CC WORKSESSION 02041997 - Laserfiche WebLink

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25- MEMORANDUM DATE: January 27, 1997 TO: Mike Morrison, City Manager FROM: Roger Larson, Finance Director ITEM: REVIEW OF EARLY RETIREMENT In years 1991, 1992 and 1993, the State of Minnesota authorized Cities to offer an early retirement incentive to public employees who were age 55 and had completed 25 years of service. Each City had the option of approving an increase in the PERA formula by 1/4% or paying single health insurance coverage premiums (until age 65) as an encouragement to retire early. For years '91 and '92 Council approved the single health insurance premium option as an early retirement incentive and chose not to participate the third and final year. The basic concept of the early retirement incentive was to allow employees who wished to retire early an opportunity to do so and at the same time save money for the participating Cities'. The savings is realized because employees who are near or close to retirement are at the top of their wage scale. Because the new employee starts out considerably less, a savings results (see attached example). In preparing these analysis', it becomes apparent that the results can vary depending upon the length of time the City is obligated to pay health insurance premiums. Upon testing several different employees, the follow appears to be evident: 1) Age 55 - Ten years of health insurance premiums results in no benefit to the City. 2) Age 60 - Five years of health insurance premiums results in a break even situation for the City. 3) Age 62 - Three years of health insurance premiums results in a savings to the City and is a cost effective method of reducing expenditures. PERA has advised me the incentive package_ will not be offered in 1997 and that it is highly likely this program will never be offered again. However, St. Anthony can formulate its own policy without violating any PERA or State requirements.