Peter Repovich
August, 2011
By the time you read this, questions that will follow the contract may or may not be answered. I would like to just touch on some items that you need to consider in the next month or so regarding health subsidies for both active and retired members. This whole new area regarding retirees is based on the Los Angeles City Council taking action last month to freeze the medical subsidy to a fixed amount. This is based on the belief that you as an active member of the LAPD no longer have the right to receive medical increases for your future as you have enjoyed all these years as an active member (you don’t have a vested right to it). First, understand that what a retiree receives in his or her future retirement matters today as an active member, and you should pay close attention to that subject matter. For the active members, the health subsidy is pretty straightforward, although we did experience some confusion as to the handout we provided at contract ratifications. For clarification, the active member health subsidy for the first year of our new contract, 2011-2012, is $1,064.54 (same as now). In year two, 2012-2013, the City of Los Angeles will cover up to a 5 percent increase (5 percent of $1064.54). That cost and that number are linked due to medical inflation. In year three, 2013-2014, it will again be covered by the City up to a 5 percent increase in cost due to medical inflation.
For active members, the City has made consideration of medical coverage in retirement an issue. You will have to make some personal choices that will affect the amount you will receive as a subsidy for this benefit. Just as your pension percentages will matter down the road when you retire, what you will receive in retirement as the specific dollar amount matters now as an active member. As it stands, as the health care subsidy increases for retirees, that total dollar amount is the same amount you will receive upon the day you decide to step out of active status. For example, retirees received a 7 percent increase in their medical subsidy just a few months ago, courtesy of the Los Angeles Fire and Police Pensions (LAFPP) commissioners. The dollar amount retirees now receive, based on that raise, is $1097.41. This is the amount you would receive toward paying the cost of medical coverage in retirement health care benefits if you were eligible to receive a 100 percent subsidy (that’s based on the pension tier you’re in, your age and your number of years of service). Remember, receiving 100 percent of the medical subsidy does not mean the City pays 100 percent of your premium. The costs vary depending on the medical plan that you are covered by. Another example to show your actual cost: The Police Relief Blue Cross two-party PPO premium is $1,548.65 per month. If you are eligible for a 100 percent subsidy of $1,097.41, then your out-of-pocket contribution would be $451.24 per month. That is no small amount of money. If you don’t get a cost-of-living adjustment (or, better said, the cost adjustments given to retirees), you may fall far behind when it comes to what your subsidy will be when you retire.
As a result of the City Council’s decision to freeze future increases to the medical in retirement, you will be presented with choices to ensure you receive the same increases that retirees receive. This is important because the alternative is you receiving only $1,097.41 per month when you retire, instead of receiving on top of that $1,097.41, plus the future increases provided by law and the LAFPP commissioners.
Remember, as I stated, when you consider retirement, you could fall way behind the reality of future increased health care costs and double your out-of-pocket contribution to cover the cost determined by your plan. The City of Los Angeles’ goal is to get a contribution of 2 percent that is paid by active members so they can have less of a general fund burden. The City is required by an actuary to pay an amount every year to front-load the medical coverage that is provided as your benefit in retirement. Although the details are still being determined, the City will provide the opportunity as an option to sign up to contribute 2 percent of your base salary for the right to lock in vesting rights on all future increases provided to retirees. If the opportunity to secure vesting by paying the 2 percent is not taken by the employee at this opt-in period, and if they open that period for other employees down the road, I am confident you will pay more for that right to vest in future increases toward that medical subsidy. We will notify you as more information toward the administration of this program occurs. Again, this is a very important subject to pay attention to over the next few months, or sooner. Please make sure that you are signed up to receive LAPPL updates so that we can send you the latest information.
Be careful and Godspeed.
Please email me at peterrepovich@lappl.org or call me on my cell if you have any questions. My number is (213) 792-1086.
