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