Don Ness updates councilors on retiree health-care decision
October 13, 2009 by Howie · 2 Comments
Duluth Mayor Don Ness sent the following eMail to Duluth city councilors today regarding a court ruling in the city’s favor regarding retiree health-care:
“We are very pleased that the court ruled in its favor on this vitally important retiree health care case. In summary, the court ruled that the city may modify retiree health benefits to the same extent that benefits for active employees are modified and that benefits are not fixed by the plan in place at the date of retirement.
I want to stress that the city does not dispute the our obligation to provide a health benefit to our retirees and retirees are in no danger of losing their benefit. With this change, retirees will be covered by plan 3a, which is still a very generous benefit. Going forward, we plan to reach out to retirees to be sure they have accurate information and that the transition is handled smoothly.
It is difficult to overstate the importance of this decision to the long-term health of city finances and the sustainability of the retiree benefit itself. This decision will dramatically reduce our unfunded liability and provide significant budgetary relief as soon as the benefit is implemented. From our internal estimates, our cost savings in the initial year of implementing the new system will be in excess of a million dollars a year. In the coming months we will complete a new actuarial study that will assess the full cost savings of the change to the unfunded liability.
The cost savings go beyond just plan design – in fact, the greatest cost savings could come from administrative efficiencies and changes in how retirees consume health services. Currently the city administers around 100 different variations of retiree health care benefits – the administrative burden and the resulting confusion surrounding benefit administration has a tremendous cost. The large number of plans has also precluded competitive bidding for the administration of the benefit.
This is a very important day for the City of Duluth. This has been a very long process, there has been tremendous effort by staff, and we employed a patient and thoughtful strategy. Now, our efforts have paid off to the benefit of our tax payers, to our city operations, and most importantly, to the long-term health of our city finances.
Thank you very much for your support of our efforts. Without the support and teamwork of the City Council, this effort would certainly have failed. Thank you.”
– Photo: Duluth Mayor Don Ness. Howie photo
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Now if the mayor would just get with the program and collect the past due lease amounts and utility bills this winter from Cirrus, then he will be doing his job.
The City has now made 2 very low blows to retirees. The first being the PERA debaucle which has yet to be settled and now this medical insurance fiasco. A judge, who obviously doesn’t understand the meaning of a “contract”, has given the City leave to take away good medical insurance coverage from people who may have retired early because of medical issues, etc., and said the City can replace it with mediocre coverage. Some of these retirees may now need to go back into the work force to cover the gap left by the extra costs they will have to bear. Will the City be willing to rehire those retirees that now need supplemental income? Probably not. The decisions that people made to retire were based in a very large part on the retiree medical insurance they would have after retirement. For a judge to blatently disregard historical precedence already set on this very same issue is a travesty of justice! What this says to me is the City of Duluth’s promises are no better than the paper they are written on. Contract set between the Unions and employees mean nothing. I certainly hope the Retirees will ask for an injunction and a retrial!