More Information and FAQs on New Retiree Health Benefit for Employees Hired after July 1, 2005
On April 7, MEA announced a Tentative Agreement (TA) with the City for a new three-year MOU. The TA includes a new Retiree Health benefit for MEA-represented employees hired on or after July 1, 2005 and who are still on the City’s payroll when the new MOU takes effect on July 1, 2026. The purpose of this E-blast is to provide more detailed information about this benefit.
First, here’s a “short” explanation of the new retiree health benefit before we get to the more detailed “frequently asked questions” (FAQs) below:
MEA’s TA requires the City to establish a new retiree health reimbursement plan for MEA-represented employees hired on or after July 1, 2005, who are still on active City payroll when the new MOU takes effect on July 1, 2026, or who are hired thereafter. The plan will be structured like the “Option C” plan currently available to employees hired before July 1, 2005 but will provide a benefit level equal to 75% of the benefits available under the original Option C. The money in this health account can be used to pay for reimbursable health expenses after the employee retires (separates) from the City, including health premium payments, medications, dental and vision expenses, and other out-of-pocket medical costs. Funding of the benefit will not begin until July 1, 2028, meaning that your benefit will not be funded until after July 1, 2028 even if you become age and service eligible in the next two years.
FAQs:
Q: What if I was hired before July 1, 2005?
A: Employees hired before July 1, 2005 already have a retiree health benefit (“Option A, B or C”). If you were hired before July 1, 2005, this new benefit for employees hired after July 1, 2005 has NO effect on your existing benefits which remain in place exactly as promised.
Q: If I was hired on or after July 1, 2005, how many years do I need to work for the City to qualify for this new retiree health benefit?
A: You become eligible to receive the City’s funding of your retiree health benefit when you reach the age and service requirements for retirement eligibility. This means eligibility when you reach 20 years of service between age 55 and 62, or when you reach at least 10 years of service at age 62 or after. At the time of retirement eligibility the City will make a one-time defined contribution to your retiree health reimbursement account.
Q: I am planning to retire after July 1, 2026 but before July 1, 2028. Since the City’s obligation to fund this benefit begins on July 1, 2028, do I have to stay employed with the City until then to get the benefit?
A: No. You just need to be on the payroll as of July 1, 2026 and meet the benefit’s age and service eligibility requirements. Once you do, you may retire or separate from City service and you will still receive the funding after July 1, 2028.
Q: Do I have to actually retire once my retiree health benefit gets funded?
A: No! Your benefit will be funded but you may continue to work while the funds in your account grow through the investment returns earned.
Q: How much do employees have to contribute to pay for this benefit?
A: There are no required employee contributions. The initial funding for this important benefit will come exclusively from the City and, thereafter, will grow according to investment choices/returns.
Q: What is the amount of the benefit?
A: The maximum lump sum benefit will be approximately $75,000 for employees who reach 20 years of service at age 55; a prorated benefit amount less than $75,000 will be paid for those who reach 20 years of service at a later age, or who have at least 10 years of service after age 62.
Q: For employees who ultimately reach 20 years of service with the City at age 55, what are these benefit numbers exactly?
A: For employees who will reach 20 years of service at age 55, the benefit amount for females is $76,128 and $74,240 for males. If you reach 20 years of service after age 55, your benefit amount is prorated. For instance, if you reach 20 years of service at age 60, your benefit amount is $70,220 for females and $67,793 for males. In the Excel spreadsheet linked at the bottom of this article, in “Table 1” you will find the exact benefit amounts for employees who reach 20 years of service at all ages between 55 and 80. These amounts are based on actuarial principles related to life expectancy.
Q: For employees who ultimately reach 10 years – but not 20 years – of service with the City, what are these numbers exactly?
A: In the Excel spreadsheet linked at the bottom of this article, in “Table 2” you will find the exact benefit amounts for employees who reach at least 10 years of service at all ages between 62 and 80. For instance, if you are female and have 15 years of service with the City at age 62, your benefit will be $50,603 and $48,600 if you are male. In addition, if you have at least 10 years of service and are still employed by the City at age 62, you will receive additional retiree health account contributions for each year that you continue to work at the City. These amounts are detailed in “Table 3” of the Excel spreadsheet linked at the bottom of this article.
Q: Why are there different amounts for men and women?
A: When the original “Option C” benefit was developed, the lump sum amount was calculated based on a projected annual yield for an employee’s life expectancy at the time of retirement eligibility. Because men and women have different life expectancies, the actuaries who calculated the lump sums applied accepted actuarial principles yielding slightly different dollar amounts.
Q: Once funded by the City, where does my money go?
A: Retiree health benefit funds get deposited in your name to the San Diego City Employees Retiree Medical Trust (SDCERMT). Created in 2012, the Trust operates independently of the City and is governed by five City unions (MEA, AFSCME Local 127, POA, DCAA and Teamsters Local 986). The Trust is professionally administered by Gallagher HealthInvest HRA.
Q: How are my funds invested?
A: You choose how your funds are invested. There are six investment options of varying risk.
Q: How and when do I access my funds?
A: You may not use or withdraw these funds while you continue to be employed by the City. Once you actually retire and separate from City employment, your retiree medical trust funds become available to you for medical expenses during your retirement. Qualified medical expenses include insurance premiums, Medicare supplement premiums, co-pays, medications, dental and vision care, medical equipment and a broad array of other tax-qualified categories of out-of-pocket medical expenses.
Q: Can anyone other than the employee use the benefit?
A: Yes, a retiree can use this benefit for medical expenses for the retiree’s spouse or tax-qualified dependents. Upon the retiree’s death, withdrawals for medical expenses may continue to be made from any remining funds until the retiree’s spouse or other tax dependents have also died; thereafter, any remaining funds revert back to the Trust.
Q: I have the years of service necessary to qualify for the benefit, but I am thinking of leaving City employment before I reach the required age for eligibility. Will I lose out on this benefit if I leave City employment?
A: No, as long as you are on the City’s payroll as of July 1, 2026 and have satisfied the minimum service requirements, you may leave City employment before becoming age eligible. Then you will be funded when you do become age eligible or after July 1, 2028, whichever is later.
Q: I was hired after July 1, 2009. What happens to the “.25%” contributions I’ve been making into a Retiree Medical Trust and the City has been matching?
A: Effective July 1, 2026, this .25% contribution will stop, meaning both the employee’s .25% contribution and the City’s matching .25% will no longer be contributed to the Retiree Medical Trust. However, 100% of the funds already contributed by the City and the employee to the employee’s account as of June 30, 2026, will remain yours alone and will continue to be invested and available to each employee consistent with the existing rules related to those accounts.
We hope this information is helpful in further defining the new retiree health medical benefit for MEA-represented employees hired on or after July 1, 2005 who remain employed as of July 1, 2026 when the new MOU takes effect.
If you have other questions or need clarification on any of this, or have any feedback or questions about anything else, as always don’t hesitate to contact MEA at info@sdmea.org or 619-264-6632.
Option C Tables – 75% Funding (General Employees)
