Thursday, May 21, 2009

Retiree Medical Questions

I said I would address the issue of most importance to many sitting on the fence trying to decide between retiring to preserve medical benefits or staying and rolling the dice in hopes things change, before your DROP period is up. Well, I have got to tell you, I have more questions than I have answers. I spent the better part of this evening reading the brief prepared by Jeffrey Sloan, for the City. Keeping in mind the brief was answering the question posed by the City; is retiree medical a vested benefit? I have relied on another brief written by Sloan related to DROP, where he opined he believed case law indicated DROP was a vested benefit. So if I am to follow suit and rely on an attorney hired by the City to provide them a legal opinion, I do not think I can pick and choose which brief I believe or rely upon to talk about this issue.

I have had discussions with various attorneys whose practice centers around collective bargaining and employee benefits. Without exception, the reply was the same when asked if Retiree Medical is a vested benefit; "as a general rule, no." I added the fact employees hired prior to 1986 gave up; at the City's request, Social Security with the promise of 100% retiree medical. The answer shifted to what could only be described as a "wobbler." Most said there is little case law to support medical insurance as being a vested benefit, even with the knowledge of not participating in Social Security.

During discussions related to Retiree Medical, I kept coming back to a belief I had when the change was made and we opted out of Social Security; the City would pay 100% of the premium for my medical insurance when I retired. The SDCERS Retirement Handbook explains the medical insurance and what employees are entitled to receive upon retirement. The Handbook states in part; "You may participate in a City-sponsored health insurance plan, a union-sponsored plan, or any other insurance plan of your choice. The Retirement System will pay or reimburse the applicable Medicare-eligible or non-Medicare eligible retiree-only premium up to but not to exceed the cost of the retiree-only premiums for the highest cost HMO plan sponsored by the City that is made available to Health Eligible Retirees. If you chose to select a private health insurance plan, the City will reimburse the actual premium cost incurred up to the maximums stated above, provided that you meet the criteria established by the Board." There was little if any thought given to this NOT being a vested benefit as it was part and parcel to our vested Retirement Plan.

It is now apparent the City has been plotting since at least 2003, to reduce or eliminate Retiree Medical for employees. In 2005, the SDPOA attempted to enter agreement with the City to begin a "Medical Trust" for "New Hires" to provide for a means to fund Retiree Medical Insurance; knowing the changes caused by the Governmental Accounting Standards Board (GASB) Rule 45, would create a political issue for the City. GASB 45, requires municipalities to show on their financials, the "future" debt related to retiree medical payments. The City of San Diego is a "pay as you go" plan sponsor and has never put money aside for "future" benefit payments. The SDPOA, trying to look ahead at what could happen, began to negotiate a way to protect our members from a City who was not well known for future planning or paying its bills.

Now the discussion turned to those employees participating in DROP. The mayor makes unilateral changes to DROP and Retiree Medical. Those of us who signed up for DROP were ALL told our benefits were frozen. We each had to initial twenty-four (24) items on the election to participate in DROP and agreement to terminate employment agreement. On page one of four, the following statement appears; "The Retirement System and your employer will rely on the following facts. Each is important because it demonstrates you have carefully considered your election to participate in DROP." Then on page two of four, there is the following admonition; "I understand that if benefits are improved or otherwise changed after I enter DROP, through meet and confer or any other process, I will not be eligible for any of these benefit improvements or changes."

I'm no attorney but it appears to me, once I enter DROP, my benefits are frozen. I cannot derive any increase to my benefits, nor can I lose any; or so I thought. The Retirement System views me as a "Retired Member" and thus my benefits frozen. The City views me as a "active employee" and subject to any and all changes in contract and working conditions. The attorneys I have discussed this with, cannot answer the question; can the City change, alter, or eliminate my Retiree Medical once I enter DROP? I am not sure we are going to get a straight answer to this question until we put it before a judge. This will not be done anytime soon. So, those of us who are on the fence and cannot decide if the change made by the mayor to this promised benefit; will have to make our decisions without the help of a definitive answer.

I want to believe a judge would side with those of us who are participating in the DROP and find we entered into a contract that secured our benefits and the mayor's unilateral changes are illegal. Will this happen? Not in time to be a deciding factor in making a life changing decision, forced upon us by a system that lacks credibility. I wish there were more to provide, but I do not have any answers.

The SDPOA met today (5/21/2009) with the City and there has been no word of what occurred or what was discussed. I will not speculate and neither should you. Contact one of the Directors and see if there was movement on this issue, for the positive. If not, make your decision based on what is best for you, your family and the circumstance most likely to present itself in the future. Do not gamble with your future.

7 comments:

Anonymous said...

Well the latest information in your column is NOT promising. In addition to the retiree medical issues discussed, the annual report on the state of the medicare system was released on May 12. This 245 page document does not paint a pretty picture. But rather than slogging through all of those pages, a read of the executive overview tells us; medicare will be bankrupt by 2017 if things remain status quo. Obviously status quo is code talk for an impending tax increase to fund the program. Here is the link to a column summarizing the report. The column contains a link to the PDF version of the actual report.

http://www.governing.com/column/medicare-trumps-opeb-fairy

For those of us still sitting on the fence, trying to make the best decision for the remainder of our lives this info gives more to consider.

Anonymous said...

Steve,
I not sure I agree with your statement: “The Retirement System views me as a "Retired Member" and thus my benefits frozen. The City views me as a "general employee" and subject to any and all changes in contract and working conditions.”

and analysis of “retirement” status upon entering the DROP program. Please take a few minutes and watch the SDCERS Board of Administration video from January 23, 2009. More specifically minutes 14:05 to 18:30, where retiree representative Dave Hall, a former SDPD Captain and former Harbor Police Chief asks a specific question about this topic. To put this in context, SDCERS Fiduciary Counsel, Ashley Dunning is providing a presentation on DROP, the Ordinances, i.e plan documents that control the Board’s actions.

HALL asks DUNNING what’s the retirement date. Dunning says it’s an important question. Roxanne PARKS, SDCERS Chief Compliance Officer, jumps into the conversation and clearly states you ARE NOT RETIRED WHEN YOU ENTER DROP. She said “your benefits are frozen but you are still an ACTIVE employee”. This MAY BE KEY to our argument regarding RETIREE MEDICAL BENEFITS ARE FROZEN when entering DROP.

She goes on to say “all you’re doing is electing an alternate form of accruing your benefit, but you are NOT retired for the time you are in DROP.”

Like you I am not an attorney, but I AM relying on information given by the Chief Compliance Officer of the SDCERS Trust to base my lifetime medical care decisions.

sparky.sandiego said...

Anonymous; to the extent Parks jumps in and said a person in DROP is not "retired" she is mimicking the words of the City. For the purpose of benefits and in the eyes of SDCERS for the purpose of earning or receiving benefits I am retired. I watched the meeting you are referring to and it plays into my statement that trying to make these decisions within a system that lacks credibility is difficult. It depends on the person at SDCERS you speak with on whatever day and time as to what answer you are given to any specific question. I have posed the question many times; if I am an active employee why can I only receive reductions to benefits and not increases? The courts as I said will have to make these decisions for us all. The problem again is this decision is way off in the future.

Anonymous said...

I agree. The decision will ultimately be made by the courts. You, me, and I suspect many others, are now caught up is this drama. And, its not what we planned for, not what we were promised many years ago, and simply immoral and unethical.

Mayor Sanders and his administration have decided this financial burden must be borne by the employees who have faithfully served, while holding up then end of the agreements. Mayor Sanders has on past occasions said "...DROP is political..." Well its political because he has chosen to make it so. Four years in politics has corrupted him in a quest for more power. He is devoid of real leadership qualities. He hasn't lead here, the Chargers, a new City Hall or any other significant issue. But, just like his days on the PD, he's found cover, by using others to battle it out in the trenches.

Within the next few days I must make a decision, stay or retire. My decision will be rooted in the information from Ms. Parks provided at the January 23, 2009, meeting. As SDCERS' Chief Compliance Officer, it is her responsibility to ensure that SDCERS complies with the Plan Sponsor's documents, as well as all laws of the State of California, and laws and regulation set forth by the Internal Revenue Service covering the trust. Her statement was in context and very clear.

Upon entering DROP an employees retirement benefits are frozen.

The dictionary defines frozen, as used in this context, as: not permitted to be changed or incapable of being altered; fixed: frozen rents; frozen salaries.

The language is clear. I could not find a legal definition of "frozen" in the online version of Black's Law Dictionary.

So now we wait.

Supporter of Sparky said...

What is the POA doing? I searched their site today and NOTHING!!! What is going on there Steve? I know it is not your responsibility any longer but could you help us all out and get the true scoop and shed some light for us??? You seem to be the only person willing to put your neck out and tell it like it is. I left the 1700 meeting on Wednesday after listening to Jordan tell us he had to make nice with Sanders so he would work with them. WTF??? He took a couple of shots at you for your BLOG and blasting the mayor. He sees your BLOG as causing the POA problems because it is pissing the mayor off. Not sure if anyone else shared this with you. Keep up the GREAT commentary on what is really going on. You need to run for the POA again!!!!

sparky.sandiego said...

Thanks Supporter; I appreciate the vote of confidence but I'm not campaigning nor am I interested in running for the SDPOA Board. I checked in on the POA Blog and asked what had happened during the meeting with the City on Thursday. Jeff Jordon provided a brief synopsis of the talks. If you go to the SDPOA Blog you can read his reply.

I too am confused about the City's stand and what has come from the latest meeting. If I understand correctly the City backed off the "cap" to Retiree Medical but said they would implement a "2 year freeze" similar to what Fire and MEA agreed to. How this is possible since an imposed contract can only contain year to year changes is a mystery. But hey; who gives a hoot about the law??

The SDPOA Board does have to attempt to work with the mayor. "Making nice" may be a bit much in light of what he has done to us and his statements since. Having said that, if this BLOG in some way is creating a problem for the Board relative to its relationship with the mayor; He is everything I have said he is and more!!!!!! He is a politician and if he can't stand the shots; get the hell out. If he is going to continue his vindictive, arrogant, bullying ways because I am making my points, maybe it time we stop wearing pink 16oz gloves and go to bare knuckles. I have no problems sharing my first hand knowledge and experiences.

Do not hesitate to call a Board member if you have a question. If you do not think information is getting out quickly enough give them a call. Most of them are more than willing to answer your questions.

Anonymous said...

Well that's very interesting news on the CAP... it may affect my decision. Any idea when we might have official word from the City and the POA.