Pensions, Benefits Cost City $9 Million
WHEELING — Almost one-fifth of what it costs the city of Wheeling each year to protect its residents and provide essential services is spent before those services are ever provided.
Despite steps taken in recent years to control pension costs, contributions to employee retirement funds and health insurance premiums continue to account for a significant portion of the city’s budget. Of the $48.7 million dollars the city expects to spend this year between the general fund, water and sewer budgets, more than $9 million — or over 18 percent — goes toward pensions and health care.
On employee health insurance, the city is set to spend about $4.1 million during the current fiscal year. The city pays 80 percent of the overall premiums, with the remaining 20 percent paid through full-time employees’ $313 average monthly premium payments.
City Manager Robert Herron said he expects these premiums to once again rise in the city’s 2017-18 fiscal year, following a nearly 10-percent increase from fiscal years 2015-16 to 2016-17. He could not yet say to what degree. The city purchases its health insurance from The Health Plan.
Herron said the city has not felt significant effects from the Affordable Care Act, but he said if a particular provision of the legislation, known as the “Cadillac tax,” kicks in as it’s expected to in 2020, city employees would pay an additional tax on their coverage.
The provision is a 40-percent excise tax on high-cost, employer-sponsored health plans. Its purpose would be to further finance the ACA and discourage excessive health care spending by employees and employers.
However, if the Republican-led House of Representatives and Senate follow through with the occurring process to repeal the ACA, this provision may no longer exist.
“We constantly review ways to save money on health insurance because it is a situation where not only the city pays, but the employees pay,” Herron said.
Health care expenses fall just below the $5 million set aside in the city’s budget to cover police and fire department pensions. Herron said this number will likely fall a bit in the next operating budget.
While former Mayor Andy McKenzie was in office, Wheeling City Council made the decision in 2014 to close enrollment of the city’s police and fire pension plans and direct all new hires to a state-run plan. This was done to control mounting pension contributions, which were mandated by the state to increase by 7 percent each year under the old system.
Also, the former council established a deferred retirement option plan for firefighters as a means of retaining veteran staff as well as saving on pension costs. Eight full-time personnel with the department are currently enrolled.
The program is designed so firefighters at least 50 years and 6 months of age, with a minimum of 20 years of service, can freeze scheduled pension payments, continue working and collect their usual salaries. They may do this for up to five years, after which the pension payments they would have received during their extended employment is paid in a lump sum.
While those payments are held by the city, they collect whatever market return they generate while invested in the pension.
The city does have a pension plan for non-police and fire employees, but Herron said the city isn’t making contributions to the plan because it’s been overfunded for a number of years.
That fund contains approximately $35.37 million, according to Herron, which is about $4 million more than what’s needed to cover all current obligations.