City of South Lake Tahoe making changes to retiree health care plan

Eligible retirees from the City of South Lake Tahoe will soon be able to opt out of the City's medical insurance plan and get the money to use as they wish.

The City Council voted Tuesday to give the one time offer to their 145 retirees. How much they'll get is based on their years of service and number of years to being eligible for Medicare. They will be notified what their compensation offer will be.

The retirees have until May 31, 2017 to decide if they want to participate. Their portion would be placed into an individual Health Care Retirement Account (HRA), or they could withdraw the money and be taxed according to the IRS regulations.

Funds are coming from the OPED (Other-Post-Employment-Benefits) Trust Fund established by the City in 2008 to fund retiree benefits. There is currently $6.6M available to disburse from that account. $4.2M of that would be distributed to early retirees and $2.4M to those in the Medicare group.

Retirees could continue to use the City's medical insurance, but with an anticipated recession in 2018, these could change according to City Manager Nancy Kerry. They would be subject to future changes in the system.

"Distributing the funds now would assure retirees receive a share of the funding as was originally intended," said Kerry during her presentation.

To qualify, retirees had to have started work before 2008, retired with at least ten years of service under their belt, retired before September of 2014 and must be a retiree at the time they make their selection.

Maximum compensation is $100,000 for early retirees with an average of $68,000. Those that are eligible for Medicare will receive an average of $32,000 with the maximum being $50,000.

The City wants to close out the trust fund account according to Kerry.

Faced with increasing unfunded liabilities, the City took actions over the years to not end up bankrupt as many other communities had to do. In 2006, SLT made substantial changed in their retiree medical benefits, and in 2008, benefits were eliminated for those not yet hired. The City then established the OPEB and began intermittently contributing. By 2010, revenues dropped due to the recession even though medical insurance and health industry costs were skyrocketing.

At this time there are the same number of City retirees as there are City employees. In the state of California, taxpayers are facing $150B in retiree medical insurance for those that worked in public agencies. Many of those agencies had ten percent of the cost of those benefits set aside, thus having to use tax resources to fund insurance and pensions. Non-fundable pension debt is $241B in the state.