Agenda - 06-09-2011 - 2 - Laserfiche WebLink

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2 work performance. For the last four budget cycles, employee pay and benefits recommendations have been heavily influenced by the downturn in the economy and focused on maintaining the County's permanent workforce without increasing property taxes. Substantial increases in employee and retiree health insurance costs, reinstatement of the County 401(k) contribution and aState-mandated increase in the employer contribution to the Local Governmental Employees' Retirement System have driven the Manager's recommendations for funding employee pay and benefits in FY 2011-12. As previously noted, health insurance costs are growing more rapidly than the cost of living. With these rising costs, the County must have a clear strategy in place to manage the costs appropriately, to aid in developing a healthy and high performing workforce, and to provide useful information and direction to staff and employees. The County's benefits consultant, Mark III, has received quotes (Attachments 1 and 2) for 2012 health insurance premiums from three major insurers (Cigna, UnitedHealthcare, and BlueCross BlueShield). Attachment 3 provides details of current and alternate plan designs. Renewal of the current PPO and HMO plans ranged from 117.86% to 130.0% of current costs. Alternate plans for a PPO and Health Savings Account ranged from 104.58% to 115.63% with significant changes to the current plan designs. The Board will approve a funding level for the health insurance renewal in the FY 2011-12 Annual Operating Budget and will consider and approve final plan design and premium structure in the Fall. Attachment 4 provides a comparison of health insurance plan designs and other employee and retiree benefits offered by other local jurisdictions and the State of North Carolina. The attached survey and the Annual Classification and Pay Study conducted by Human Resources confirm that Orange County remains competitive with regards to employee pay and benefits. Employees have voiced concern over the lack of pay increases over the last few years, and they have stated there should not be any change to health insurance benefits while salaries remain at FY 2008-09 levels. Overall, employees are satisfied with current County benefits with the exception of the County contribution of $27.50 per pay period to general employees' 401(k) or 457 plans. Although the annual contribution of $715 is not competitive with the 50 other counties that contribute to a supplemental retirement program, the value that accumulates over time is significant. Over a 30 year period, the County contribution of $21,450 could more than double with an average yield of 5.0% and triple with an average yield of 7.0%. In addition, with the reinstatement of the County contribution in 2011, employee participation increased to a higher level than before the suspension of the County's contribution in 2009. The County contribution encourages employees to invest their own financial resources for retirement. FINANCIAL IMPACT: Attachments 1 through 4 and Appendix A of the Manager's Recommended Budget include information about the estimated costs of various pay and benefits options. RECOMMENDATION(S): The Manager recommends that the Board discuss employee pay and benefits for FY 2011-12 and provide direction to staff.