meet the 2008 requirement for reporting future plans.
City staffhas been meeting with outside consultants to analyze the pension challenges facing the
City, discussing how the City's pension fund compares to those in other cities and researching
what options the City has for managing these challenges.
Agenda Item j)
August 13, 2007
City Council Agenda Report-Developing Health Care Solutions to GASB 45 and AB 2544
Page 2
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FINANCIAL IMPACT:
City staff will research the various options that would provide the best cost benefit for the City
and its employees. Several options for consideration include ABD Insurance Services analysis
of post employee health benefit program changes, developing a fully funded program through
fiscal financing, i.e., bonds, reallocation of resources, set-aside financing, etc.
Recommendations will be provided at a future meeting for consideration by the City Council.
RECOMMENDATION:
Staff recommends that City Council receive and file the ABD Insurance Services PowerPoint
Presentation on Developing Health Care Solutions to GASB 45 and AB 2544.
Submitted by:
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NOTED AND APPROVED:
bq-
David carman~, Jity ~anager
Attaclunent:
PowerPoint Presentation - ABD Insurance Services
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