Memo-07-10-2018-Item-11

July 10, 2018

MEMO TO:        Mayor Barber and Board of Commissioners

FROM:             Frank A. Rush, Jr., Town Manager

SUBJECT:       Resolution Amending Personnel Policy to Establish Retiree Benefits (Health Expenses, Recreational Benefits) - (Summary & Suggested Motions)

The Board of Commissioners is scheduled to consider the attached resolution formally amending the Town’s Personnel Policy to establish post-employment benefits for retirees who have served the Town of Emerald Isle for 20 years or more.  Specifically, the attached resolution establishes:

  1. a monthly payment (generally ranging from $200 - $300 per month) to retirees to assist with health expenses in retirement (insurance premiums and direct medical expenses), and
  2. allows long-serving employees to continue to receive recreational benefits from the Town in retirement years (Community Center memberships, beach driving permits, and beach access parking permits). 

The provision of these retiree benefits would demonstrate the Town’s appreciation for its longest-serving employees, provide an additional incentive for current Town employees to continue their career with the Town, and aid in recruitment efforts for new employees. 

As you know, the Board has discussed the establishment of a retiree health benefit several times in recent years.  Many governmental employers offer a retiree health benefit (including Carteret County, Morehead City, Havelock, Atlantic Beach, Swansboro, and Cape Carteret in our area), and many simply allow long-serving retirees to continue to participate in the group health insurance plan provided by the governmental employer.  Due to the uncertainty of future health insurance costs, the proposed retiree health benefit included in the attached resolution does not allow long-serving retirees to continue to participate in the Town’s group health insurance plan.   Rather, the retiree health benefit included in the attached resolution has been purposely structured to provide meaningful assistance to the retiree but also result in limited and predictable expense for the Town in future years. 

Under the proposed retiree health benefit, the monthly health benefit payment would equal $10 per month per year of full-time service to the Town.  Thus, a retiree with 20 years of service would receive a monthly payment of $200 for health expenses, or $2,400 per year.  Similarly, a retiree with 30 years of service would receive a monthly payment of $300 for health expenses, or $3,600 per year, and so on.  The Board should note that the monthly payment would be taxable income for the retiree.  Retirees receiving the monthly payment must be eligible to retire with the NC Local Government Employees Retirement System, which generally allows full retirement after 30 years of service and reduced retirement at age 50 and after 20 years of service.  The Town’s retiree health benefit would cease when the retiree reaches age 65, is eligible for Medicare, receives other employer-sponsored health care, or dies.  Thus, we expect eligible retirees to receive this benefit during their 50s and early 60s only, depending on their retirement date. 

The FY 18-19 budget adopted by the Board in June includes a total of $16,000 to fund this benefit for the first year.  We anticipate that up to 5 current employees would be eligible for this new benefit in FY 18-19 if all 5 choose to retire during this fiscal year.  Over the next 10 years we project that 5 – 10 retirees per year would receive this benefit, with an annual cost ranging from approximately $16,000 - $33,000 per year (an average annual cost of approximately $24,000). 

There is no direct additional cost to the Town associated with the continuation of recreational benefits, as these benefits are currently provided to all Town employees.  The same 20-year service requirement would apply to recreational benefits, and we project that up to 16 retirees would receive this benefit over the next 10 years.  This benefit would not cease until the retiree dies, thus many retirees will continue to enjoy this benefit after reaching age 65. 

The retiree benefits included in the attached resolution would be effective upon adoption, and would apply to all future retirees with at least 20 years of service to the Town. 

Rhonda Ferebee, Town Clerk / HR Specialist, and I look forward to discussing the attached resolution with the Board at the July 10 meeting.