Friday, July 27, 2018

NorCo Retirement Board Adopts New Formula For Retiree Medical Benefits

Blogger's Note: If you are a county employee or retiree, you'll want to read this post. If not, you may wish to skip to the final paragraph telling you that the county pension fund is now 90% funded at $415 million, a feat that few municipal governments can replicate. 

In May, Northampton County's Retirement Board voted to end a practice that was chipping away at pension checks. The Board directed the County to stop deducting medical contributions from retiree benefits after determining that the practice is illegal. Since that time, retirees have paid nothing for their medical care. At a meeting last night, Board members voted to continue the practice of providing free medical care to county employees, as well as spouses and dependents, who retired before 12/31/96. Those who retired after that date will still have free individual medical care, but if they wish to include a spouse, three percent of the base pension will be deducted. If it is a spouse and other eligible dependents, it's five percent.

This change is the result of a 5 to 1 vote. Voting in favor of this pension change were Lamont McClure, Ken Kraft, Steve Barron, Bill McGee and Tom Guth (employee representative). The great dissenter was retiree representative Gerald E. "Jerry" Seyfried. Ron Heckman was absent as a result of a conflict.

Barron explained that, under this proposal, 384 retirees will be paying less, 255 will pay more and 555 will pay no more than they were before. For those who pay more, the average will be about $50 per month. No one will pay more than $150.

In response to questioning by Executive McClure, Barron stated this policy is similar to what happens in other third class counties, including  Lehigh County.

When Home Rule was established in 1978, one of the benefits that employees received upon retirement was free medical care. Spouses and dependents were included. This changed when Bill Brackbill became Executive. He first imposed a $10 co-pay, but later changed it to a percentage of the pension. These deductions continued and increased under Executives Glenn Reibman, John Stoffa and John Brown.

Seyfried has long maintained that only the retirement board, and not the Executive, has the authority to change retiree benefits. He has also long argued that it is illegal to reduce a pension benefit. He argued it violates the nonimpairment clause of the Home Rule Charter and Pennsylvania State Constitution, the latter of which provides that "[n]o ex post facto law, nor any law impairing the obligation of contracts, or making irrevocable any grant of special privileges or immunities, shall be passed."

Solicitor David Ceraul advised the retirement board that the county's contract is with the retiree,not a spouse or dependent. Thus, requiring a contribution for a spouse or eligible dependent is no violation of the nonimpairment clause.

Seyfried was unswayed by Ceraul, arguing that this new policy is still a diminishment in benefits. Lamont McClure disagreed, although he told Seyfried that retirees owe him a "debt of gratitude" for his role in correcting an illegal practice.

McClure went on to say that, though the practice of deducting from pensions for medical benefits was illegal, every retiree signed documents agreeing to it. He said he wanted to be fair to the retiree, but "I have an obligation to the county taxpayer as well. I was not going to treat the county taxpayer as a piggybank."

Under Barron's proposal, no county contribution will be needed to fund retiree health benefits. "Do not let the perfect be the enemy of the very, very good," McClure implored Seyfried.

This, incidentally, is a nonissue for employees hired after June 30, 2010. They  must provide for their own medical care when they retire. Only half of Pennsylvania counties offer post-retirement benefits. Lehigh County ended them in 1987.

Tom Guth asked county administrators for better literature on retirement benefits. The county agreed to prepare a handbook and will present cost figures at the August meeting.

In other news, the county's pension fund is now 90% funded. Pension Fund manager John Spagnola told the retirement board that, as of two days ago, the fund contained over $415 million. The OPEB (Other Post Employment Benefits) Fund, which pays for retiree medical benefits, stood tall at over $41 million.

23 comments:

Anonymous said...

The actual medical plan is not a very good plan. The lifetime limit is not even realistic. I doubt the federal government even considers it a real plan.

Anonymous said...

9:45. You obviously have no idea what you are talking about. There is no lifetime limit on the cost. When you turn 65 you are covered 100 % by "Blue Journey" and Medicare. The County's plan is exceptional. Costly to the County but exceptional.

Anonymous said...

What about the people hired in 1976 worked until 2011 they were hired under the assumption of free medical when they retired which included thier spouse. This person has to pay for medical for thier spouse while an individual hired in say 1985 retired in 1995 recieve free medical for themself and thier spouse .so a person who worked over 30 years has to pay for thier spouse whilw the person who worked only 10 years doesn't. I feel the people hired before 1996 should recieve benifits for both can you look into this Bernie ? Much apperciated

Bernie O'Hare said...

11:29, My take on this is that once a person is vested, there can be no diminution of benefits. This situation started under Lamont's predecessors and he is trying to fix it without hitting up taxpayers. He is in a tough spot. I need to research this mater more thoroughly, but am inclined to agree with Jerry on this one. The county seems to think it can force payments for spouses and dependents bc their contract is with the employee, not them. But under that contract, there was an agreement to provide coverage to spouses and dependents. They are third party beneficiaries. The S CT case cited by Ceraul is complete nonsense. It applies to the private sector, not the public sector, and fails to address the constitutional question involved.

I understand the desire to avoid hitting up taxpayers. But with an OPEB fund standing at $41 million, that won't happen.

Like I said, I need to do a lot more reading. I am very uncomfortable talking about these matters. But 11:29,it seems to me that you are completely correct.

Anonymous said...

the county's pension fund is now 90% funded... not bad, but it was at 98% when John Brown left, that's a big dip.


an OPEB fund standing at $41 million...that's less than 50% of the total OPEB liability.

Bernie O'Hare said...

This is false, and is probably knowingly false. When John Brown left office, the pension fund was at $402 million, less than it is now. the OPEB Fund was not even reported. brown waspretty much a disgrace.

https://www.northamptoncounty.org/HR/Documents/Retirement%20Board/RBM_20171204.pdf

Anonymous said...

annon10:44, You are misleading. Before age 65 no Medicare so all is from county plan and you drain very low lifetime limit Part A. The "Blue Journey" is a scam. It is a Medicare Advantage plan that is a very poor HMO. It doesn't work in many places and needs preapproval for all things. Terrible plan that is why most don'; use it. Retirees said they supported Mr.McClure in order to fix the awful lifetime limit.

Anonymous said...

Since this was deemed an illegal practice, will the employees who have been paying for their benefits be reimbursed for the amount they were erroneously charged?

Anonymous said...

"2:23 PM" I was a member when the Medicare Advantage plan was called Senior Blue and now is called Blue Journey. In the past I was required to have my PCP make a referral for a specialist. That worked well for both me and my husband. My husband during his long illness required many specialists and the program was seamless. Under Blue Journey I am not required to have preapproval. I will continue to review my concerns with my PCP prior to seeking specialist care as I have found her to be insightful and knowledgeable about the care her patients received from specialists. To the best of my knowledge, by federal regulation, these plans are limited in coverage to certain geographical areas. Over my many years of county employment, I have seen many administrations come and go but it is my opinion that, in general, the health care met the needs of the employees. I have been out of town for one month so if the above information has been changed I have not, as yet, received any notification.

Bernie O'Hare said...

2:52, I am unaware of any such plan. The illegal practice was stopped.

Anonymous said...

why wasn't Ron Heckman present? Hopefully he has a good excuse. As a retiree, I would like to know how he would have voted. I feel that is a fair question. Ron, would you have voted for or against the retirees on this issue.

Bernie O'Hare said...

4:56, There was a good reason for Ron’s absence, but I do not feel comfortable sharing it. His absence means he did not vote for this proposal, regardless what he intended. I have not spoken to him about this and he can answer that himself, if he wishes.

Anonymous said...

You can work 30 years for a county and now not have benefits which means a ton of people after 2010 are SOL! Nice of them.

Bernie O'Hare said...

That’s true. This happened in 2010. Over half of all counties pay no medical care for retirees.

Anonymous said...

I feel the Board made a good vote. It was a fair compromise for the retirees. A bad practice was stopped. I don't believe the retirees want to be greedy, they just want the system to play by the rules.
What good is a benefit if you bankrupt the ability to pay. I fear a few greedy people are driving this issue.

Anonymous said...

Well for those of us still working with 30 plus years this does not seem fair. Seems we should be not be excluded just because we are still employed.

Anonymous said...

Lehigh County retirees who are eligible for health care do not pay anything for themselves or their dependents. They remain on the county policy even when they turn 65, and the county also reimburses them for a part of their Medicare premium.

Health care at retirement is considered part of compensation, so that the counties who eliminated that benefit basically reduced new employees' compensation dramatically, and no one complained. They do the same job as the person sitting next to them who will receive the benefit, but are compensated significantly less.

Bernie O'Hare said...

"I feel the Board made a good vote. It was a fair compromise for the retirees. A bad practice was stopped. I don't believe the retirees want to be greedy, they just want the system to play by the rules.
What good is a benefit if you bankrupt the ability to pay. I fear a few greedy people are driving this issue."

Who are these few greedy people? Jerry? The only member of the Board to vote No? He was praised by McClure and several other board members. Jerry wants what you want - a system that plays by the rules. But do you really want this? You ask what good a benefit is if it bankrupts the system. That s a very Republican question. That is precisely why you have pensions. To protect employees once they have retired. Under your logic, you should eliminate defined benefit pensions immediately bc they could bankrupt the system.

The question is whether this change is a diminishment or impairment of pension benefits in violation of the state constitution. That question has not been answered. The case cited by Ceraul deals with a collective bargaining agreement in the private sector that had already expired. it fails to address the nonimpairment clause, i.e. the constitution.

In Illinois,lawmakers concerned that pension benefits could bankrupt the system reduced them. The Illinois Supreme Court answered, "Crisis is not an excuse to abandon the rule of law. It is a summons to defend it."

All members of the retirement board agree that the changes made by Brackbill were done illegally. That is why all persons who retired before 1997 continue to receive full health benefits. Were subsequent changes done legallY? The answer appears to be No. My understanding is that Brackbill and subsequent executives made these changes unilaterally. But let's say that they went to the retirement board and got approval. My thinking is that this diminishment or impairment could only be effective for employees who are hired AFTER the date the pension benefit is reduced. So when Brackbill made his change,let's assume he went to the retirement board and got them to agree. It would be effective only for employees hired after that date. When it was reduced by Reibman and then Stoffa and Brown, the reductions can only be imposed on employees hired after the change.

http://www.chicagotribune.com/ct-illinois-pension-law-court-ruling-20150508-story.html

Anonymous said...

When Mr McClure announced at the Retiree luncheon in May that the County would stop deducting the medical contribution, he also stated that they would take a look at the situation, and if it is decided that a medical deduction will be reinstated, no one will pay more than what they were previously paying. Mr O’Hare, you stated that Mr Barron stated that 255 retirees will pay more under the newly approved plan. Mr O’Hare, isn’t this a direct contradiction to what Mr McClure told us at the May luncheon (Mr O’Hare, I think I remember seeing you at the May luncheon). Again, Mr McClure stated very clearly at the luncheon that no one would pay more if the medical contribution is reinstated. What is the explanation for this clear contradiction?

Bernie O'Hare said...

1:27 Yes, I was there. Great food, and just so you know, I pay for my meal. I am there to cover the event for my blog or the Bethlehem Press or both. I do not make all of them, but try.

I am hard-pressed to remember Lamont's exact words. I did write a story back then, and am linking to it. I quote him as saying no one's benefits will be reduced, which actually sounds broader than your recollection.

Of all the county execs I have seen, I believe McClure is the most committed to the employee and retiree. This is a question of law. Frankly, I think the advice he got does not really answer the question. But that's all this is about - the law. If further research reveals McClure was given bad information, he will correct himself. On the other hand, if further research reveals Jerry is wrong, he will back off.

https://lehighvalleyramblings.blogspot.com/2018/05/mcclure-has-lunch-with-retirees.html

Anonymous said...

Yes, I too remember Mr McClure saying that no one’s benefits would be reduced; but in addition to that, I remember him also saying that if the medical contribution is reinstated, no one would pay more than before. Because I had money deducted from my check each month, I was especially attentive to Mr McClure’s comment about any future contributions. I do agree that Mr McClure is very committed to the employee and Retiree, and if my recollection is correct, perhaps he would have been better off to reserve comment until he had looked more closely at the numbers, ie. how much revenue was lost by stopping the medical contributions. As far as the meal goes, I am glad you do attend the luncheon and report on it in your blog. You provide information to the retirees that is not reported in the newspaper. You provide a valuable service. Also, thank you for taking the time to look back and provide the link to your story on the May luncheon.

Bernie O'Hare said...

You are quite welcome. I certainly believe you, especially since this impacts you so much.

Anonymous said...

This is very unusual. I too attended the luncheon and remember things just a little differently than mentioned above. I remember Mr. McClure telling us that he was going to eliminate these co-pays on retirees and the "medical contribution" would no longer be in effect for retirees. I apologize if I am wrong, but I just don't remember him stating things the way it is being reported here by my fellow retirees. Again, I apologize if I am wrong. Please allow me to blame it on my years.