Benefits changes have little impact on Mayor Wharton, but affect some council members

Oct. 04--Memphis Mayor A C Wharton convinced the City Council this year to cut retiree health care subsidies, and he's also asked the council to reduce pension benefits for new workers.

But these cuts would have little impact on Wharton himself.

The mayor receives most of his benefits not through the city, but through Shelby County, where he logged decades of service as public defender and county mayor. Now 70, he receives a county pension of $83,000 per year, on top of his city salary of $171,000.

Wharton's not yet eligible for a city pension, and when he qualifies, it would likely be far smaller than the county pension. He's also eligible for a health insurance plan through Shelby County that costs less than comparable city plans.

In April, Wharton proposed cutting most subsidies for retiree health care, calling the cut a painful but necessary step to save money for the city's troubled pension fund. The City Council approved a retiree health care subsidy cut on June 17, then faced vehement protests and took steps to partially reverse it -- now the original cut faces a court challenge. Wharton has also asked the council to consider moving to a less generous pension plan for new city workers and those with less than 10 years' experience. Debate on that is expected to restart this month.

Wharton said the fact that he doesn't depend on city medical and pension benefits helps keep him objective. "Because I have no vested interest one way or the other, I can hold true to my oath for doing what's best for the city of Memphis, both short term and long term," Wharton said. "I have said openly there's nothing in this politically for me, quite the contrary. And at the same time, there's nothing in it personally in terms of gain or loss."

He pays premiums to Shelby County for life insurance as well as dental and cancer coverage. He's covered under the federal Medicare program and he also pays $65 per month for a county-subsidized Medicare supplement plan for himself and his wife. Medicare typically pays about 80 percent of medical costs and supplement plans help fill the gap.

A city employee would pay $440 per month for premier-level family health insurance coverage. And starting Jan. 1, the city drops its practice of paying a 70 percent insurance subsidy for retirees, and the retiree must pay the entire amount. Different groups of retirees pay different sums, but Medicare-eligible retirees over 65 with premier-level family coverage would pay $1,647 per month, so much that most would be priced out.

The $65 premium Wharton pays for the county's Medicare supplement plan is far lower than the cost of the new Medicare supplemental plans the city is offering to pensioners as an alternative to city coverage. Two-person rates range from $199 to $390, depending on the plan.

Some commenters on the Facebook page "I Have Been Negatively Affected by The City Of Memphis Council Vote!!" characterize Wharton as wealthy and out of touch, making sarcastic references to the city-owned Cadillac he uses.

"I understand the symbolism of that and things like that do matter," Wharton said. "And I'm not gonna be arrogant and say 'So what? I got a Cadillac.' I understand that. These are tough times. Not only do we have the imperative to do the right thing, there's also an imperative to make it appear that you're doing the right thing."

Wharton says he can relate to the anxiety and hardship that some employees and retirees face, citing difficulties his late parents faced and his experience representing indigent clients as an attorney. He said he knows that $50 or $100 per month can represent a big amount for someone on a fixed income. "To the contrary, your expenses are never fixed."

The Commercial Appeal obtained information about the mayor's pension and benefits through public records requests. The records show that unlike Wharton, some city leaders are affected by the benefits changes.

Seven of the 13 council members use city health insurance: Joe Brown, Harold Collins, Edmund Ford Jr., Janis Fullilove, Wanda Halbert, Reid Hedgepeth and Myron Lowery. Three council members are currently eligible for city pensions: Bill Boyd, Brown and Lowery.

Fullilove said she depends on city insurance to cover herself and her husband, who has numerous health problems. She was the only council member who abstained when the council voted June 17 to boost premiums for both retirees and employees 24 percent, an action Wharton's administration said would avoid deficits in the health care fund. In addition, the state comptroller wants the city's funds to end the year with a positive fund balance.

Fullilove said the increase has hit her hard and that her situation makes her more empathetic to those affected by the cuts. "Because I know it's hurting me so bad that I'm looking for another job at maybe Macy's, or Walmart or Family Dollar or somewhere where I can supplement my income. Because I'm not able to make it," said Fullilove. (City Council members earn $29,000 annually for their part-time council work and Fullilove also earns money as a talk radio host.)

Wharton's administration had originally asked council members to raise premiums 57 percent. The proposal to limit the increase to 24 percent came from Ford, a council member who's also covered by city health insurance. In an interview, Ford said he switched to city insurance because it offers better benefits than he can get through his job as a math teacher at Central High School.

"A lot of people don't realize that the city of Memphis plan can be considered a very rich plan. Even with a 24 or 57 percent increase, that plan is significantly less than one with entities such as Shelby County Schools itself," he said.

Should City Council members do more to disclose that the decisions they make on health insurance and pensions could benefit themselves? The city Code of Ethics requires all members of boards to announce in advance if a vote might benefit them personally, and that they may recuse themselves.

But City Council attorney Allan Wade said votes on employee benefits are like votes on property taxes that affect everyone, including council members. "I think you can have some incidental benefit from every vote they take," he said. Unless there's a special benefit to the group themselves -- City Council members, for instance -- there's no need to disclose it, he said.

One outside expert agrees. Kathleen Clark is a law professor at Washington University in St. Louis who specializes in government ethics. She said some conflicts of interest are inevitable -- for instance, a decision on frequency of garbage pickup affects everyone, and she believes decisions on health and pension benefits fall into that category.

"Isn't it clear to the public that the members of the council can be affected by the legislation that they are debating? I'm not sure what kind of more robust disclosure would be necessary."

Wharton originally proposed moving new hires and those with less than 10 years' experience into a 401 (k)-style system, but he said more recently that he's discussing a wide variety of money-saving plans with council members.

Changes in pension rules would likely have little immediate impact on most City Council members. Most stand well short of the 25 years of service needed to qualify for most city pensions, and the council voted in 2004 and 2010 against a policy that allowed elected and appointed officials to qualify for a pension after just 12 years.

City Council members are scheduled to reopen the debate on pension benefits on Oct. 21, when their independent experts with The Segal Company offer a briefing.

For a member-by-member breakdown of the benefits provided to the Memphis City Council, click here.

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About subsidy cuts, premium increases

In the debate over city of Memphis health insurance, what's the difference between a premium increase and a subsidy cut?

A premium is an amount paid for insurance coverage, usually each month. In this case, think of the health insurance premium as a pie that's split between the employee or retiree and the city of Memphis.

The 24 percent premium increase means the pie gets bigger. For instance, the total premium for city employees covered in the premier-level family plan increased from $1,190 to $1,476.

But the government subsidizes the insurance by paying roughly 70 percent of the pie. That leaves the employee to pay the other 30 percent. When the 24 percent increase took effect in September paychecks, employees saw their monthly share rise from $355 to $440.

The subsidy cut does not apply to employees, but it applies to some groups of city retirees. It means that they have to pay 100 percent of the premium.

For example, consider retirees over 65 who are eligible for Medicare: The 24 percent premium increase went into effect last month and raised their premium for premier-level family coverage from $1,328 to $1,647, but right now they only have to pay 30 percent, so they saw their cost rise from $334 to $415. Starting Jan. 1, they'll have to pay 100 percent of the pie, $1,647. That's far more than most could afford and the city is proposing shifting them to Medicare supplemental insurance.

A lawsuit aims to stop the subsidy cuts from taking place at all -- a hearing is scheduled for Monday. But the lawsuit does not challenge the 24 percent premium increase.

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