Mayor Ness discusses controversial city employee benefits plan

By KBJR News 1

January 30, 2014 Updated Jan 30, 2014 at 7:47 PM CDT


Duluth City employee health care benefits have been the subject of controversy and lawsuits.

The city changed the way it provides for worker health care benefits, putting current and retired employees on the same plan.

Today Mayor Don Ness and Chief Administrator David Montgomery explained how that plan is working.

This is the first Post Employment Benefits report since the Minnesota Supreme Court ruling that allowed both active and retired city employees to be on the same healthcare benefits plan...

Today's conference focused on the city's unfunded liability.

Mayor Don Ness said the city dodged a bullet by revamping city employee retirement benefits when they did.

The mayor said the old defined benefit plan was non–sustainable, and would have resulted in dramatically reduced services, and threatened to bankrupt the city.

In 2005 the city had a projected unfunded liability of 280 million dollars and if reforms hadn't been made, the liability would have risen to 405 million dollars by 2013.

The reforms reduced the city's projected liability by 223 million dollars.
They included moving all active employees to a single plan and all retirees to what's called a Medicare Social Security Supplemental plan.

This has retirees receiving the same benefits as active employees and saves the city more than 1.5 million a year.

The problem isn't completely resolved.

The city currently has 8.5 million dollars in liability, however by the year 2033 it's expected to rise to 17 million.

There's only two ways that that can be addressed and that's either higher... more, revenue coming into the city of Duluth or fewer services being delivered. So that's our challenge.

Possible solutions include selling unnecessary city assets.

Now all new employees have money that goes into a retiree healthcare saving account that can be used upon retirement to purchase their own insurance, but does not include a defined benefit plan.

That's expected to happen but the good news is after the year 2033 the numbers do start to go down.

Posted to the web by Gabrielle Ware