BOARD MEETING DATE: December 4, 2009
AGENDA NO. 12

TITLE:

Adopt Resolution Approving Establishment of Health Reimbursement Arrangement Plan and Approve Selection of Plan Service Provider

SYNOPSIS:

AQMD sponsors an IRS-approved Section 457 Deferred Compensation program and a Section 125 Health Care Reimbursement program for its active employees. This action is to establish an IRS-approved Health Reimbursement Arrangement Plan to allow active employees to save, on a tax-free basis, for their future post-retirement health care costs. This program would be at no cost to AQMD as all contributions to savings accounts would come from employee earnings only, and plan participants would pay all administrative costs.

COMMITTEE:

Administrative, November 13, 2009, Recommended for Approval

RECOMMENDED ACTIONS:

1. Adopt Resolution 2009-__ approving the establishment of a Health Reimbursement Arrangement Plan for AQMD employees.

2. Authorize the Executive Officer to approve an agreement with The Hartford as AQMD’s Health Reimbursement Arrangement Service Provider.

 

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Over the past several years there has been an expressed interest, from both represented and management employees, regarding the establishment of a program to allow employees to save, on a tax-free basis, for their future post-retirement health care costs. With the exception of the initial cost ($2,500) to evaluate Health Reimbursement Arrangement (HRA) program vendors and an estimated cost of between $5,000 to $7,000 to prepare and review plan documents, AQMD would not incur any ongoing costs to administer the program. All contributions to savings plans come solely from employee earnings and all administrative costs associated with participant investments, health care reimbursements and account statements are included as part of the plan and are paid by plan participants.

Currently, many government agencies offer either post-retirement health care, which is very costly, or a health reimbursement program to help its employees afford health care in retirement. AQMD currently offers neither. This program would allow employees to set aside their own earnings for this purpose without a cost to AQMD.

Late last year staff began working with AQMD’s insurance consultant to explore various options that could assist employees with their health care costs in retirement. After reviewing three programs available to government agencies, staff contracted with Benefit Funding Services Group (BSFG), AQMD’s Deferred Compensation consultants, to identify additional HRA providers. BSFG, through a Request for Information, received five proposals from HRA service providers and performed an objective analysis of each plan’s structure, services, cost, investment options and IRS tax exemption.

Proposal

Staff is recommending that the Board establish an IRS-approved Health Reimbursement Arrangement program for its employees. Based on the results of the independent analysis performed by BSFG, which was reviewed and evaluated by AQMDs Deferred Compensation Committee, staff recommends selection of The Hartford as AQMD’s HRA provider. Initially, this program would be made available to non-represented employees with the understanding that it could be expanded to cover represented employees, based on their approval. Under the rules establishing HRAs, each defined group covered by the plan would be required to establish its own criteria on what earnings would be contributed (e.g., a set monthly percentage of pay, a portion of currently allowed sell back of earned leave time, etc.). Attached is the adopting Resolution formalizing the establishment of a Health Reimbursement Arrangement Plan.

Attachments

Resolution

RESOLUTION 09-__ OF THE GOVERNING BOARD
OF
SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT

1. Adoption of Health Reimbursement Arrangement Plan

WHEREAS, South Coast Air Quality Management District (the “District”) employees covered by the San Bernardino County Employees’ Retirement Association do not receive post-employment retirement benefits, either from the retirement system or from the District; 

WHEREAS, the cost of health care continues to increase at rates that far exceed the rate of inflation;  

WHEREAS, it is in the best interests of its employees to establish a tax-exempt health reimbursement plan to enable active employees to better prepare for the cost of health care in retirement;

WHEREAS, pursuant to Internal Revenue Code Section 105, the Governing Board of the District has the authority to establish a tax-exempt Health Reimbursement Arrangement for its employees;

WHEREAS, the Board has determined that it desires to establish an IRS-approved employee Health Reimbursement Arrangement program, at no cost to AQMD;

NOW THEREFORE, BE IT RESOLVED, that the District Board hereby establishes the South Coast Air Quality Management District Health Reimbursement Arrangement Plan, and that this plan is ratified, approved and adopted;

RESOLVED FURTHER, that the Clerk of the Boards of the District, by the signature of such Clerk of the Boards, be, and the same hereby is, authorized to attest to the execution by the District of the documents signed pursuant to this resolution, and to certify adoption of this resolution.

2. General Implementing Authority

RESOLVED, that the officers of the District are authorized, empowered and directed to do all other things and acts, to execute and deliver all documents and certificates necessary to establish the South Coast Air Quality Management District Health Reimbursement Arrangement Plan and in their sole judgment, take the necessary, proper or advisable actions in order to carry out and comply with the purposes and intent of the foregoing resolution; and that all of the acts and deeds of the officers of the District which are consistent with the purposes and intent of such resolution be and hereby are, in all respects, approved, confirmed and adopted as the acts and deeds of the District.