Lansing Will Eventually Nix Retiree Health Care For All Employees After Reaching Deal With Firefighters

LANSING — Lansing will eventually close out its retiree health care account, after reaching a deal with firefighters to eliminate city-sponsored post-employment health care for fire department employees hired after Jan. 1, 2021.

The change will make a dent in the city’s legacy costs, which are underfunded in the long-term by hundreds of millions of dollars, city officials say. 

The rest of the bargaining units in the city, including the UAW and unions representing police, agreed as part of their recent contracts to eliminate retiree health care for new hires. And the city is already phasing out retiree health care for non-unionized employees, Mayor Andy Schor said.

Contract also includes raises

The fire union was the last holdout until City Council approved a three-year contract Monday night with the Local 421 chapter of the International Association of Fire Fighters. The contract takes effect retroactively to July 1, 2019.

New employees hired by the fire department or other city departments will instead have city-sponsored health care savings accounts. The city’s contribution to those plans will be 4% of base wages and employees must contribute 3%.

The contract also includes what City Council Vice President Adam Hussain referred to as “modest” raises of 2.5% the first year, 2.5% the second year and 2% the third year. The raises will take effect retroactively with back pay.

Lansing health care accounts considered ‘underfunded’

Lansing has not invested enough money to cover more than $730 million in pension and retiree health costs expected to come due over the next several decades,.

It’s not clear exactly how much of a dent eliminating retiree health care for the fire department and the rest of the city will make. Lansing’s Chief Restructuring Officer Judy Kehler said Monday she could not yet provide a monetary estimate.

“We are working with our actuary to fine tune the data,” Kehler wrote in an email.

Lansing’s retiree health care system is 13% funded for police and fire and 27% funded for other employees, according to a 2020 report submitted to Michigan’s Department of Treasury. Both of those ratios are low enough to trigger “underfunded” status from the state.

Lansing’s pension system is 64% funded for police and fire and 57% funded for other employees, according to the report.

Schor agreed to compromise on health care changes after criticism

The city faced the threat of legal action last year after Schor announced he would scale back health care offered to Lansing retirees to mirror plans offered to active employees. Those changes, set to take effect Jan. 1, 2021, would have saved an estimated $8 million annually, according to the city.

Following protests from retirees, Schor instead reached an eleventh-hour compromise with unions, which the city says will save $3.5 million annually.

Under the compromise plan, retirees under 65 maintain their previous coverage under Blue Cross Blue Shield of Michigan or Physicians Health Plan, according to the city. Retirees 65 and over switched to Humana Medicare Advantage this year.

Schor had pursued changes to retiree health care based, in part, on recommendations from the consulting firm Manquen Vance.

At the start of 2020, Lansing agreed to pay  Manquen Vance $120,000 annually for three years to study the city’s benefits and develop a strategic plan, according to a contract obtained via a Freedom of Information Act request. 

The latest fire department contract states that health care plans for members who retire after March 8, 2021 will mirror health care offered to active employees.


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