LAKEPORT – City retirees took their concerns over a potential cost change to their health care benefits to the Lakeport City Council on Tuesday.
The issue surrounded the question of what portion of a retiree's health care premiums the city should be required to pay, and if it should once again cover a benefits surcharge added for retirees in the 2006-07 fiscal year.
About a dozen city retirees and current employees attended the meeting because of the issue, including retired Police Chief Tom Engstrom, who just celebrated the third anniversary of his retirement.
Engstrom said this was the third year he'd come to the council due to his concern about the benefit changes.
“I don't know why we discuss it every year,” he said. “I think we should just pay it.”
Lakeport's contract with employees states that the city is not required to pay more for health care premiums for retirees than it is for active employees, said City Attorney Steve Brookes.
That provision, he said, was first adopted in a memorandum of understanding dated July 1, 1998, and is included in the city's comprehensive retiree health care rules.
The original idea, he said, was to prevent someone from upgrading to a higher-coverage plan shortly before retirement, which would cost the city more to cover than when the person was working.
Beginning in the 2006-07 fiscal year, the Redwood Empire Municipal Insurance Fund (REMIF), who oversees a health care insurance plan for member cities, added a surcharge on the premiums charged for retirees because of their higher costs to the system, said Brookes.
The surcharge currently amounts to 15 percent, or $124 a month for two people, $59.51 for a single person and $209.71 for a family. The cost to pay it for all 36 retirees is just under $25,000, according to Brookes' staff report.
The rationale behind the surcharge, his report said, was to moderate the “disproportionate amount” of the health care premium used by retirees.
The quality of the city's health benefits have helped attract and retain staff, Brookes' report said. His report also noted that costs to maintain retiree health benefits have become “increasingly costly.”
Estimated costs for health care premiums in the next fiscal year budget are $742,000, or $370,000 for 37 active staff, $50,000 for the five council members and $322,000 for the 36 retirees, Brookes reported.
The surcharge has raised concerns for retirees, who say they were guaranteed 100-percent health care coverage during retirement, which was a primary reason for working for the city. Brookes' report challenged the idea that staff who retired after 1998 weren't aware of the changes.
For the last two years the city chose to pick up the surcharge added to employee premiums, but the issue made its way back to the council again this year.
And, once again, Engstrom stepped forward to argue on behalf of retirees like himself.
When Engstrom was hired in the early 1990s, he was guaranteed 100-percent medical coverage, he told the council. It was an important benefit, he added.
As a department head, he wasn't involved in the negotiations on the 1998 memorandum of understanding, he said. It wasn't until Randy Johnsen was hired as city manager in 2001 that department heads sat in on negotiations.
The result, he said, was he didn't even know what the memorandum said about benefits or the changes to them.
Engstrom said he and his wife have stayed in the community for a variety of reasons, with the quality of health benefits being an important factor.
“I would ask the council to do what you've done in past years and continue to pay that portion,” he said.
City Councilman Bob Rumfelt said he felt it wasn't right to change the rules on retirees, and that they should be given what they worked hard for and deserved.
“My feelings are, we just need to bite the bullet and pay it,” he said of the surcharge.
Mayor Buzz Bruns agreed, saying he always had held the same opinion regarding retiree benefits.
City Manager Jerry Gillham questioned the memorandum of understanding's original intent. He said it didn't seem logical to him that any entity would guarantee health insurance to retirees in perpetuity.
Engstrom told Gillham he wasn't asking for special consideration, and that if it was required he would pay the extra $124 per month.
But based on his original understanding of his benefits, Engstrom said he believed he had been promised total coverage. “When I was hired, everything was done on a handshake.”
That handshake agreement included a guarantee of a 100-percent medical coverage for he and his wife until Medicare kicked it, when the city would then offer them supplemental coverage, Engstrom said.
“It doesn't go on forever, Jerry,” he said in response to Gillham's comment about benefits being extended in perpetuity.
City officials said that the benefits have changed for newer employees, who – if they were hired in recent years – are aware of the benefit cap.
Mayor Pro Tem Ron Bertsch, himself an early retiree, said the city shouldn't take away benefits from people who have worked a long time to get them. Like Rumfelt, he suggested the city “bite the bullet” and pay now, but address the issue for future retirees.
Rumfelt moved to approve paying the surcharge and adding language to update the retiree health rules to settle the issue for current retirees.
Bertsch seconded the motion, with it passing on a 3-1 vote, with Councilman Jim Irwin voting no. Councilman Roy Parmentier was absent from the meeting.
E-mail Elizabeth Larson at
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