The Retiree Medical Trust would like to welcome the members of the Daly City Police Officers’ Association. They are the latest association to join the RMT. Kudos to President Lee Aquila and his board members for all of their effort and hard work in making their participation in the Trust possible.
As I have traveled around the state meeting with various associations, one central theme continues to emerge: many cities and counties are diluting the medical benefits they provide for their employees. In some cases, new hires can expect zero medical benefits when they leave the profession.
This has resulted in an awkward benefit situation. Officers are working side by side, doing the same job day in and day out, but are being compensated differently based on their hire date. New equals less. New hires are being paid less for doing the same job. But then again, this situation is eerily reminiscent of when PEPRA kicked in full throttle in January 2013.
But let me share one other observation I have made with regard to the post-employment health insurance and medical expense benefits. Most of the associations typically have leadership with a fair amount of seniority. And from what I have seen, those senior leaders are dedicated to trying to negotiate some form of replacement medical benefits for their new members who aren’t as fortunate as the senior members. It’s commendable and speaks well of the association leaders’ commitment to their members.
When the PORAC RMT first came into existence, we were bound by an IRS rule requiring that if an association were to join the RMT, then all of their members would have to participate. That participation would also have to be at the same contribution dollar amount. That rule was like a super-high hurdle that made it difficult for some associations to join.
A Viable Solution
But I have good news to share. The IRS has relaxed that very restrictive requirement. An association can now identify and isolate specific groups for participation. Most commonly, that happens by identifying a date of hire, much like PEPRA did when that legislation kicked in. A very common occurrence is an association that has tiered benefits, with senior members having many benefits and new hires having very little benefits or none at all.
The RMT can help you out with that problem. We can help you structure your association’s participation to take care of your new members without jeopardizing the benefits of your senior members.
The RMT can send someone to meet with your board to discuss the Trust plan and share with you how your members can benefit from participation. With some advance notice, we should be able to show up and deliver a presentation. Contact information for the Trustees is listed at right.
Recently, the Trustees made a change to contribution modifications. Associations can now increase their contribution amount by as little as $25 increments. On a biweekly pre-tax deduction, that amounts to about $10. For a participant who contributes for 10 years, that will add about $45 per month to the lifetime benefit. It’s a pretty decent return on a very small investment.
Disclaimer: These articles are generally prepared three to four weeks in advance of publication. Even so, I want to share with you our current financial state. As of the first week in May, the Trust portfolio is sitting around $46 million. The Trustees are very excited to be experiencing fairly steady and reasonably large growth. As we expand to nearby states, it’s possible we may evolve from a state trust into a regional trust.
The Effect on Short-Timers
Almost without exception, new associations that join will have one or more members who are very close to retirement. That always leads to the fear that those members might lose money. Nope. Nobody loses any money. The Trust plan is able to provide a benefit to those short-timers as well. Nobody loses — everybody wins.
I encourage you all to check out our website at PORACRMT.org.