Staff proposes phased retiree premium increases as self‑insurance costs climb

City staff told the council the self‑insurance fund costs climbed about 46% from FY24 to FY27, prompting a funding approach that raises both employee and employer contributions. Jared said staff proposed a 25% increase to employee premiums and a 25% increase to the employer contribution; the employer increase equates to roughly $1.85 million additional funding and about $11,888 per budgeted FTE.

"So how we did that was a 25% increase to the employee, and a 25% increase to our employer contribution," Jared said, adding the proposal was intended to keep the fund solvent. Staff also explained retirees currently cost about 54% more per month than active employees on a per‑employee basis and recommended smoothing retiree premium increases over two years (12.5% in FY27 and 12.5% in FY28) because eight retirees remain on the plan and are often on fixed incomes.

Council members expressed concern for retirees on fixed incomes and asked whether the council could absorb some of the retiree increases for one year. Others cautioned that deferring increases would simply push costs into the next fiscal year and set new expectations. Staff sought direction from council on whether to smooth or defer retiree increases.

Why it matters: increases in health‑insurance contributions affect employee take‑home pay, employer costs and the solvency of an internal insurance reserve. Council asked staff to model alternatives and the equity implications before the final readings.