Finance Highlights 2008 0917 - Laserfiche WebLink

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CITY OF SAN LEANDRO STAFF REPORT DATE: September 11, 2008 TO: Council Finance Committee VIA: Steve Hollister rim City Manager FROM: Justinian Caire, Human Resources Direl!/�3& Human Resources Department Perry Carter, Interim Finance Director Finance Department RECOMMENDATION: It is recommended that the Finance Committee review and approve the Staff Report pertaining to the City's participation in the California Government Voluntary Employee Beneficiary Association (VEBA) Trust and forward it with the accompanying resolution to the full City Council for consideration and approval. BACKGROUND The City has historically provided a comprehensive program of benefits that addresses many of the health and welfare needs of the employees and their families. Periodically, additions and/or modifications to the benefit structure are made to comply with negotiated labor agreements or to provide an improved benefit for employees which is cost neutral. Staff has recommended approval of the attached resolution approving the establishment of a VEBA Trust. A VEBA Trust is a tax exempt benefit plan qualifying under Section 501(c)(9) of the Internal Revenue Code. This plan is similar, in many respects, to a 125 Flexible Spending Account where accumulated assets are utilized for the payment of eligible health and other expenses for employees and their families. Unlike a 125 plan, however, accumulated assets in a VEBA Trust can be used to make premium payments. The recommendation to implement a VEBA Trust is based on a number of factors. The first is the significant positive impact the benefit will have on employees during and after their retirement from service. By establishing a VEBA Trust, employees will be able to plan for future as well as current health care expenses not covered through the City benefit programs. Expenses such as Long Term Care, unreimbursed medical premiums, copays and pharmacy charges are all eligible expenses under a VEBA Trust arrangement. Employees will realize a significant benefit since eligible contributions to a VEBA Trust are tax exempt and the reimbursed expenses from the VEBA Trust are also tax exempt. Another factor is the flexibility of a VEBA over any other alternative available_ VEBA's can tailored to fit the needs of any employer and their employee base. One of the more significant benefits of a VEBA is that it allows for levels of contribution and participation based on