CR 91-16 Amendment Early Retirement Insurance
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January 7, 1991 Report #91-16
AMENDMENT TO THE EARLY RETIREMENT
INSURANCE BENEFIT POLICY
Proposed Action.
No action is necessary on this item. council lS being informed of
this amendment to the Personnel Policy as per Section 315.03 of the
Hopkins city Code. This item is being presented for the Council's
review and possible discussion.
overview.
The city of Hopkins instituted a program in 1985 that allowed
employees to retire early and still receive single health benefits
until they reached the age of 65. A number of employees have taken
advantage of this program since then.
I am proposing that the program be expanded for a one year period as a
. cost saving measure. Employees who have reached the top of their pay
range will be replaced by employees at the beginning of the pay range.
I am hopeful that the City will experience considerable savlngs In
expenditures by amending this program. It is part of the overall
planning which staff is doing in response to the anticipated cuts in
LGA.
Primary Issues to Consider.
o Can this program be amended by changing the personnel policy?
o How will the program be changed?
o Why should this change be made?
o Why should the program be eliminated at the end of 1991?
Supportinq Information.
o Examination of the issues.
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~teven Mielke, city Manager
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Early Retirement Policy
page Two
Primary Issues to consider.
o Can this program be amended by changing the personnel policy?
This program was established by council action. It has since
been made part of the Personnel Policy. section 315 of the
city Code allows the City Manager to amend the Personnel
Policy.
When this program was instituted it was made clear that it
would be reviewed on a regular basis and ended if the cost
became excessive.
o How will the program be changed?
For the remainder of 1991 the age of eligibility will be
lowered by five years. This will be age 50 for police
officers and age 55 for the other employees. At the end of
~ 1991 the entire program would be ended.
o Why should this change be made?
The need to reduce expenditures is apparent. The Minnesota
legislature will soon be taking action that will likely reduce
the amount of aid promised to Hopkins for 1991. By offering
this retirement incentive in 1991, employees who have been
with the city for many years and have reached the top of their
pay range can retire early and be replaced by new employees
who will be paid at the beginning of the pay range. This pay
differential will exceed the added cost of the retirees'
health benefits, and therefore lower expenditures in 1991.
The actual amount saved depends on how many employees take
advantage of the program and when they retire. staff expects
the savings to range from $10,000 to $25,000.
There will be some loss of productivity as inexperienced
employees replace experienced employees. This disadvantage
will disappear over time, as the new employees gain
experience, while the savings will continue for a number of
years.
o Why should the program be eliminated at the end of 1991?
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The cost of health insurance is still rising at a rapid rate.
~--- The City currently has an open ended commitment to allow
employees to retire early. The city needs to review the
effects of the program.
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Early Retirement Policy
Page Three
This one year expansion of the program will "capturell a number
of employees who would have normally been eligible for the
program in the next few years. If the savings are as great as
expected, and productivity losses are manageable, the City may
offer early retirement options again in the future.
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