HomeMy WebLinkAbout07.d.2) Consider request by Board Member Nejedly to receive report on Board health benefits.7.d.2
Central Contra Costa Sanitary District
April 29, 2011
TO: HONORABLE BOARD OF DIRECTORS
VIA: JAMES M. KELLY, GENERAL MANAGE I
FROM: RANDALL M. MUSGRAVES, DIRECTOR OF ADMINISTRATION Mk
KENTON ALM, DISTRICT COUSEL
SUBJECT: DISTRICT BOARD MEMBER BENEFITS
At the April 21, 2011 Board meeting, Member Nejedly requested a discussion of health
benefit options for the Board members at the May 5, 2011 meeting. The concern
expressed was that the healthcare premium charged to the District is excessive when
used as secondary coverage. The following information regarding the District's
healthcare plans, premiums and options is provided to assist the Board in their review
of this matter.
Attached is a summary comparison of the District's healthcare plans.
Staff has requested legal review regarding specific California law and IRS regulations
relating to Board compensation and benefits. Unfortunately, those opinions were not
available at the time this memo was submitted for the agenda packet. Specifically,
District staff has sought legal advice from Mr. Kenton Alm, District Counsel (Meyers
Nave), Mr. Daniel Clinton, Labor Attorney (Hanson Bridgett) and Trucker Huss, the
District's Counsel for deferred compensation plans, cafeteria plan and Board
compensation.
However, this memo will provide the Board with general information regarding District
health benefits and potential options.
MEDICAL COVERAGE
The District has three options for medical coverage: Kaiser Permanente HMO, Health
Net HMO, and Health Net PPO. Coverage is provided at no cost to Tiers I and 11 Board
Members. Tier III Board Members who select the Health Net PPO plan shall pay the
difference in premiums between the PPO plan and the highest cost HMO plan.
HMO: A Health Maintenance Organization, or HMO, provides employers a way to take
care of all their employees' health care needs with reduced costs by negotiating with
specific doctors, hospitals, and clinics. These specific providers must be used by the
employee for the reduced fees to be provided to their medical insurance plan.
Honorable Board of Directors
April 29, 2011
Page 2
PPO: In a Preferred Provider Organization, or PPO, an employer can also provide
employees with reduced costs billed to their health insurance plan. Similar to a HMO,
but the employees can choose the physician they want to see instead of being solely
restricted to the HMO providers. An employee can choose between a member or
nonmember provider. The member provider would be the least expensive choice for the
employee.
Co -pays apply for office visits, prescription drugs, counseling, ambulances, emergency
room visits, or hospitalization as shown below:
BENEFITS AFTER RETIREMENT
Pursuant to California Government Code Section 53201(c), after twelve or more years
of service on the Board, Board Members who took office after January 1, 1995 are
entitled to purchase medical, dental and reduced life insurance ($10,000 policy) at the
District's premium rate. The medical coverage after age 65 will be integrated with
Medicare. The cost of Medicare is not covered by the District.
Board members who took office prior to January 1, 1995 are entitled to District paid
medical, dental, and life insurance until age 65. After age 65, they are entitled to keep
District medical (Medical supplement) and dental insurance, but must pay 50% of the
premium cost. There is no extra cost for life insurance.
CONTINUANCE OF BENEFITS UPON DEATH IN OFFICE
In the event of your death while in office, your dependents will be eligible to receive
medical and dental benefits for the length of your total service with the District, or until
such time that your spouse remarries or dependents no longer qualify for benefits under
District policies.
MEDICAL PREMIUMS
The tables on the next page display the premiums for each plan.
Kaiser HMO
Health Net HMO
Health Net PPO
Office Visits
$10
$10
Varies — See
Attached
Drug Generic
$10
$10
$10
Drug (Brand)
$15
$15 (Brand) / $35
Non - Formula
$15 (Brand) / $35
Non - Formula
BENEFITS AFTER RETIREMENT
Pursuant to California Government Code Section 53201(c), after twelve or more years
of service on the Board, Board Members who took office after January 1, 1995 are
entitled to purchase medical, dental and reduced life insurance ($10,000 policy) at the
District's premium rate. The medical coverage after age 65 will be integrated with
Medicare. The cost of Medicare is not covered by the District.
Board members who took office prior to January 1, 1995 are entitled to District paid
medical, dental, and life insurance until age 65. After age 65, they are entitled to keep
District medical (Medical supplement) and dental insurance, but must pay 50% of the
premium cost. There is no extra cost for life insurance.
CONTINUANCE OF BENEFITS UPON DEATH IN OFFICE
In the event of your death while in office, your dependents will be eligible to receive
medical and dental benefits for the length of your total service with the District, or until
such time that your spouse remarries or dependents no longer qualify for benefits under
District policies.
MEDICAL PREMIUMS
The tables on the next page display the premiums for each plan.
Honorable Board of Directors
April 29, 2011
Page 3
Monthly Premium Rates
(Effective July 1, 2010 to June 30, 2011)
Annual Premium Rates
(Effective July 1, 2010 to June 30, 2011)
Kaiser Permanente
HMO
Health Net HMO
Health Net PPO
Single
$597.63
$748.60
$1,084.44
Dual
$1,195.27
$1,497.18
$2,172.01
Family
$1,691.30
$2,170.93
$3,144.31
Annual Premium Rates
(Effective July 1, 2010 to June 30, 2011)
OTHER BOARD BENEFITS
Staff has requested a legal opinion from Trucker Huss regarding the Board's ability to
participate in the District's cafeteria plan. This is a possible benefit and option to allow
the Board to pay for additional medical expenses not paid by their primary carrier. if the
Board desires to participate in the plan, the Plan documents must be revised to reflect
the Board's participation. This would also save the District the premium cost of
secondary medical coverage. Staff has not received their opinion at the time this memo
was submitted. A response is likely to be provided Monday, May 2, 2011.
The District has designed its Cafeteria Plan to conform with Section 125 of the Internal
Revenue Code and the accompanying regulations. Accordingly, the Plan provides the
freedom to choose different taxable and pre -tax benefits to suit individual needs, such
as a health care spending account. It also provides for benefits such as the dependent
care assistance plan. It is doubtful that any taxable benefit would be eligible.
MEDICAL WAIVER
Attached is a copy of staff's memo, dated May 30, 2006, and Trucker Huss' opinion
Kaiser Permanente
HMO
Health Net HMO
Health Net PPO
Single
$7,171.56
$8,983.20
$13,013.28
Dual
$14,343.24
$17,966.16
$26,064.12
Family
$20,295.60
$26,051.16
$37,731.72
OTHER BOARD BENEFITS
Staff has requested a legal opinion from Trucker Huss regarding the Board's ability to
participate in the District's cafeteria plan. This is a possible benefit and option to allow
the Board to pay for additional medical expenses not paid by their primary carrier. if the
Board desires to participate in the plan, the Plan documents must be revised to reflect
the Board's participation. This would also save the District the premium cost of
secondary medical coverage. Staff has not received their opinion at the time this memo
was submitted. A response is likely to be provided Monday, May 2, 2011.
The District has designed its Cafeteria Plan to conform with Section 125 of the Internal
Revenue Code and the accompanying regulations. Accordingly, the Plan provides the
freedom to choose different taxable and pre -tax benefits to suit individual needs, such
as a health care spending account. It also provides for benefits such as the dependent
care assistance plan. It is doubtful that any taxable benefit would be eligible.
MEDICAL WAIVER
Attached is a copy of staff's memo, dated May 30, 2006, and Trucker Huss' opinion
Honorable Board of Directors
April 29, 2011
Page 4
regarding the Board's inability to receive the District's medical waiver. In November
1989, the District received a letter from Corbett & Kane advising that the Board
members were to be considered as "employees" for purposes of federal income tax and
Medicare tax withholding. In May 2006, the District received a legal opinion from
Trucker Huss advising that the payment of cash in lieu of health benefits is considered
additional compensation and is therefore, impermissible under California law, as opined
by the Office of the Attorney General.
LEGAL REVIEW
As Mr. Alm, District Counsel, has previously stated, Board Members can participate in
healthcare plans that are offered to a significant number of employees. It appears that
the Board Members are currently constrained to the three healthcare plans.
Mr. Alm was not able to finalize his opinion at the time this memo was submitted in the
Board packet. Upon receipt of his memo, staff will finalize this memo and send all of
the documents, including the legal opinions, to the Board.
INCENTIVES TO SERVE AS A BOARD MEMBER
Board Members currently receive $221 for each attendance at a qualified meeting, up
to a maximum of six meetings per month. This amounts to a possible monthly stipend
of up to $1,326, or up to $15,912 per year.
The Board Members currently receive health, dental and life insurance benefits and
could receive other benefits provided to the large number of District employees.
To encourage candidates to run for office, the District pays for all but $500 of the cost
of the Candidate's Statement for a Board election. The candidate is only required to
pay $500.
OPTIONS
At this time it appears to staff that there maybe two options the Board may wish to
consider.
1. Develop and implement a Health Spending Account (HSA). A HSA is a tax -
advantaged medical savings account for individuals who are enrolled in a High
Deductible Health Plan (HDHP). The funds contributed to this type of account
are not subject to federal income tax at the time of deposit. A HSA also allows
funds to roll over and accumulate year to year if not spent. This option would
require re- negotiating the current labor agreements with the three bargaining
groups, or it can be proposed at the next contract negotiation.
4
Honorable Board of Directors
April 29, 2011
Page 5
2. Provide Board Members the ability to participate in the District's Cafeteria Plan,
contributing a dollar amount, not to exceed Management's benefit amount, to be
used for medical expense reimbursement.
Staff and Mr. Alm, District Counsel, will be available for Board questions.
cc: Daniel Clinton, District Labor Counsel
0
a cV
0 0
O
LO
0
—
0
�o°�
L
yg
L
Cl) cz
U
t D. c
U
3 UNO
U
Ov—
ID
2
21
Y
a
c�
CO
r
fl.
0
0
(D
CL
q
TO
o T 0 o
Z E
0
0
0
0
0
00
0� N
ff3
Efi A
c. w co
Z
6f1
6i
Z
6%
Z
6,?
Z-C >
O
CU
CL
t0
O❑
E
o
C°�
>
M
a
UDC;) Oto0
N 70 CL
cm)
U
+
L aU
oimo i -O
0
*6
o
Z
c)
-
69Qa69 -QZ
ca
c�
Z
Z
000
MM64c4
0
L
L
L
y..
{[S
cm 'O
lo L 75
O 'd
co L O
O N
t0
T�
t
O-0
t .a
�
o�
:3
olD c
o'ac
3
L >�
>~
t0M
�
V O
U O
O
��
— \
O
0 CO
a
O�
+
a❑
Q.
O
O�
U O
oT�/�i
o
O
U
O C :3
U
�OOtoo
T
T L
T (0 c
Q
T
T (� ma
T W�
T
T
CM
Q
�}
} 0
6). T CO
T
to
6 T Co
09�
a
T �
c
690
,
-010'0
O
CfF}
>
UZ
>
>
>
p3 '0
U
V
U
U
.0-1
=
O
O E
O
,
O m D
O
-
--
N
6f3
69
Ef3
40 O
�
.�
.�
.�
6c4m
O
c
U
�`
O
cis
U
N
c
O
as
� N
O
>% co 0
CO
O
E 8L
N O
t
Cf)
N
.
CO
O
3
as C
.
_
cc$ O
C
co -0
�
cn :3
33
L
0
L O
y cd
E
a�
0
O�
N N
-C
a
X La)i
(D
¢¢
Oa.
E�
0
I I
u
_
E
m
rn
CD
LL
d
co
moo
U
U
U
U
LO O
Z
Z
Z
Z
LOL t�} �
O
II
°
:3a
aD
E
O ❑
o ,�
0
0
MV-
m
a. [L O
+ U
+
O
0,
o
LO O
LO
"O
Z
M
co
ta a
6
li60
L
0
i
•�
II
s N
m
E
Z v
o..
o0
o
N
E
�v
N
O❑
T ++
+
T
+
�o
a.
o
�
LO �
LO
O
T
O
T
N d1
ff? U
N
60
O N
LL 69
II
J+
0
L
a
LL
o
moo
U
p 0 0
2
LO LO
-H
Wr L
«
1pTd'
LL 6Fi
Q_ U
W U E
E
to
o
E
E
o
N
O m�
N
U
`!
O
N j
co
CO
U)
a U
N
y
"
Y}
CO
CZ
U "O N
NY���OO�
O p
L L N N
3
—�.,
co 0
c
co
7 V
ao- ,=5a)622
5 UOi