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image Pamela Ayala, human resources director for Tooele County, explained how the $125,000 mentioned in last week’s county commission meeting included only the amount saved in premium payments for already retired employees for the remainder of the year. The commissioners claim the savings would be much more.

May 7, 2013
County retirement plan expected to save $219K

Savings is per year; other counties across Utah have dropped retirement benefits 

Audience members at last Tuesday’s Tooele County Commission meeting howled in disbelief and anger after they heard proposed cuts to county retirement benefits would save the county only $125,000.

“You are ruining all these lives for $125,000 out of $22 million?” asked an unidentified voice from the audience. “I don’t know what your thinking is to destroy lives like this. It seems impossible.”

The $125,000 figure mentioned at the meeting came from Pam Ayala, the county’s human resources director while she explained to approximately 200 current, retired and laid off county employees the commissioners’ proposed retirement benefit cuts.

Although it wasn’t fully explained at last Tuesday’s meeting, the $125,000 savings is only for premium payments for already retired employees for the remainder of this year, according to county officials.

County commissioners and other elected officials didn’t challenge the $125,000 figure during the meeting, but the next day they claimed the savings would be much more.

The proposed benefit plan changes the commissioners want will help the county in two ways, according to Tooele County Treasurer Jeremy Walker.

The changes will save the county around $219,000 in annual cash payments and reduce an unfunded liability that the county cannot pay unless it lays off more employees or borrows money, according to Walker.

“The county’s 2011 financial statement shows the county paid $219,942 for other postemployment benefits in 2011,” he said. “The 2011 statement also gives the actuarial accrued liability of the post-retirement benefits as $9.8 million.”

The actuarial accrued liability is the amount needed to fund post-retirement benefits other than those provided by the Utah Retirement System that current employees have already earned, as determined by an actuary following government accounting industry standards.

The large AAL amount indicates that the annual cash payment for post-retirement benefits will continue to rise, according to Walker.

“The county just doesn’t have the money to keep paying the increasing cost of these benefits,” he said. “The $219,942 paid in 2011 represents the salary of five employees.”

The county’s insurance broker, Richard Droubay, who is consulting with the county commissioners on their benefit plan, told commissioners that most counties in Utah have already eliminated post-retirement insurance benefits.

During last Tuesday’s county commission meeting, Droubay told the audience that he surveyed other Utah counties on post-retirement insurance benefits.

Out of 29 counties, 26 responded to Droubay’s survey. Nine counties offer insurance benefits to retired employees before age 65 and only three offer insurance benefits to retired employees after age 65, according to Droubay.

“You need to be aware that there used to be a substantial number of counties that used to offer post-retirement insurance benefits,” he said. “Most of them have gotten rid of those benefits over the last 10 years. The majority of them have determined that they are no longer going to be in the retiree business as far as health, life, and dental insurance are concerned. The expense has been a problem for all counties, not just this one.”

For Commissioner Shawn Milne the savings created by changing the benefit plan are needed not only to balance the current budget, but will also remove a huge future liability that the county can’t afford.

“This will help with this year’s budget,” said Milne. “And the changes in benefits will help the future solvency of the county.”

At last Tuesday’s county commission meeting, commissioners considered a proposal to change post-retirement insurance benefits for employees.

Under the current benefit plan, employees earn one free year of health insurance after retirement for every five years they have worked for the county. After the years of free insurance are expended, retired employees pay 50 percent of their health insurance premium.

The commissioners’ proposal drops from the county’s health insurance plan all current retirees that have expended their free years of health insurance. Retirees with free years of insurance left that are under 65 can stay on the county insurance plan until they are over 65, but as long as they pay 25 percent of the insurance cost, which is currently $114 per month.

The proposal also includes a buy back of $2,500 per year for unused free years of insurance. Current employees that retire with their last day work before June 30, 2013 will keep their free years of insurance for a payment of 25 percent of the cost for insurance, which is currently $114 per month. Employees that retire after June 30, 2013 will receive no post-retirement insurance benefits.

After more than 90 minutes of hearing complaints from current and former employees at last Tuesday’s meeting, the commissioners took no action on the proposed resolution to change the benefit plan.

The instead opted to consider alternatives before voting on the proposal in a future meeting.

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