Budget Approval Looms as Council Singles Out OPEB Option

The end of a long budget review process for the Hyattsville City Council may be soon at hand after city leaders appear to have coalesced around a proposed revision to the city's retiree health care benefit plan.

Last night, the city council voted 9-1 (Mayor Marc Tartaro was absent) to direct the city treasurer to compose a new budget based around a retiree health care benefit plan dubbed Scenario A, a move which could free up $565,000 in next year's budget alone.

The current retiree health care benefits plan pays for medical care in full for both retirees and their dependents. The city has paid for these benefits under a pay-go scheme, funding them as the claims have been made. From the perspective of an insurance professional, Mayor Marc Tartaro and City Treasurer Elaine Stookey have repeatedly emphasized, running a pay-go scheme on health care benefits can be a financially risky position. It is estimated that the current retiree health care benefit plan leaves the city with a $10.7 million liability over the long term. 

For the last several years, the city council has debated revising the retiree health care benefit structure, commonly referred to as OPEB (an abbreviation of Other Post Employment Benefits), and establishing a trust fund to pay down the liability. But for various reasons, those efforts have never made it as far as city elected leaders took it last night. 

"I think getting to this point was a lot more stressful than it needed to be, unnecessarily so," said Council President Candace Hollingsworth (Ward 1) in an interview after last night's council meeting. "I am glad we are at a point where we can coalesce around a general idea for OPEB, even though OPEB has been made to be the marquee issue for this budget cycle, there are lots of other things that we are doing or choosing by not having the time needed to review a budget."

Under the proposed Scenario A, retirees aged 60 and older would get to keep their current benefit plan. Dependents of retirees over the age of 60 would be eligible for benefits equaling $6.25 per month per year of service after a one year notice period. Retirees under the age of 60 would stay on the current benefit plan until either they turn 65 or on June 30, 2018, whichever comes first. They would then be transitioned to the $12.65 plan until they are Medicare eligible, at which point their monthly benefits would be cut in half.

Dependents of retirees under the age of 60 would be able to participate in the city's retiree health care pool, put they would have to pay their own insurance premiums. 

Employees retiring over the next five years would have the current benefits until either they turn 65 or until June 30, 2018, at which point the retiree is eligible for $12.50 per month per year of service until they reach Medicare eligibility, at which point their monthly benefit is cut in half.

All other employees would move to the Scenario A upon retirement.

"With scenario A, we are able to grandfather in a lot of folks, and i think that's important," said Council Member Tim Hunt (Ward 3) in an interview after last night's city council meeting. "These are benefits that were promised and benefits that were owed. It's certainly not ideal from any perspective, but it's one that I feel comfortable moving forward with"

The estimated $565,000 in savings significantly reduces next year's budget shortfall. Driven by declining property tax revenues, and the cost to establish a retiree health care trust fund, Mayor Marc Tartaro's original proposed budget had the city dipping into the reserve fund.

The city council is expected to receive a revised budget by the time of a special council session scheduled for Thursday, June 27. Because the budget, normally, requires multiple readings before it can be approved, the budget will have to be approved as an emergency measure if it is to be effective in time for the next fiscal year, which begins on July 1.