City of Saginaw’sUnfunded Liability

Presented to City CouncilBy

Dennis Jordan SPHR, Director of Human Resources

February 3, 2014

Fund Balance

Beginning F/Y Balance % of Budget

2014 - $ 268,881 0.8%

2013 - $1,248,058 3.9%

2012 - $3,970,352 11.6%

2011 - $3,771,779 11.0%

2010 - $1,544,461 4.9%

2009 - $1,455,258 4.4%

Unfunded Liability(s)

% Funded

OPEB - $220,255,745 1.6%

Police/Fire Pension- $ 69,116,726 62%

MERS Pension - $ 76,562,229 47%

TOTAL = $365,934,700

Annual Required Contributions

Police and Fire PensionFY Beginning

2013 - $6,046,388

2012 - $5,845,642

2011 - $5,685,858

2010 - $4,469,001

2009 - $4,453,364

Average Annual Increase = 7.1%

Annual Required Contribution

MERSFY Beginning

2013 - $9,059,568

2012 - $7,576,236

2011 - $6,720,804

2010 - $5,856,972

2009 - $5,104,320

Average Annual Increase = 15.5%

5 Year Projected Pension Contributions

Police and Fire MERS

FY Beginning

2014 $6,475,681 $ 9,979,000

2015 $6,935,455 $11,975,000

2016 $7,427,872 $12,514,000

2017 $7,955,251 $10,631,000

2018 $8,520,074 $ 9,034,000

Possible Pension Solutions

Note: Both Pension Systems Closed to New Hires in 2000Note: Both Pension Systems Closed to New Hires in 2000

•Freeze current participants benefit and change benefit to a hybrid (both DB and DC) or only a Defined Contribution Plan.

•Negotiate changes to current employees in the system to comply with State EVIP Compensation Plan ( Multiplier and/or Adders).

•Move the Police and Fire Pension System to MERS.

Healthcare Strategy

Three Draw Downs on the Healthcare system

Active Employees Future Employees/Retirees

• Active Retirees

Changes to Healthcare

ACTIVEPre 2009 No Deductibles; Co-pays; Contributions

2009 - Negotiated -

– $250/$500 Deductibles

– $1000/$1500 Co-Pays

– $20 per pay contribution

Performed audit of dependent status on active employees (estimated savings of $250,000 annually)

Changes to Healthcare

New Hires

• New Hires (2009) no longer eligible for Retiree Healthcare. Healthcare Savings Plan (HSP) provided for New Hires @ $125 per month.

More Changes to Healthcare

2010 - Initiated annual open enrollment process for Active and Retiree Health Care Participants.

2011/2012 - Negotiated All Actives - – $500/$1000 Deductibles

– $2000/$3000 Co-Pays

– $20/$30/$50 per pay contribution (indexed annually)

– Three Tier Drug plan (7/35/70)

– Created New PT Contract with SEIU – No HealthCare

Retiree Health Care Contributions

Annual Required Contribution

2013 - $16,188,521

2012 - $17,615,866

2011 - $17,836,256

2010 - $20,635,286

2009 - $20,070,947

Actual Contribution

2013 - $8,282,847

2012 - $9,791,130

2011 - $9,515,047

2010 - $8,945,764

2009 - $7,888,799

*726 Retirees

What have we done so far with the Retirees?

July 1, 2013 – Efforts made to move retirees to one plan ( same as current active employees).

•Retirees appealed – Court ordered and injunction. Litigation in process.

•Retiree Association has met with the City on several occasions. Alternative plan offered by City-No agreement at this time.

PPO3 vs PPO4

Current PPO 3 With $10/$40 RX

Proposed PPO 4 With

$7/$35/$70 RX Explanation of Differences

PPO 3 PPO 4$250 $500 $250 vs $500; Diff of $250/yr$500 $1,000 $500 vs $1,000; Diff of $500/yr20% 20% No Difference

$1,000 $1,500 20% up to $1000 vs 20% up to $1500; Diff of $500/yr$2,000 $3,000 20% up to $2000 vs 20% up to $3000; Diff of $1000/yr$1,250 $2,000 Deduct + 20%; Difference of $750 per year$2,500 $4,000 Deduct + 20%; Difference of $1500 per year

$20 $20 No Difference$20 $20 No Difference24 24 No Difference$75 $75 No Difference

Unlimited Unlimited No Difference$10/$40 $7/$35/$70 $3 less for generic, $5 less for preferred brands/$30 more

for non preferred brands$10/$40 $14/$70/$140 $4 more for generic, $30 more for preferred brands/$100

more for non preferred brands Pharmacy Benefit

Up To 90 Day Supply

Pharmacy Benefit Up To 30 Day Supply

Physician Offi ce VisitChiropractic Offi ce Visit

# of Chiro Visits Per YearEmergency Room

Preventive Care Dollar Maximum

Family OOP (Ded Plus % Copay Max)

City of Saginaw Plan Comparison - PPO3 vs PPO4

Actives

Medical Plan Comparison

Single DeductibleFamily Deductible

% CopaySingle % Copay MaxFamily % Copay Max

Single OOP (Ded Plus % Copay Max)

Don’t Shoot the Messenger!