The city’s Fire and Police Pensions board has been advised that retiree healthcare benefits are guaranteed, prompting one employee group to ask that a cap on benefits be blocked from going into effect.

By David Zahniser, Los Angeles Times
September 28, 2011

The cornerstone of L.A. City Hall’s recent plan to fix its finances and rein in soaring retirement costs has been thrown into jeopardy.

Faced with a growing pension burden, Los Angeles Mayor Antonio Villaraigosa and the City Council moved this summer to freeze the amount of healthcare benefits given to thousands of police and firefighters once they retire. Those benefits would not increase in coming years, Villaraigosa said, unless employees contribute more toward retirement from their paychecks.

But in a reminder of the risks faced by local agencies when they tinker with public pension benefits, a law firm retained by the city’s Fire and Police Pensions board concluded this month that those benefits were already guaranteed — and that the city is legally obligated to cover the cost of rising healthcare premiums for its retirees.

One group of retirees has already begun calling on the pension board to block the cap on health benefits from going into effect. Meanwhile, civilian city workers have begun demanding their own legal opinion to determine whether they too should be spared from new limits on their retiree healthcare.

City Administrative Officer Miguel Santana, the city’s top budget official, said the decision to freeze the monthly medical payment for retirees was the single most significant step toward balancing this year’s budget. If that decision is reversed, the city will face a $100-million hole in its budget, Santana said.

Villaraigosa went further, describing the arguments in the legal opinion provided to the pension board as “absolutely ludicrous.” The pension board has nine members, five of them selected by the mayor.

“I believe we’re absolutely on strong legal ground,” he said.

Pension and retirement costs have been steadily rising in recent years, consuming $769 million of this year’s general fund budget, which pays for basic services such as parks and public safety.

Retired police officers and firefighters now receive a monthly healthcare stipend of $1,097 per month, enough to cover a monthly premium for two people enrolled in either Kaiser or a Blue Cross HMO, according to city officials.

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