Board Members Present: Dorothy Anderson, Patrick Lanning, Sandra Bishop, Paul Conte, and Ron Farmer.

Others present: Randy Berggren, Jim Origliosso, Laurie Muggy, Jean Meyers, JoAnn Andersen, Dick Helgeson, Marty Douglass, Jennifer Jule, Janet McClennen, Debra Smith, Dick Varner, and Krista Hince of the EWEB staff; Ruth Atcherson, City of Eugene Minutes Recorder; and members of the public.

RETIREMENT BENEFITS PROJECT

Laurie Muggy, Human Resource Specialist II, provided an overview of the staff presentation on the retirement benefits project. She presented the Retirement Benefits Project with the aid of overhead projections, as outlined in the attachment entitled the same. She noted that the retirement benefits have not been scrutinized since 1989. Janet McClennen, Benefits Specialist, presented a portion of the project, also.

Commissioner Conte asked if there was no PERS or Medicare supplement in the Tier 1 Plan. Ms. Muggy explained that there was and that they pay first and EWEB pays second. She added that there were different costs for the different plans. Commissioner Farmer asked if EWEB would make up the difference. Ms. Muggy responded that EWEB would and that there would be savings if the employees picked a cheaper plan.

Commissioner Farmer asked if any assumptions had been made among the four plans. Ms. Muggy said that it had been assumed that the least expensive plan would be chosen.

Ms. Muggy stated, in response to a question from Commissioner Lanning, that one of the plans is comparable to the existing EWEB plan.

Ms. McClennen discussed the bar charts contained in the attachment entitled EWEB Retirement Benefits Project Proposal to be Presented to Board of Commissioners.

Commissioner Farmer asked how many companies have proposed a prescription supplement. Ms. Muggy explained that they had only contacted EWEB's carrier and did not have information on other providers. She said, in response to another question, that there are potential replacements for a prescription supplement plan.

Ms. McClennen discussed Tier 2 of the benefits proposal.

Commissioner Farmer asked what evidence there was that the Tier 1 employees have a harder time paying for the benefits than the Tier 2 employees. Cathy Bloom, Assistant Treasurer, responded that the salaries were less, as they dated back to the 1960s and the pension plan has changed radically since then. Commissioner Farmer requested that staff provide numbers to support this assertion.

Ms. Bloom said that the advisory group of retirees had provided input in the determination of the Tier 1 and Tier 2 proposals for dollar amounts.

Commissioner Conte said that he had taken the credited earnings that were made to fixed PERS accounts and had looked just at the portion that was above the guarantee. He said that he had seen a bubble in certain years and subsequent fluctuation, initial evidence that this should be more closely examined.

Commissioner Farmer expressed concern regarding the assumed ability to pay on the part of the retirees. Ms. Bloom concurred, stating that some of the retiree benefits are at less than 50 percent of the salary that they had received while working. She felt that the information PERS had provided to the task force members was incomplete and inconclusive. Commissioner Farmer stated that it is difficult to create Tiers of retirement benefits plans when the facts are not completely known.

Regarding the trend increase, Commissioner Lanning asked if it was passed on to employees and retirees as a set amount. Ms. Muggy stated that the trend increase equals the increases the EWEB plan is experiencing. She explained that this prevents EWEB from having to absorb 100 percent of the trend increases. In response to another question from Commissioner Lanning, Jean Meyers, Human Resource Manager, said that this increase has been passed on to employees since 1989.

Ms. Muggy summarized the Tier 2 plan and related concerns that the retiree advisory group had expressed which included trend increases and that the prescriptions would be moved off of the EWEB plan and into the PERS or Regence plan. Ms. McClennen related that the advisory group had come back to the benefits project with recommendations. She displayed the recommendations with the aid of an overhead projector.

In response to a question from Commissioner Conte, Ms. Muggy stated that the assumptions were that the retirees would be comfortable with the premiums based on the input from the advisory group.

Commissioner Farmer asked if, when these proposals were considered, the entire package had been implemented instead of offering "yes or no" choices, what the bottom line would be. Ms. Bloom stated that if the recommendation had been adopted as the advisory group had wished it to the UAL (unfunded actuarial liability) would have hit a little over $29 million.

Ms. McClennen provided an overview of the attachment entitled Sample Out-of-Pocket Rx Costs with PERS and Rx Supplement.

In response to a question from Commissioner Conte, Ms. McClennen stated that the conclusion reached is that the coverage is comparable to what they have at the present. She added that the only "unknown" or vulnerable area is whether or not the provider accepts assignment. She noted that there is a cap on how much of the disallowed expense is allowed to be passed on and the cap is 15 percent above the Medicare allowed amount.

Commissioner Conte asked if there was a better prescription (Rx) supplement plan. Ms. McClennen responded that the benefits project team could explore possibilities.

President Anderson commented that the future of Medicare Rx coverage is currently unknown. Jean Meyers, Human Resource Manager, agreed, stating that there is a bill in the House of Representatives at present which could shift more of the responsibility for prescriptions to private coverage.

Ms. Muggy continued the overview of the possible retiree benefits plans that had resulted from the retirement benefits project.

Commissioner Bishop asked why the years of service table only went to the 21^st year. Ms. Muggy responded that the years of service table had been developed in 1989. She said she was uncertain as to why it stopped at 21 years. General Manager Randy Berggren stated that he had participated in the development of the table. He related that the Board at the time had been charged with determining how long an employee worked for EWEB prior to being fully vested in the retirement benefits. He felt that this table had contributed to the reduction in the unfunded liability.

Ms. Muggy discussed the hard retirement dates that Tier 2 and Tier 3 had incorporated. She stated that no matter where the line was drawn, someone would miss better benefits by mere months. She noted that a softer retirement date had been looked at and it had been determined that it would add $775,000 to the unfunded liability. Mr. Berggren explained that the amount of money added to the unfunded liability had been the actuarial value over the study period of 20 years.

Commissioner Conte likened it to treating some employees more favorably than others and questioned the rationale for it. Ms. Muggy responded that the table was consistent with PERS eligibility. Mr. Berggren added that it was driven by concern that there would be a large population of employees trying to beat the cut-off date and retire early.

Commissioner Farmer asked if there was a possibility of leaving Tier 1 and Tier 2 as they are and treating all of the rest equally. Ms. Meyers responded that the benefits project had started with 18 different options. She said that this possibility had not been explored, in part, because the existing employees since 1989 had cost-shared with EWEB in terms of the trend increase.

Ms. Bloom said, in response to a question from Commissioner Conte, that if all retirees and employees only receive coverage up to the age of 65 it is a $12 million UAL. She explained that Tier 5 consists of people who have coverage for themselves and are under 65 and that Tier 5 creates a $3.7 million UAL.

Ms. Muggy provided an overview of the proposed Tier 3, Tier 4, and Tier 5 benefits.

Commissioner Farmer asked, regarding the difference between Tier 3 and Tier 4, that given that the average years of service is 23 years, why a Tier 3 retiree would have 75 percent of their premiums paid retiring in 5 years and a Tier 4 retiree would not receive any assistance with the premium retiring in 6 years. Ms. Muggy stated that, of the employers surveyed, many had similar benefits. Commissioner Farmer asked why Tier 3 benefits had not been proposed to be reduced in order to provide Tier 4 benefits to retirees. Ms. McClennen responded that the benefits project did not want to pull benefits from those who were already retired.

Ms. Muggy shared the feedback received from the employees advisory group. She noted that there was some confusion regarding the "as-is" benefits. She said that frustration had been expressed at the lack of ability EWEB has to guarantee benefits given the current financial scenario.

Ms. Bloom delineated the UAL results of the different Tier scenarios with the aid of overhead projections.

Ms. Meyers articulated the role of the project team which was to study and construct alternatives that address the pressures of cost, the human dimension, and balance both of those in the defense-ability in the eye of the public and provide the best possible plan. She explained that the next step would be to seek approval for this specific proposal. She noted that Commissioner Conte had recently explored the issue and provided staff with information about retiree income-based health distribution.

Commissioner Conte stated that he felt that the Board should thoroughly examine the policy implications. He said that it is easy to shift numbers without a framework. He commented that every time something is taken away from one group it penalizes them. He felt that the Board needed to see a more extensive listing of the benefits that were being altered. He wanted to know whether or not the PERS benefits could be "beefed up" with EWEB benefits to provide parity. He stressed the importance that the benefits be fair.

President Anderson requested a copy of the PERS actuary.

Ms. McClennen commented that information from PERS consisted primarily of indicators. She said that it does not address specifically what an individual's ability to pay is. She felt that, in order to determine an ability to pay, one would have to employ a very subjective judgment.

Commissioner Conte reiterated that he is only looking at the potential pension benefit. He felt that in a tier system some discrimination between employees will occur and that this needs to be thoroughly examined.

Commissioner Farmer remarked that the challenge lies in trying to mix the benefits with what is charged for premiums. He felt that this was a difficult problem to assess.

Commissioner Bishop said that the factors involved have to be balanced with agreements made with retirees in the past. She stressed the importance of giving existing and future employees more warning. She felt that it was possible to take the line between Tiers and move it. She emphasized that she can not base a decision on one single indicator.

Commissioner Conte concurred, and reiterated the importance of employing solid rationale in this decision.

Commissioner Farmer stressed the importance of keeping wages and benefits competitive in order to draw the best and most competent work force.

President Anderson commended the benefits task force for the work that they had done.

Ms. Meyers summarized the charge of the Board of Commissioners, stating that staff would come back with a more extensive comparative between EWEB health plan benefits and PERS, including dental and visual, and secondly, some continuation to help understand the total pension benefit "bite" and to identify where the PERS "bubble" kicks in and who benefits from that.

The meeting adjourned at 8 p.m.

_____________ ______________________________________

Assistant Secretary President