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16 THE CITY OF -° ~ -~- ~"' CITY COUNCIL AGENDA REPORT j~L£~S~4NTONo Addendum September 4, 2007 Finance Department TITLE: REVIEW AND DISCUSS RESOLUTION AMENDING MEMORANDUM OF UNDERSTANDING BETWEEN THE LIVERMORE-PLEASANTON FIRE DEPARTMENT JOINT POWERS AUTHORITY AND INTERNATIONAL ASSOCIATION OF FIREFIGHTERS, LOCAL 1974 SUMMARY The purpose of this addendum is to respond to Council member Sullivan's request for additional information regarding the retiree medical benefit. Council member Sullivan raised a number of questions including the funded status of this benefit, the steps taken up to this point, the strategy we will follow leading up to the effective date of a new accounting standard that will govern this issue, and how all of this will be publicly reported. Unlike pension benefits, retiree medical benefits vary widely from jurisdiction to jurisdiction. However, because the cost of this benefit can be significant, a new accounting standard will come into play that will change the way the public agencies fund and report the actuarial accrued liability of the retiree medical benefit. The attached MOU that City Council is being asked to approve includes both health plan design changes and employee cost sharing that will reduce this actuarial liability. These health plan design changes proposed in this MOU represent the first change to this benefit that will also incorporate capping the amount of the benefit and employees sharing in the cost of the benefit. This will likely produce discussions with other bargaining groups regarding cost sharing and would further reduce the long term costs of providing this benefit. It should be noted that this benefit cannot be changed unilaterally, but is subject to collective bargaining process with each bargaining group. RECOMMENDATION Continue the fact finding effort and monitor pre-funding the retiree medical benefit in relation to the funding strategies other cities employ and the potential for pre-funding through an irrevocable trust established by CaIPERS. FINANCIAL STATEMENT The health plan design changes and employee cost sharing incorporated into this agreement is estimated to reduce the actuarial liability between $600,000 and $800,000.