RETIREE HEALTH COST

 

 

During budget worksessions staff was requested to review options and cost to provide retirees some additional benefit due to the high cost of health insurance.  This request was mainly initiated by retirees under the County’s VERIP program who retired prior to age 60.  The VERIP program provides some benefits for 5 years which means they expire prior to the retiree reaching age 65 or Medicare eligibility.

 

The current VERIP program eligibility is 50 years of age with 10 years of service and has two different elements.

 

·         Retirement Income – retirement income under VRS is calculated with 5 additional years of service, the difference between that amount and their actual VRS amount is paid for a period of 5 years.

 

·         Retirement/Health Income – retirees receive the County’s employer contribution for health insurance for 5 years.  Currently this amount is $5,755 annually.  This amount can be used to pay health insurance or any other purpose.

 

                                                                             Annually                                  Monthly

Current cost for Family Coverage                                        $9,984                                          $832

VERIP payment                                                                      $5,755                                          $352

 

 

City of Charlottesville Benefit            Full time employees hired prior to December 2, 2002 have total cost

paid by City

 

Full time employees hired after December 2, 2002 have 20% of cost

paid with 5 years of service, plus 4% for each additional year of

service.  Total cost paid by City after 25 years of service.

 

 

Options Reviewed

 

VRS Health Insurance Credit Program – Eligible with 15 years of service, local option

 

                                State Employees                   $ 4.00/month per year of service, maximum $120/month

                                School Professional             $ 2.50/month per year of service, maximum $75/month

                                Local Employees                  $ 1.50/month per year of service, maximum $45/month

 

                County currently pays approximately $330,000 annually to VRS to provide this Credit for School

                Professional Employees.

 

                Cost to provide the Credit for Local Government employees would be approximately $40,000.

 

                Minimal benefit and VRS advised that these cost will likely double in the next couple of years.

 

VERIP – Extension of benefits

 

                Extend the Retirement/Health element of VERIP for an additional 5 years at ˝ of the County’s

              employer annual contribution.

 

                Eligibility would be 55 years of age with 20 years of service.

 

Projected cost shown below based on worst case scenario -- everyone eligible would elect this option the first year of eligibility.  Historically only 50% have elected to do so.  Projection includes School Professionals who are already receiving VRS credit.

 

 

Summary of Increased Retiree Benefit Proposal

 

FY 05

FY 06

FY 07

FY 08

FY 09

FY 10

FY 11

FY 12

FY 13

FY 14

General Fund Employees

51,768

56,945

45,239

49,763

50,529

148,218

173,230

252,203

302,083

366,199

School – Non Prof. Employees

2,876

3,164

3,480

7,656

12,632

46,318

61,140

72,859

86,309

101,722

School Prof. Employees

132,296

155,016

160,078

164,602

172,641

264,014

275,131

269,016

286,588

305,166

 

Total Cost

 

186,940

 

215,125

 

208,798

 

222,021

 

235,802

 

458,551

 

509,501

 

594,078

 

671,981

 

773,086

 

 

 

Above cost include a revision to the VERIP plan to provide all retirees with 10 years of benefits.  Current plan discontinues benefit when the retiree reaches age 65.   Under the current plan if an employee retires at age 62 they only receive 3 years of benefits.

 

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