REPORT TO COUNCIL
SUBJECT
Title
Authorize the City Manager to execute a Side Letter Agreement between the City of Santa Clara and Unclassified Miscellaneous Management Employees (Unit 9) Regarding Healthcare Benefits
Report
COUNCIL PILLAR
Enhance Community Engagement and Transparency
BACKGROUND
The Unclassified Miscellaneous Management Employees of the City of Santa Clara (hereafter, “Unit 9”) Memorandum of Understanding (hereafter, “MOU”) expires on December 31, 2024.
The City and Unit 9 began negotiations on a successor MOU in February 2024 and met approximately nine (9) times. Since the MOU is expiring and in an effort to continue successful negotiations on a successor MOU, the parties agreed to a Side Letter to expand the health insurance to align with eight (8) other bargaining units in the City. Additionally, updating the health insurance benefit will qualify the City to be a bona fide benefits plan. On or about September 3, 2024, Unit 9 notified the City that the Side Letter was ratified by Unit 9 membership.
DISCUSSION
The recommended action authorizes the City Manager to execute a Side Letter Memorandum of Understanding with a term of December 31, 2024, that incorporates the terms to extend the employer contribution for employee plus family coverage effective January 1, 2025. Currently, the maximum coverage is set at the employee plus one level.
Effective January 1, 2025, the City will pay 100% of the premium of the lowest-priced Kaiser (Region 1) plan for employees in Unit 9 enrolled at the Employee Only and Employee Plus One levels, and 90% of the premium of the lowest-priced Kaiser (Region 1) plan for employees in Unit 9 enrolled in the Employee Plus Two or More level. Employees who select a plan whose premium exceeds the City contribution described above will be responsible for the difference. Employees will not receive any portion of the City’s contribution as cash or any other taxable benefit.
Current employees hired on or before December 31, 2023, who choose not to enroll in a City health plan and meets the requirements set forth in the MOU shall continue to receive a cash-in-lieu amount equal to $946.86/month, while employees hired or rehired on or after January 1, 2024, shall receive a cash-in-lieu amount of $250/month. The cash in-lieu amounts are unchanged.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
The City regularly budgets the total compensation cost for its current employees and integrates known and projected cost increases from MOUs in the City’s annual budget. The ten-year forecast also incorporates the projected labor costs. The costs of this MOU are within budget authority approved by the City Council through the negotiation process.
The costs associated with the changes to healthcare cannot be determined at this time as the City cannot predict enrollment behavior, especially with the change to the City paying 90% of the lowest priced Kaiser (Region 1) premium for employees who enroll in Employee Plus Two or More level. However, if the enrollment levels remained status quo for plan year 2025, the City is anticipating an approximate $163,000 increase.
The costs in FY 2024/25 are expected to be absorbed within existing departmental budgets and the ongoing costs will be incorporated into the FY 2025/26 and FY 2026/27 Biennial Operating Budget.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov>, or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Authorize the Office of the City Manager to execute a Side Letter Agreement between the City of Santa Clara and Unclassified Miscellaneous Management Employees (Unit 9) in the form presented, extending the employer contribution for medical insurance premiums to 90% of the lowest Kaiser rate for employee plus family coverage, effective January 1, 2025
Staff
Reviewed by: Aracely Azevedo, Director of Human Resources
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Side Letter - Unit 9 Health Insurance