As the Covington City Council prepares to meet to go over the first draft of the 2017 budget, council members used Monday night to approve proposed employee benefits for next year. At its January 28 retreat, the council asked staff to request bids for cafeteria plans, allowing employees to choose different levels of insurance based on perceived needs.
In February, the city issued a Request for Bids (RFB) for benefits consulting and broker services. The request included asking the company to provide the number of its public sector clients, resumes of individual brokerage staff who would provide services to the city, and how the firm keeps clients informed of updates, trends and developing strategic benefit plan.
The council had approved offering employees a Health Reimbursement Arrangement (HRA) account. The plans are employer-funded medical reimbursement plans, which set aside a specific amount of pre-tax dollars for employees to cover health care expenses annually.
However, to offer the HRA, according to City Manager Leigh Anne Knight, employees must be offered a high-deductible health insurance plan. Council member Chris Smith, Post 1 East, who had taken part in meetings discussing the various plans, reported that the plan being proposed required a $2,600 out-of-pocket deductible.
More, the broker would charge a 2 percent service fee for setting up the high-deductible plan. He called upon retired City Manager Steve Horton, who had attended the meeting, to share the retiree’s concerns with the council.
Horton told the council a 2 percent would cost those currently retired a little over $400 a year, and they were unable to take part in either the high-deductible plan or the HRA account.
Council Member Chris Smith, Post 1 East, said he had attended the meetings with Human Resources and Knight, and he was concerned because the current plan offered by the city had a $350 deductible, and it was $2,600 with the high deductible insurance. “The biggest problem is that those who want to stay on the existing plan and the retirees will be penalized 2 percent. I think we’re moving real fast.”
Knight explained that the 2 percent administrative fee would be there whether or not the high deductible plan was offered to active employees if, as the council had previously approved, an HRA account was offered.
“One thing I want to make clear is there is not going to be an increase in the premium” Knight said. “I want to be clear that it’s not going to cost any one anymore this year.”
The city pays 75 percent of active employees’ premiums, but retirees pay 100 percent of the charge. Council Member Hawnethia Williams, Post 2 West, said, “This is not a comment about the plan or the number of plans, but it’s about passing administrative charges off on people who don’t have access to lower [cost plans].”
Knight said they would find out if it was possible not to charge retirees unable to sign up for the HRA accounts the administrative fee.
A motion to accept Cigna’s bid but removing the 2 percent fee charge for the four retirees effected was made by Council Member Josh McKelvey, Post 3, East, and passed unanimously, 6 to 0.
Depending on the number of employees who enroll and the plans selected, the estimated cost of employee medical insurance, including dental and vision is $4,945,821. The council also approved increasing the amount of basic life insurance for employees and their family members from $30,000 to $50,000.
“We would like to have every employee covered,” she said. “To do that, we’d like to pay 100 percent of the cost for just the employee, adding the possibility for the employee to purchase additional insurance for a spouse or child.”
The employee would pay 100 percent of the premium for family members, she suggested. The enhanced benefit would cost $74,963 per year, but it’s only $25,000 more than the amount budgeted for last year because the city currently pays for the employee and their enrolled family members.
Smith motioned to raise the life insurance amount to $50,000, but to continue paying 75 percent of employee’s premiums. Currently, the city pays 75 percent of the employee’s and their family members’ premium. A tie vote was broken by the mayor, who voted it against it.
McKelvey made second motion to adopt the recommended action – increase the life insurance to $50,000 with the city paying 100 percent of the premium for the employee, while offering, but not paying for, life insurance for the employee’s family members. The motion passed 4 to 2, with Smith and Whatley dissenting.
The estimated cost for the $50,000 life insurance premium for an employee is $75,963, an increase of $25,000 over last year’s premium for the employee and their family members.
The council also approved a motion unanimously to offer voluntary life insurance up to $150,000 to employees and their family members. The total cost for the premiums would be the responsibility of the employee.
Long-term disability will also be added to the city’s employee benefit package, once the employee has worked for the city for 12 months. The city would pay 100 percent of the premium at an estimated cost of $62,137.
Long-term disability would kick in if an accident happened on an employee’s own time. Once requirements are met, the employee would receive 60 percent of their annual salary until they return to work. The cost, she said, is $62,137 per year and the city would pay 100 percent of the premium.
Assistant Human Resource Director Paul Dailey said, “This is one of the benefits to offer employees the agent told us about. The school district offers it. It’s part of the package.”
There was a discussion about the cost of providing long-term disability, which Smith said, if combined with the increase in life insurance offered, raised the cost $100,000. “I have a hard time with this,” he said. “I feel the long-term disability would hinder people getting back to work.”
Johnston disagreed, saying, “If I had an accident and I’ve only been here two years, and I haven’t built up 720 hours in sick leave, I would see this as gap filler. My research says that we’re trying to close the gaps we have in the City of Covington [employment benefits and salary] to keep us competitive.”
After further discussion, Williams amended her motion to approve the request to include a stipulation that the employee must have been employed with the city for 12 months before qualifying for long-term disability insurance.
The motion passed unanimously.