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Insurance, Pension Moves Urged

Steven Goode

April 17, 2010

A city council committee charged with finding ways to reduce spending and increase revenue has recommended drastic changes in the way the city provides health care and pension benefits for employees.

The four-member panel began its analysis in October and reported to the council this week.

Reducing health insurance costs was one of its principal recommendations. It pointed out that city employees pay widely varying amounts for their share of health insurance, from 10 percent for municipal employees to 33 percent for board of education employees. It also said the city's average health insurance claim is higher than the national average: $4,200, compared with $3,500.

The city, which is self-insured, spends about $85 million each year on health care benefits. The panel recommended that the city hire a consultant to determine if self-insurance is still the best option.

It also recommended that the city examine its insurance policies and evaluate the benefits of a health savings account plan, which places more responsibility on employees to limit health care costs.

The committee said that whatever insurance plan the city chooses, it should consider increasing the amount employees pay for their health coverage, even though such a change would have to be negotiated with more than a dozen union bargaining units.

The panel also recommended an overhaul of the pension system, which it said may be unsustainable because of the early retirement age allowed many municipal employees, who also are living longer. Increasing pension costs could amount to millions more than the city's current defined benefit pension plan could support.

For example, panel member Tim Sullivan said Friday, the pension plan allows police officers to count overtime and private job pay toward their pensions. In the case of an officer who retires at age 46 with 25 years of service and receives, as some officers do, 125 percent of base pay for 40 years, the cost to the city could be more than $4 million, Sullivan said.

"The next cop they hire can't be offered the same plan as the current one," Sullivan said. "It's ridiculous."

This committee, like one that issued a report to the council in 2002, recommended that the city institute a defined contribution plan - a 401(k) plan, for example - for all new employees.

Council President Pedro Segarra said Friday that he understands some changes, such as pension reform, will take a long time to achieve, but that time is no reason to ignore the issue.

Segarra, who said he supported the recommendations, added that he hoped the unions would recognize the necessity of the changes.

"I'm optimistic that they will understand the fiscal reality that we are in," he said.

The panel also recommended combining some internal municipal and board of education services, improving the purchasing process, hiring a purchasing agent, examining the cost of contract requirements and developing an innovation fund to reward city employees for fiscal responsibility and creativity.