Board Members present: Dorothy Anderson, Patrick Lanning, Sandra Bishop, Paul Conte, and Ron Farmer.
Others present: Randy Berggren, Jim Wiley, Dick Helgeson, Ken Beeson, Jim Origliosso, Roseanna McArthur, Lance Robertson, Kevin Biersdorf, Steve Hill, Jean Meyers, Cathy Bloom, Jennifer Joule, JoAnn Andersen, and Krista Hince of the EWEB staff; Ruth Atcherson, City of Eugene Minutes Recorder, and Tim Reyer, AON consultant.
President Anderson called the Special Board Meeting to order at 1:10 p.m.
AGENDA CHECK
President Anderson noted that the last item regarding the electronic media policy had been added.
ITEMS FROM BOARD MEMBERS
No Board Members wished to speak at this time.
CORRESPONDENCE
General Manager Randy Berggren said that he had nothing to share at this time.
PUBLIC INPUT
There were no members of the public who wished to speak at this time.
RETIREMENT BENEFITS
Jean Meyers, Human Resource Manager, indicated that the project team's presentation this evening has three distinct portions. She introduced George Mason, a representative of the Retiree Association Group (RAG), who would be sharing a proposal that the RAG had formulated. Ms. Meyers explained that Mr. Mason would present first. Following Mr. Mason, the project team would present additional materials and information requested by the Board since the last meeting, to be followed with discussion. Then, Jim Wiley, Electric Division Director and Jennifer Joule, Human Resource Generalist, would guide the Board through a "structured retiree benefits plan design decision process."
Mr. Mason thanked the Board and EWEB for allowing the RAG to make their presentation regarding retiree benefits. He provided an overview of the Funding of Post-Retirement Medical Liabilities Chronology. He likened the change in retiree benefits to a punishment levied on the retirees for the unfunded annual liability (UAL) that the utility had accumulated.
Mr. Mason explained the RAG Proposal #7, noting that it combined Tier 1 and Tier 2. He said that a retiree and spouse would split their portion of the premium 40/60 and that a surviving spouse would continue to pay 60 percent of the portion of the premium that they were responsible for.
In response to a question from Commissioner Conte, Mr. Mason stated that the cost for prescription coverage had been omitted from the figures as the amounts were not known at this time.
Cathy Bloom, Assistant Treasurer, said that, under the RAG Proposal, the UAL would drop by $3.7 million or approximately 8 percent.
President Anderson left the meeting due to illness.
Vice President Lanning noted that the RAG Proposal increased the premium for Tier 3 retirees while decreasing it for Tiers 1 and 2.
Commissioner Farmer asked how long it would take the UAL for the health insurance to be eliminated with the proposal. Tim Reyer, AON actuarial staff, responded that the total cost would be increased and this would add future liability. He speculated that it would take substantially longer to pay down the UAL, perhaps as much as 30 years under the RAG proposal. Ms. Bloom said that the increase was due to the increase in cost for the Tier 3 members.
Vice President Lanning asked how the retirees' proposal compared with staff's proposal. Ms. Bloom responded that the retirees' proposal would give EWEB a $28 million UAL while the staff's proposal would give a $19 million UAL. Mr. Reyer added that just on Tiers 1 and 2 the UAL increases by $600,000 with the proposed plan.
Commissioner Conte asked Mr. Mason to explain the substantial increase proposed at the Tier 3 level. Mr. Mason said that the cost was based on the Board's wish to make the premiums equal for all of the tiers and that he had come up with a full premium based on the new annual premium of EWEB, based on the years of service chart. He stated that, in effect, the employees are paying 25 percent of a premium that could be five or six years old, whereas now that would move up to 25 percent of the current year's premium for EWEB at the year the employee becomes 65. He added that the 60/40 split was based on the rates for Tiers 1 and 2.
Commissioner Farmer commented that staff is "drowning" in comments regarding the increases in utility rates from low income people, many of whom are elderly, and the hardships that the increases have created. He asked Mr. Mason how he could justify to the public the expense that the retirees' proposal would incur to EWEB in such an economic climate. Mr. Mason replied that retirees were faced with the same economic situation and that cuts in benefits would create a hardship, severe in some instances, for the retirees of EWEB. He added that there should be no rate increases until the spring of 2003. He commented that most of the retirees in the Tier 1 group were aged 80 and above.
Mr. Mason summarized, stating that the retirees proposal was doable and that the retirees would try other methods to accomplish the creation of a health benefits package that staff and the RAG could agree upon should this proposal not be satisfactory to the Board.
Ms. Meyers introduced staff's proposal for the Post Retirement Medical Benefit Plan. Ms. Bloom explained that if the current medical plan was trended up due to medical inflation, it would start with low dollars and the impact to Tier 1 would be small, but at the end of the calculations Tier 1 and Tier 2 would be at $15 and $30 respectively. Commissioner Conte noted that the retirees had stated that the retirees were willing to pay a higher payment as long as they are not trend increases.
In response to a question from Commissioner Bishop, Ms. Bloom stated that the utility pays invoices as they come in.
Commissioner Farmer asked for background regarding the decision not to accumulate a medical trust fund. Ms. Bloom responded that a trust fund could be legally separated from EWEB and, should the Board request it, the financial department could get a ruling on it and pursue it as an option.
Ms. Joule suggested that the Board look over the attachment entitled Summary of Proposed Retiree Benefits Structure. She provided a brief overview of the summary.
Commissioner Conte suggested that technical changes be made to the description of who qualifies for Tier 4 so that it would define them as current and future employees not in Tiers 1, 2, and 3.
In response to a question from Commissioner Conte, Ms. Joule stated that the surviving spouses of retirees would still be eligible for coverage, but would be moved to PERS at a new premium.
Next, Ms. Meyers shared with the Board feedback on the proposed retiree plan design changes which were solicited broadly from the active employees base. While not meant to be fully representative of active employee feedback; the employee comments serve as a general indicator of potential issues and concerns. She added that the project team had done their best to communicate with both retirees and employees regarding proposed plan changes however, the emphasis has been on retiree involvement. In the past several months the project team had not directly visited with active employees. To remedy this, the team met with managers and supervisors on October 4 and asked that they solicit employee feedback and summarize comments back to their division directors. She reported that those who provided feedback appreciated the Board's decision to leave current employees on the Tier 3; active employees understand why the UAL needs to be funded; and employees responded favorably to the fact that the years of service table had been left in the retiree benefit equation. She cited that employees were concerned over the long-term ability of the utility to provide benefits and as such, EWEB's ability to attract and retain good employees in the future may be comprimised. Ms. Meyers also noted that there was some level of support for a five-year phase in of the implementation of the changes to retiree benefits.
The Board agreed to a brief break.
Commissioner Bishop commented that it would not be wise to combine Tier 1 and Tier 2. She said that there was a question of honor in that there were agreements made to the older retirees while they were workers and that the Board should meet its obligations. She stated she was interested in hearing what other commissioners thought about this and would like to hear more discussion.
Mr. Mason clarified for Vice President Lanning that the benefits for Tiers 1 and 2 in the RAG proposal were similar to staff's with increases to premium. The exception was the trend increases for both Tiers. Mr. Mason added that the trend increases were the main issue.
In response to a question from Commissioner Bishop, Ms. Bloom stated that EWEB had measured the UAL in 1989 and that it had been $32 million at that time. She said that medical costs went up and down over the years and the actuary's projections had gone up and down accordingly. She reiterated that the increase in the UAL had to do with health care, EWEB's own trend, and the fact that EWEB did not fund it because funding was being directed to other financial needs. She noted, in response to further commentary from Commissioner Bishop, that prior to 1989 the UAL had been a soft number based on estimates.
Commissioner Conte remarked that the nation should recognize its priorities and take care of its people. He said that there was no clear legal obligation on the part of EWEB to provide the benefits, but that there was a moral and ethical obligation. He added that what a person got out of a plan was a large issue and that this was affected by whether EWEB had the money to foot the bill. He said that there were many levels of benefits and that EWEB might not be able to provide the benefits at the level at which it had planned to.
Commissioner Conte stressed that some level of a cap on benefits must be in place or the Board could be revisiting this discussion in five years. He stated that there was no way that EWEB could guarantee that the utility could continue the benefits at this level.
Commissioner Farmer agreed that, legally, there was no obligation to provide benefits at the level that they had originally been projected to be provided. He felt that promising a level of benefits that EWEB ultimately could not pay was not right and was a moral problem of the same magnitude as trying to change the structure in order to provide the benefits at some future time. He also stated that in his opinion, the current three tier system was discriminatory; he feels its not right to provide different benefits among different groups of retirees . He summarized goals and objectives he felt important to accomplish as a result of this work: to bring the UAL down so that there was not a catastrophic financial risk and to make sure that another Board of Commissioners does not have to address this issue again in a couple of years.
Vice President Lanning commented that the retirees' proposal indicated a desire on their part to be able to predict what the premiums would be. He suggested that the cap should essentially be the maximum EWEB payments.
Mr. Wiley stated that Tim Ryer's proposal (AON Consultant) would create a UAL of $8.4 million for Tiers 1 and 2 and the staff proposal would create a UAL of $7.7 million for Tiers 1 and 2.
Mr. Wiley provided the timeline and overview of Exhibit 8: EWEB Retirement Benefits Project; Board of Commissioners Decision Table. He noted that there had been concerns raised regarding the schedule as originally the decisions needed to be made at the present meeting in order to implement them in 2003. He explained that this had been based on an open enrollment letter that had been mailed to employees and retirees on October 23, 2002. He said that, since then, staff had reassessed the timeline and determined that the decision that would affect the premiums for Tiers 1 and 2 would need to be made by November 1, but that the other items could "float" for a short time.
The EWEB Board of Commissioners decided the following:
Commissioner Conte felt that the RAG proposal had been very responsive and well-thought out. He supported the RAG proposal, but stated that he would not oppose staff's proposal.
In response to a question from Vice President Lanning, Mr. Reyer said that a standard mortality table had been used as a reference for life expectancy.
Ms. Bloom explained that the numbers that were presented from AON were dated from 1/1/02. She said that the team was proposing that they only include premium increases that would be passed on and that staff had not anticipated passing on the 22 percent increase that had actually occurred, as opposed to the 13 percent increase that was originally projected.
Mr. Reyer said, in response to a comment from Commissioner Conte, that the experience rating was, in part, driving the increases for the pre-age-65 group.
Ms. Meyers said that, in the staff proposal, 2003 would be the transition year and that the cap would kick in as of 2004. She felt that the cap would not likely be activated as of 2004 as the retirees would be moving onto the PERS plan.
Vice President Lanning asked if staff had wanted to raise any other points with the Board. Staff responded that there were no other points of information to be raised.
Ms. Meyers summarized the discussion and the vote of the Board.
Vice President Lanning reiterated that he supported the RAG proposal for the trend increases for Tier 1 and for the amount that the retiree premium should increase as of 2003.
Commissioner Bishop asked what mechanism could be put in place to only affect Tiers 2, 3, and 4 when addressing the trend increases and raising retiree premiums. She noted that the other three tiers would, in effect, be paying extra to cover these expenses for the Tier 1 retirees. Vice President Lanning felt that the RAG had worked through this issue and had expressed a willingness to pay a higher premium in exchange for a higher level of predictability in the rates.
Mr. Mason said that, while he could not speak for all 556 retirees, he had talked with quite a few and the general consensus was that they were willing to pay a higher premium in exchange for more predictability in the rates and that they were willing to give up the dental and vision benefits in exchange for the Rx supplement. He stressed that all of the retirees were on a fixed budget.
Ms. Meyers asked the Board to revisit the issue of caps. Commissioner Farmer reiterated his support for placing the cap at the 6 percent medical trend index, but agreed to vote with the will of the majority of the Board, and not delay the process of voting any longer. He said he felt that the issue had been revisited many times and that he was ready to vote and move on.
Ms. Meyers requested that the Board clarify its vote for whether or not to discontinue the subsidy toward post-65 Tiers 1 and 2 dental vision coverage. Commissioner Bishop stated that she strongly opposed discontinuing this subsidy for Tier 1 retirees.
Commissioner Conte suggested that the motion should include both the proposal and how it would be funded when it next came before the board. Staff agreed to do so. Commissioner Bishop asked for a memorandum that provided a synopsis of the discussion and votes that had been cast at the present meeting.
ELECTRONIC MEDIA POLICY
Mr. Berggren explained that he would recommend to the Board to rescind the board's motion directing the General Manager to set up an executive session within which to discuss public meeting law and electronic media. He said that he wanted to proceed to have an open meeting discussion and that this motion did not allow enough flexibility to do so.
Commissioner Bishop moved to rescind the motion made at the Board meeting held on October 15, 2002, to hold an Executive Session for the purpose of discussion of the open meetings law and the possibility of a policy regarding electronic media. Commissioner Conte provided the second.
Commissioner Farmer clarified that he saw nothing in the memorandum regarding this issue that he felt needed to be discussed in an Executive Session and that he had made the motion because he had questions that he felt would be adequately answered in such a session.
The motion passed by a unanimous vote.
The meeting adjourned at 5:20 p.m.
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Assistant Secretary President