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HomeMy WebLinkAboutCommittee of the Whole - 18 May 2020 - Agenda - Pdf CITY OF RENTON AGENDA Committee of the Whole Meeting 5:15 PM - Monday, May 18, 2020 Videoconference 1. 2019 City's Medical Insurance Plan Update a) Presentation 2. Liability Insurance Fund Performance Update a) Presentation 3. Financial Position and COVID-19 Response -Shared Work Program - Voluntary Exit Program a) Presentation 4. Executive Session 6:15 pm to Discuss with legal counsel representing the City in matters relating to City enforcement actions - RCW 42.30.110(1)(i) Employee Benefits Retirement Savings Plan & Health Plans May, 2020 AGENDA ITEM #1. a) Deferred Compensation 457(b) Retirement Savings Plan AGENDA ITEM #1. a) 457(b) Deferred Compensation Plan In addition to the pension plans offered by the State Department of Retirement Systems, the City offers a Deferred Compensation Plan for supplemental savings toward retirement. This is a multi-employer plan, managed in coordination with the Renton Regional Fire Authority. •During 2019, the Committee maintained a due diligence process through quarterly review meetings •Fiduciary training was conducted for Committee members •Reviewed Committee governance documents: •Investment Policy Statement •Operating Guidelines AGENDA ITEM #1. a) Plan Updates in 2019 •Replaced several of the investment options with less expensive funds •Reduced annual plan administrative expense applied to participant accounts from 0.06% to 0.05% •Discontinued TIAA Advice service and sent communications about target date funds •Conducted small balance cash outs for inactive accounts •Processed Required Minimum Distributions for qualifying participants •Reviewed metrics on effectiveness of TIAA communication and education campaigns AGENDA ITEM #1. a) 2020 Market Volatility •U.S. economy came to a halt in the 1st quarter as the coronavirus pandemic swept across the nation. Gross Domestic Product (GDP) declined at an estimated 4.8% annualized rate in the 1st quarter. •Economists predict the economy will fall at an annual rate of 25.3% in the 2nd quarter of 2020. •Diversification is one of the best strategies for weathering a market downturn. •The Deferred Compensation Plan offers participants a variety of investment options across market segments. •Investors should stay the course and ensure their asset allocation is appropriate.AGENDA ITEM #1. a) CARES Act •On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a $2.2 trillion dollar relief bill to counter the economic impact of the COVID- 19 pandemic, was signed into law. •Under the Act, retirement plans could allow for relaxed distributions and loan rules for participants affected by the COVID-19 pandemic. •The Committee elected not to open the plan to these loans and distributions at this time. •Committee could decide to allow these provisions in the future, if deemed necessary.AGENDA ITEM #1. a) Plan and Participant Profile In-service 0.7%$38,000 Terminated 96.9%$5,535,765 Other 2.4%$136,294 Plan profile $93.5 Million Contributions 6.1% Year -over-Year Assets $7,084,950 6.1% Year-over-Year Distributions2 $5,710,059 2.4% Year-over-Year Participant profile Participant Counts and Average Balances3 Engagement (as of 3/31/2020) This report is as of the period ending 03/31/2020 and reflects the trailing 12 months of activity unless otherwise noted. The report includes all TIAA plans except 457(f), 457(b) Private, Nonqualified Deferred Compensation, and Retirement Healthcare plans. This report excludes details on non-participant accounts (forfeiture and revenue credit account) but includes the balances. 2. Certain Distributions (e.g., QDRO, Disability or Age 70.5 Minimum Distribution) may be categorized under In-Service, Terminated or Other. Please see the Glossary for additional information. 3. “Active” participants have a status of Active or Leave, a balance greater than zero and have made a contribution in the last 12 months. “Terminated” participants have a status of Terminated on all plans and a balance. “Other” represents all other participants in the plans (other status codes and non-contributing) with a balance. 1,070 Employer 44.5%$3,152,541 Employee 44.9%$3,177,678 Matching 0.0%$0 Rollovers 10.7%$754,731 0% Accomplishments Participants with balances Accomplishments Total phone calls (Transactional) 82 Advice 163 Increased contributions 338 Rebalanced 280 Active 758 71%$83,201 Terminated 259 24%$103,538 Other 53 5%$68,025 AGENDA ITEM #1. a) •Benchmark fees against the National Association of Government Defined Contribution Administrators (NAGDCA) 2018 and 2019 surveys •TIAA recordkeeping fee will further decrease by 0.03% in September 2020, when the ICMA-RC transition fee incurred in 2013 is fully amortized •TIAA contract expires in 2020 •Committee is negotiating a one-year contract extension with TIAA. Given current circumstances, an RFP or RFI would be difficult. 0.24%0.28% 0.20% 0.26% 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% Admin & Recordkeeping Investment Expense Total Cost: 0.44% Total Cost 0.54% Renton Benchmark Deferred Compensation –Fees & Expenses Plan data provided by TIAA as of 12.31.2019 AGENDA ITEM #1. a) •Continue to leverage resources available through our record keeper, TIAA, at no additional cost •TIAA uses participant data to target communications to specific demographics •Committee also deployed targeted communications to certain populations in 2019, including TIAA Advice/target date fund usage and required minimum distributions for retired participants Communication Plan AGENDA ITEM #1. a) Communication Plan For institutional investor use only. Not for use with or distribution to the public. TIAA’s Digital engagement Educational campaigns and resources Financial Foundations New Year’s checklist Diversification Save more Webinars Getting a head start Online tools Gaming Digital Challenge Supplemental campaigns Advice Savings/income/peer Early Engagement Get started Additional education Newsletter content —Tools and resources —eDelivery —TIAA mobile Microsite Flyers —How to update your account online —Online tools —Digital resources AGENDA ITEM #1. a) Customizing a plan based on your segmentation profile Plan sponsor experience 13% 26% 42% 16% Segment as a % of total population 3% $1,894,862 $7,293,274 $39,107,033 $27,648,352 $3,290,062 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Total participant assets by segment e)Dollar Stretcher d)Life Builder c)Accumulator b)Transitioner a) Established All data as of 12/31/2019. 1. Average total assets is inclusive of all participant assets held with TIAA. 2. Refer to the closing slide of the presentation for important information on how benchmark populations are derived. Life stage Dollar Stretcher Life Builder Accumulator Transitioner Established # of participants 102 207 336 125 22 Average total assets1 $18,577 $35,233 $116,390 $221,187 $149,548 Benchmark population2 16%21%37%17%8% % of total population 13%26%42%16%3% For institutional investor use only. Not for use with or distribution to the public.AGENDA ITEM #1. a) Questions What questions do you have?AGENDA ITEM #1. a) Health Plans AGENDA ITEM #1. a) •The City offers a self-funded medical, prescription, dental, and vision plan, administered through HMA and CHS. •The City is the plan sponsor and plan fiduciary. The Renton Employee Health Plan Board (REHP) makes plan design decisions and sets contribution rates, based on actuarial valuations and prior claims experience. •Cost share between the City and employees are set through collective bargaining. •Stop Loss coverage is currently at $250,000 per individual. •The City offers a fully insured alternative through Kaiser •Also offered are Life and Disability insurance, an Employee Assistance Plan (EAP), and Flexible Spending Accounts (FSA) Benefits Plan Overview AGENDA ITEM #1. a) Change in Broker/Advisor •Due to a change in business model with the prior Broker/Advisor, the City changed to Gallagher as of 01/01/20 •The Broker/Advisor’s role is to: •Act as a liaison between employer and carriers •Support compliance, including legal and actuarial •Provide advice on plan design using data analytics and best practices Change in Pharmacy Benefit Manager (PBM) •Due to significant errors with Envision Rx, the City changed to Costco Health Solutions (CHS) effective 9/1/2019 •The PBM approves and pays prescription claims at participating retail pharmacies Pharmacy Benefit Manager –New PBM AGENDA ITEM #1. a) Medical •Removed $30 copay for in-network preventive care, and apply all other copays to annual out-of-pocket maximum •Mental Health benefits increased from 50% to 100% coverage •Fertility benefits up to $20,000 lifetime maximum added Dental •Annual benefit maximum increased from $1,800 to $2,000 •Orthodontia lifetime maximum benefit increased from $1,250 to $2,000 •Type III service with preferred provider benefit increased from 50% to 80% •Type I and Type II services at out-of-network benefit decreased from 100% to 80% Vision •Removed $30 copay for eye exams •Laser surgery with lifetime maximum of $1,000 per eye added Highlight Plan Design Changes for 2020 AGENDA ITEM #1. a) Summary of changes previously approved by Council •HMA Medical Plan 2.5% increase in administration •Kaiser 5.1% increase in fully insured premiums •Stop Loss 8.5% increase in premium •Life and Disability rates were reduced nearly 30% •No change in fees or benefits for First Choice EAP, or BAC Flex Spending Vendor Fee Changes AGENDA ITEM #1. a) - 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Med/ Vision RX Dental Excess / Admin City Prog -5.6% Claims and Cost Trend +0.5%+8.3%+8.5% Total cost –Per Employee Per Month +3.4% +12.5%-2.0%+6.3%-5.4%+8.0%AGENDA ITEM #1. a) Plan Reserves Target Reserves for 2020 Active Employees Actuarial Forecasted Expenses $12,579,724 Target Reserve Percentage 30.00% Target Reserves Amount $3,773,917 Actual Reserves 1/1/2019 Reserve Balance $3,806,112 Plus: Funds in $11,852,912 Less: Expenses ($10,955,743) Net change fully insured ($6,588) 12/31/2019 Reserves $4,696,693 Change in Reserves $890,581 Actual Reserve Percent Reserves/Expected Claims 37.34% Excess Reserve Amount $922,776 AGENDA ITEM #1. a) Questions What questions do you have?AGENDA ITEM #1. a) 2019 Risk Management 502 Insurance Fund Review May 2020 Kelsey R. Ternes, MBA, ARM-P Risk Manager AGENDA ITEM #2. a) 502 Insurance Fund History Total Expenditures •2014 $3,079,769 •2015 $3,672,618 •2016 $4,285,494* •2017 $2,761,531 •2018 $3,041,360 •2019 $3,203,107 *2016 includes 1-1/2 years of property insurance premiums and numerous workers’ compensation claim settlements from previous years.AGENDA ITEM #2. a) 502 Insurance Fund The 502 Fund is an Internal Service Fund that is used for four main purposes: 1.Claim Costs for Workers’ Compensation, Unemployment, Liability Claims, Property Damage and other losses 2.Premiums for Insurance and Excess Insurance Coverage 3.Administrative Expenses 4.Recovered Funds/ Subrogation AGENDA ITEM #2. a) 1. Claims and Losses Self-Insured Retentions (SIRs) & Deductibles •Workers’ Compensation ($500,000 SIR) •Liability ($250,000 SIR) •Auto Liability ($250,000 SIR) •Property ($50,000 Deductible) •Auto Physical Damage ($25,000 Deductible)AGENDA ITEM #2. a) Workers’ Compensation •Workers’ Compensation Statutory coverage of employees plus the optional coverage of volunteers for occupational injuries and illnesses as directed by the Washington Department of Labor & Industries. •Partnership between Benefits and Risk Management. •The City utilizes a Third Party Administrator, Eberle Vivian Inc, to process and manage its Workers’ Compensation claims.AGENDA ITEM #2. a) •Excess insurance begins at $500,000 per claim. •Excess insurance premium is based upon an actuarial analysis of the past 10-years claim history. •100% Employer Paid –Employees do not contribute toward benefits. Workers’ Compensation Insurance AGENDA ITEM #2. a) Workers’ Compensation Claims Claims and Costs •2014 $961,366 96 claims •2015 $2,094,851 103 claims •2016*$594,725 71 claims •2017 $172, 940 35 claims •2018 $306,537 56 claims •2019 $314,098 42 claims *Note: Decrease in claims from Renton Regional Fire Authority formation 7/1/2016.AGENDA ITEM #2. a) •Unemployment Unemployment insurance benefits provide temporary financial assistance to workers unemployed through no fault of their own that meet Washington's eligibility requirements. •The HR Labor Division manages Unemployment. •100% Employer Paid –Employees do not contribute toward benefits. Unemployment AGENDA ITEM #2. a) Unemployment Claims Comparison $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 2014 2015 2016 2017 2018 2019 2019: 28 Claims $47,860 AGENDA ITEM #2. a) Property Insurance Property insurance provides internal financial protection to city-owned property from perils such as fire, theft, vandalism, flood, earthquake, and weather damage. Property covered includes the insurable portions of buildings, contents, public artwork, and mobile equipment. Property Insurance AGENDA ITEM #2. a) 2019 Insured Property Values* •Structures $279,623,325 •Building Contents $18,547,170 •Automobiles $9,024,367 •Inland Marine (Equipment) $1,500,400 •Public Art $260,078 •Total Insured Property $308,955,340 *City-Wide as of 7/1/19 11 AGENDA ITEM #2. a) 2020 Insured Property Values* •Structures $302,807,388 •Building Contents $19,494,254 •Automobiles $10,317,244 •Inland Marine (Equipment) $1,645,991 •Public Art $260,078 •Total Insured Property $334,524,955 *City-Wide as of 5/1/20 AGENDA ITEM #2. a) Property Loss Costs •2014 $121,476 •2015 $93,492 •2016 $185,581 •2017 $255,668 •2018 $216,455 •2019 $113,969 AGENDA ITEM #2. a) Liability •Liability Helps protect the city’s financial statement from the financial risks imposed by lawsuits and claims of negligence. •Excess Liability Insurance begins at $250,000 per claim. •$250,000 Self-Insured Retention.AGENDA ITEM #2. a) Most Common / High Cost •Property Damage •Bodily Injury •Automobile •Civil Rights Violations *Partnership with City Attorney fundamental to our success. Liability Claims AGENDA ITEM #2. a) Number of Liability Claims *Based on year filed; claims can be made within 3-years of incident date. Average 70 Claims/Year AGENDA ITEM #2. a) Number of Liability Claims by Division 2019 23 22 9 6 4 3 3 2 2 1 1 1 1 1 2019 Claims by Division AGENDA ITEM #2. a) Numbers of Liability Claims by Department 2019 Settle 30-40% of Claims 50-60% Claims are Auto AGENDA ITEM #2. a) 19 City’s Cost of Liability Claim Trends AGENDA ITEM #2. a) Lines of Coverage: •Liability --General, Automobile, Public Officials, Employment Practices, Employee Benefits, Airport, Cyber, Underground Storage Tank, Pollution, Stop-Gap & Law Enforcement •Property --Buildings, Inland Marine (Equipment) & Public Art •Flood and Earthquake •Automobile Physical Damage (not auto replacement) •Workers’ Compensation •Boiler and Machinery •Employee Fidelity/Crime Bonds •Unemployment Claims 2. Insurance Premiums AGENDA ITEM #2. a) Property Insurance Premiums Property •2019 Property Insurance Costs $436,576 •Hardening of the Insurance Market •Property Insurance is expected to go up 15-20% for our July 1, 2020 renewal AGENDA ITEM #2. a) Liability Insurance Premiums Liability •2014 WCIA $484,447•2015 WCIA $477,240•2016 Self-Insured $272,039 •2017 Self-Insured $271,081•2018 Self-Insured $276,916•2019 Self-Insured $305,834 AGENDA ITEM #2. a) Liability Insurance Premiums Liability •Insurance Premiums continue to go up. •Liability Insurance for 2020 increased by 15%. •Renton has experienced a very good loss run record for the last 5 years, with zero losses over $250,000. AGENDA ITEM #2. a) 3. Administrative Expenses •Broker Fees Broker Alliant •Liability Claim Management 2019 •80% by Risk Manager •20% Third Party Administrator Carl Warren •Risk Mitigation Measures Safety "Loss prevention yields greater results than loss control"AGENDA ITEM #2. a) 4. Recovery of Costs/ Subrogation Subrogation Recovery of costs incurred to repair damage to city- owned vehicles and property from responsible third parties and insurance. •Average >$100,000/year in recovered funds •2016-2019 $500,000 AGENDA ITEM #2. a) Important to Know •Washington Cities Insurance Authority (WCIA) Self insured municipal risk pool, offering liability, property and specialty insurance programs as well as risk management services to municipal entities in Washington state. •Council approves becoming self-insured-began January 1, 2016 •Savings: Insurance Premiums >$200,000/year, Administrative Costs Savings, Control of Liability Claim and Litigation Outcomes •Increased involvement by City Attorney’s office on liability claims with litigation potential. •In-house Risk Mitigation (Safety, Claim Management and Risk Strategies) is key to savings Renton has saved over $200,000 per year. Total savings since leaving WCIA is approximately $1 M.AGENDA ITEM #2. a) Top Risk Concerns •Awareness of Liability with COVID-19 •Joint and Several Liability •Police Liability •Aging Subsurface Infrastructure •Public Records Violations AGENDA ITEM #2. a) Questions What questions can I answer?AGENDA ITEM #2. a) Impact of COVID-19 on City’s Financial Position & Response Committee of the Whole May 18, 2020 1AGENDA ITEM #3. a) Review of April 20 presentation City’s actions in response to revenue loss Update on preliminary forecast based on City’s actions Next steps 2 Agenda AGENDA ITEM #3. a) Identified impact of COVID-19 on City’s revenues Approximate loss of $22.5 million (still our best estimate) Preliminary steps toward mitigating revenue loss •Reductions in discretionary spending •Delay of hiring for vacant positions •Elimination of out-of-state travel and training •Reductions in overtime •Other ideas, for example, sharing staff where possible Identified next steps Departments identify and implement cost-savings measures Forecast updated as additional information becomes available Legislative effort at federal and state level for relief due to revenue losses 3 April 20 Presentation AGENDA ITEM #3. a) Departments identified reductions for discretionary expenditures and delayed hiring Departments identified capital improvement projects that could be eliminated or deferred Identified available reserves Updated City’s financial projections 4 Actions to Date AGENDA ITEM #3. a) Shared Work Program Voluntary Separation Incentive Program Continuing to pursue funding from Federal and State governments 5 Other Actions to Date AGENDA ITEM #3. a) What is it? An incentive program offered by the WA Employment Security Division that provides unemployment benefits for partial furloughs Purpose? To create savings so as to avoid layoffs or other measures that financially impact employees How does it work? Employees stay on the City’s payroll with a reduced schedule between 10-50%, retain benefits and receive their partial unemployment plus $600/week from the CARES Act up until July 25 How many are participating? How much can we save? Over 200 employees are currently participating. Savings for the General Fund are estimated at approximately $642k 6 Shared Work Program AGENDA ITEM #3. a) 7 Voluntary Separation Incentive Program What is it? A program offered by the City incentivizing voluntary separations Purpose? To create savings so as to avoid layoffs or other measures that financially impact employees How does it work? Employees who have been employed at the City for at least two years can voluntarily choose to separate from the City and receive 18 months of COBRA at no cost to the employee Voluntarily separations create vacancies which are held open, thereby achieving savings for the City How many are participating? How much can we save? TBD AGENDA ITEM #3. a) Current sources: Federal funding from CARES Act for COVID-related expenditures and/or community support funding ($3.141M) King County Economic Development Relief Program for business support ($165,890) CDBG funding for business recovery ($450,000) Potential other sources: King County CARES Act Direct Allocation (TBD) FEMA funding (TBD) Direct relief from Federal CARES Act for revenue loss (TBD) 8 Federal and State Funding AGENDA ITEM #3. a) 9 Forecasted Impact as of April 20, 2020 Revised Forecast Due to Loss of Revenue Related to COVID-19 2017 2018 2019 2020 2021 2022 2023 2024 Summary ($ in Million)Actual Actual Actual Projected Projected Projected Projected Projected Beginning Fund Balance 24.4$ 31.5$ 44.5$ 48.1$ 16.1$ 11.6$ 5.3$ (2.9)$ Operating Revenue 104.1$ 105.7$ 128.5$ 125.9$ 125.7$ 127.8$ 129.9$ 132.0$ Base Operating Expenditure1 (86.3) (89.7) (117.3) (134.6) (131.1) (135.0) (138.9) (143.0) Operating Surplus (Deficit)17.8$ 16.1$ 11.2$ (8.7)$ (5.4)$ (7.2)$ (9.0)$ (11.0)$ 1X Sources2 0.6$ 0.0$ 2.5$ 1.5$ 1.3$ 1.2$ 1.2$ 1.1$ ADD the Changes in Rev Here:-$ -$ -$ -$ PROPERTY TAX (4.3)$ SALES TAX (9.0)$ B&O TAX (2.4)$ UTILITY TAX (1.6)$ GAMBLING TAX (0.8)$ REET (1.2)$ STATE SHARED REVENUES (0.8)$ OTHER (2.3)$ Waived Lease Rent (0.1)$ 1X Uses3 (11.3) (3.1) (10.2) (2.4) (0.4) (0.4) (0.4) (0.4) Net Resources - Uses 7.1$ 13.0$ 3.6$ (32.0)$ (4.5)$ (6.4)$ (8.2)$ (10.3)$ Ending Fund Balance 31.5$ 44.5$ 48.1$ 16.1$ 11.6$ 5.3$ (2.9)$ (13.2)$ Ending Bal as % of Opr Budget (Target=12%)36.52%49.68%41.00%12.00%8.88%3.89%-2.12%-9.24%AGENDA ITEM #3. a) 10 Updated Forecast Based on Actions to Date Revised Long Range Financial Projection, Adopted 2019-2024 Related to COVID-19 2017 2018 2019 2020 2021 2022 2023 2024 Summary ($ in Million)Actual Actual Actual Projected Projected Projected Projected Projected Beginning Fund Balance 24.4$ 31.5$ 44.5$ 48.1$ 33.3$ 14.2$ 5.8$ (4.4)$ Operating Revenue 104.1$ 105.7$ 128.5$ 125.9$ 125.7$ 127.8$ 129.9$ 132.0$ Base Operating Expenditure1 (86.3) (89.7) (117.3) (134.6) (132.1) (136.1) (140.0) (144.1) Operating Surplus (Deficit)17.8$ 16.1$ 11.2$ (8.7)$ (6.5)$ (8.3)$ (10.1)$ (12.2)$ 1X Sources2 0.6$ 0.0$ 2.5$ 1.5$ 1.3$ 1.2$ 1.2$ 1.1$ 1X Uses3 (11.3) (3.1) (10.2) (2.4) (0.4) (0.4) (0.4) (0.4) Revenue Impacts: PROPERTY TAX (4.3)$ (2.1)$ SALES TAX (9.0)$ (6.4)$ B&O TAX (2.4)$ (1.9)$ UTILITY TAX (1.6)$ 0.3$ GAMBLING TAX (0.8)$ REET (1.2)$ STATE SHARED REVENUES (0.8)$ (0.8)$ OTHER (2.3)$ Waived Lease Rent (0.1)$ Adjustments: Cost containment by departments 5.2$ Annexation sales tax reserve 3.6$ (0.9)$ (0.9)$ (0.9)$ Internal service fund reserves 1.6$ Risk management reserves correction (1.7)$ LEOFF1 reduced contribution 1.0$ Fleet savings 1.2$ Shared Work Program 0.6$ CIP reserves 3.9$ Net Resources - Uses 7.1$ 13.0$ 3.6$ (14.8)$ (19.1)$ (8.4)$ (10.2)$ (11.4)$ Ending Fund Balance 31.5$ 44.5$ 48.1$ 33.3$ 14.2$ 5.8$ (4.4)$ (15.8)$ Ending Bal as % of Opr Budget (Target=12%)36.52%49.68%41.00%24.73%10.74%4.28%-3.13%-10.96%AGENDA ITEM #3. a) Implementation of actions which have been identified Council approval of second quarter budget amendment reflecting these changes Council approval of Voluntary Separation program Forecast updated as additional information becomes available Continued legislative efforts at federal and state level for relief due to revenue losses 11 Next Steps AGENDA ITEM #3. a)