Supervisor Don Knabe, BOS Chair

Los Angeles County Board of Supervisors Chairman Don Knabe announced today a series of sweeping reforms to the County’s retiree healthcare obligations, agreed to by labor leaders and County management, which could save up to $840 million over the next 30 years.

These reforms represent the most significant reductions to retirement obligations in over 35 years, since the Board of Supervisors reduced pension opportunities for general members four separate times between 1977 and 1981.

The County’s current annual costs for retiree healthcare are approximately $487.8 million, with the County obligated to pay for retiree healthcare first, before any public services are funded. As part of recent contract negotiations, County and labor leaders took action to reduce the future costs of retirement medical costs.

Currently, after 10 years of service with the County, an employee receives 40-percent of retirement healthcare paid for, with an additional four-percent accruing each year after that, for a total of 100-percent after 25 years of service. The benefits are extended after the retiree dies for eligible spouse/domestic partners and children up to age 19, or age 23 if they are full-time students.

“The County was on-the-hook paying for healthcare for people who had never even worked for the organization,” said Supervisor Don Knabe. “We had a responsibility to mitigate spiraling retiree health care obligations for future employees, while still providing a level of retiree healthcare that is both sustainable and fiscally responsible.”

The new agreement reached with County labor groups will provide paid medical coverage at the retiree only premium level and not at the current level of full family coverage. The retiree may choose to purchase coverage for dependents, but the County will only provide a financial subsidy for the retiree only level.  Additionally, Medicare-eligible retirees will be required to enroll in Medicare and the County subsidy will be based on a Medicare supplement plan. The same vesting rights and years of service crediting formula of 40-percent after 10 years and 100-percent after 25 years will still apply. These reforms do not apply to current retirees or current employees, and if approved, would be in place for employees who begin employment with the County on or after July 1, 2014.

“Over the last several years, our labor partners were essential to helping the County weather the recession by sacrificing raises and cost of living increases. I’m grateful that labor has stepped-up once again, agreeing to reforms that could save us up to $840 million in the decades ahead,” said Knabe.

The final step in implementing the reforms involves County management and labor leaders from the Coalition of County Unions and SEIU Local 721 presenting the reform proposals to the LACERA Board of Retirement for their consideration.