LATHROP – Retirees who would otherwise see a hit to their post-employment medical benefits will now get the opportunity to pay into a fund that can be used to cover the cost of post-retirement insurance.

On Monday the Lathrop City Council approved a plan that will set up a retiree health savings plan that allow employees to pay two-percent of their annual salary to the pre-tax account that can then be used to fund health services after an employee reaches retirement age. 

In a memorandum of understanding signed last year by the city’s two represented bargaining units, reductions to the city’s existing health retirement plan for new retirees were set to go into effect and the city agreed to pay into an Other Post Employment Benefit (OPEB) trust through CalPERS – the State of California’s Public Employee Retirement System. To help mitigate the impact, the Lathrop Municipal City Employees Association suggested the establishment of the RHS plan and members unanimously agreed to the two-percent payment that will provide funding for post-retirement benefits.

The cost of setting up the plan will be incurred by LMCEA members, and the city will act as an administrator to take care of the benefit payments.

An opportunity for the same mechanism will be provided for members represented by Service Employees International Union when the formal request comes back in from union leaders. In the past, according to the city’s staff report, the union has hinted at wanting to provide something similar to its members.

The rising cost of employee retirement benefits and the number of employees reaching retirement age has made navigating the escalating costs a challenge for municipal administrators.

There will be no cost to the City of Lathrop or taxpayers, and the cost of payroll processing will be incorporated into the normal monthly workload.