Health Care Trust Section Reference Concera/lssue ‘Comments | Section 1, Section 5 Placement of this legislation within the linois Compiled Statutes is unclear and determines how the plan would be implemented and managed. “There are many reasons that placement of this language within the Pension Code, Chapter 40, Act 5 would be advantageous, ‘most notably for issues regarding Trustee lability and indemnity. Ifthe legislation were to be elsewhere in the ‘Statutes issues regarding establishment of a Voluntary Employees Beneficiary Association (VEBA) and related Trust, ‘compliance with ERISA and other tex-qualification matters need to be addressed. Provisions relating to bankruptcy of the Health Care Trust ae not addressed should this section be outside of the Pension Code, Note: The Chicago Transit Authority Retiree Health Care Trust isin the Pension Code at ‘Scction 22-101B et seq Esiablishment ofa Trust effective Fanuary 1.2020 Ththe Health Care Trustis designed to be a VEBA under an IRS qualified retirement progeam, time will be necessary to draft, approve and set-up the legal structure and related docoments in accordance with IRS regulations. In addition, budgets for 2020 may be established well before legislation finalized, However, the stabilization fund needs to be available prior to day 1 of healtheare benefit payments, Dollar amounts For the budget stabilization fund and initial contribution to the annuitant health eare trust are not etailed. F [Bection SO) and (2) “The Board of Trustees Is comprised of a members, thee of which shall be appointed by the President and three of ‘hich are elected trustees. ‘This composition may lead to an inefficient decision-making process andior impasse on various matters. For example, adoption ofthe healthcare budget requires a majority vote of | the trustees. In the event the two representative groups of Trustees cannot agree on the budget, the budget process and related negotiations may become subject to matters outside the interest of the annvitans. In addition this structure may requireSecilon Reference ‘Concerafiseue Comments ‘dual committees (Le. investments, finance, budget). Note: The (Chicago Transit Authority Health Care Trust has a Board of 7. Seation 5) Payments By the Couniy shall be made at least quarterly and the budget stabilization fund is only tobe used to absorb annual variances from budgeted seyenues and expenditures. Funding of medical olaims to the third-party administrator is currently provided weekly. Itis very likely that a significant cash deficit wil result while awaiting quarterly payment from the County. ‘Seotion 5) ‘The County and the Board of Trustees of ‘the Annuitant Health Care Trust may ‘agree in writing to issuance of bonds o ther debt instruments to make County contributions to the Health Care Trust, mous agreement by the Board of Trustees ‘would be required in tis situation or majority. In addition, the Board of Trustees would not want to be involved in obligatory finance matters of the County Section 5) and Seation 5(i) “The annual amount contributed by the County is to strictly be used to finance and fund the Health Trust for health benefits and programs for the year in whieh it is contributed “The ability ofthe Healh Trust generate a surphis is important to assist in payment of claims into the subsequent year and for other financial operational matters. The Tegislation does not address the administration of any surplus or deficit generated outside of a reserve for incurred and unreported claims (IBNR) plus 6 montis of expected claims ‘and administrative issues. Section 5(@) Tereases of County contibutions are to be determined by annual unadjusted pereentage increase in the consumer price index-u "Actuaral-based projections are not considered. An inflationary healthcare index is not considered. Increases due to enrollment ‘are not considered. In general, medical care experiences. increases higher than CPI-U. CPI-U is US average and not specific to Chicago-metro area. CPI-U adjusts for price, while health trend has significant utilization and technology elements. Note: The CTA Retites Health Care Trust utilizes actuarial projections, Sestion 3) Funding reserve Tevel shall nat be less ‘than the amount of incurred and ‘unreported claims plus 6 months of expected claims and administrative expenses. ‘A G-month timefame provides limited margin to correct unfavorable experience. The CTA Retiree Health Care Trust requires IBNR plus 12 months of expected claims and ‘expenses. In addition, the Funding of the reserve is unclear, as the budget stabilization fund is nol to be utilized other thanSestion Reference ‘Concerniissue ‘Comments ‘variances from budget. An upfront extra eontibutfon beyond ‘the annual allocation is necessary. 10. | Seation 51%) ‘Staff ofthe Pension Fund shall be used by’ It isnot clear as to which Board (the Pension Plan or the Health the Board of Trustees of the Health Care| Care Trust) approves the allocation, how often the allocation is ‘Trust. The Board of the Health Care | to be completed or the basis ofthe allocation. This will add ‘Trust shall reimburse the Pension Fund | administrative efforts to staf to determine a precise allocation for administrative costs (ie. overhead, shared staff, shared resources). [tis possible that overall administrative costs will increase as staY assigned to specifi programs (Health Care versus Pension) and inherent confliets between staff of the Health Care Trust and Pension Fund may develop. The oversight ofthe staff forthe Health Care Trust is not detailed (i. role of Executive Director of the Pension Plan with respect to the Health Core ‘Trust. Ti. | Section 9201.1 | Allows forthe Pension Pian to provide | Timing and frequency of reimbursement is not addvessed. tn various administrative services asare | addition, a scenario in which the Health Care Trust does not necessary for the Health Care Trust with | have adequate cash or becomes insolvent, and is thus unable to reimbursement from the Health Care” | reimburse the Pension Plan is not addressed ‘Trust to the Pension Plan. 2 ‘Matters not addressed T) Changes to Section 9-259 does not indicate obligation 1) Language not make ctear that if sliinishment of benefits, liability ‘ests with the Health Care Trust. 2) Interoept language if funding to Health Care Trust not provided. 3) Definition of annuitants is not provided. for health care subsidies or any related matter are extinguished. 2) Pension Fund intercept language is at Section 9-184.5 3) Currently coverage of health cere benefits includes ‘annuitants, spouses and dependents