Please bring the June 27 GO Committee packet for the June 28
Council Session
Agenda Item 8
June 28,
2011
Action
MEMORANDUM
June 27,2011
TO:
FROM:
SUBJECT:
County Council
Robert
H.
Dnunmer, Senior Legislative
Attorney~_
Other Post Employment Benefits Trust
f;
Action:
Expedited Bill 17-11, Personnel
County funded Agency
Government Operations and Fiscal Policy Committee recommendation (3-0): approve the
Bill with amendments.
Expedited Bill 17
~
11, Personnel - Other Post Employment Benefits Trust County ­
funded Agency, sponsored by Council President Ervin, Councilmembers Navarro, Floreen,
Andrews, Riemer, Rice, Leventhal, EIrich, and Council Vice President Berliner was introduced
on May 26, 2011. A public hearing was held on June 14 and a Government Operations and
Fiscal Policy Committee worksession was held on June 27.
Bill 17-11 would amend the Retiree Health Benefits Trust (RHB) to provide a funding
mechanism to pay for other post employment benefits (OPEB) for employees of Montgomery
County Public Schools (MCPS) and Montgomery College (College).
The Bill, as introduced, would create· a I5-member Board of Trustees that includes the
current 13 members of the Board ofInvestment Trustees (BIT) and 1 member from MCPS and I
member from the College. The 13 members of the BIT are:
1. Director of Management and Budget
2. Director of Finance
3. Director of Human Resources
4. Council Staff Director
5. 1 OPT/SLT Bargaining Unit Representative
6. 1 Police Bargaining Unit Representative
7. 1 Fire Bargaining Unit Representative
8. 1 active non-represented employee
9. 1 County retiree
10. 4 public members knowledgeable in pensions, investments, or financial matters
 PDF to HTML - Convert PDF files to HTML files
June 27 Worksession
The Committee reviewed the Bill and several potential amendments. Larry
A.
Bowers,
MCPS Chief Operating Officer, Susanne DeGraba, MCPS Chief Financial Officer, Susan
Madden, Montgomery College Chief Government Relations Officer, Amy Moskowitz, Associate
County Attorney, and Linda Herman, Executive Director for the Board of Investment Trustees
answered questions from the Committee.
The Committee made the following recommendations (3-0):
1.
Amend line 23 of the Bill at ©2 to add "prescription drug plan" to the definition
of retiree benefit plan.
Amend the composition of the Board to add two additional members from MCPS
and two additional members from the College. This would increase the Board
from 15 to 19 members. See lines 82-105 of the Bill at ©5-6.
The MCPS members must include:
(A) a designee of the Superintendent;
(B) an active employee of the Montgomery County Public Schools
who is a member of a bargaining unit; and
(C) a retiree of the Montgomery County Public Schools.
The College members must include:
(A) a designee of the President;
(B) an active employee of Montgomery College who is a member of a
bargaining unit; and
(C) a retiree of Montgomery College.
2.
3.
Approve the Bill with amendments.
This packet contains:
Expedited Bill 17-11
Circle
#
1
F:\LAW\BILLS\1117 OPEB Trust\Action Memo. Doc
2
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. _--,-17.:...-...:..1-,::1-:------:::---:­
Concerning: Personnel - Other Post
Employment Benefits Trust
County-funded Agency
Revised: 6 -27 -11 Draft No. _9__
Introduced:
May 26, 2011
Expires:
November 26,2012
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
-'N-'.l:o~n~e
_ ____:_-_ _
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President Ervin, Councilmembers Navarro, Floreen, Andrews, Riemer, Rice,
Leventhal, EIrich, and Council Vice President Berliner
AN EXPEDITED ACT
to:
(1) amend the Retiree Health Benefits Trust to provide a funding mechanism to pay
for other post employment benefits for employees of certain County-funded
agencies; and
(2) generally amend the law governing post employment benefits.
By amending
Montgomery County Code
Chapter 33, Personnel and Human Resources
Sections 33-158, 33-159, 33-160, 33-161, 33-162, 33-165, 33-166, and 33-168
By adding
Montgomery County Code
Chapter 33, Personnel and Human Resources
Section 33-169
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets))
'*
."
..
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law Wlaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No.
t
7-11
Sec.
1.
Sections 33-158, 33-159, 33-160, 33-161, 33-162,33-165,33-166,
2
3
and 33-168 are amended and Section 33-169 is added as follows:
33-158.
Definitions.
4
In this Article, the following words and phrases have the following
meanmgs:
[(a)]
Board:
The Consolidated Retiree Health Benefits Trust Board [of
Investment Trustees] established under [Article III] Section 33-160.
[(b)]
Contribution:
payment made to the Trust Fund by the County to
.QID:
benefits for County retiree benefit plans or
benefit plan.
~
5
6
7
8
9
10
11
12
County-funded agency retiree
County:
Montgomery County Government.
County-funded agency:
Montgomery College and Montgomery County
Public Schools.
[(c)]
Custodian:
The County Director of Finance.
[(d)]
Investment manager:
a person or entity who exercises discretion to
manage all or part of the assets of an institutional investor.
[(e)]
Participating Agency:
an agency eligible to participate m County
benefit plans under Section 20-3 7(b) which elects to participate in any
County retiree benefit plan.
[(0]
13
14
15
16
17
18
19
20
21
22
Retiree benefit plan:
any retiree medical plan, dental plan, vision plan,
or life insurance plan maintained by the County and administered by the
Chief Administrative Officer. Depending on the context,
retiree benefit plan
may also refer to
~
23
retiree medical plan, prescription drug plan-1 dental plan,
F:\LAW\BILLS\1117 OPEB Trust\BiII 9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
24
25
vision plan, or life insurance plan established and maintained
Qy
funded agency.
~
County­
26
27
[(g))
Trust Fund:
the Consolidated Retiree Health Benefits (RHB) Trust
Fund established to pay all or part of the benefits provided under any retiree
benefit plan.!. including
~
County-funded agency retiree benefit plan.
33-159.
Establishment
of Trust.
County Retiree Benefit Plans.
The Chief Administrative Officer must
28
29
30
(a)
31
32
33
34
35
include the terms of any County retiree benefit plan, including
eligibility and benefits, including those benefits collectively
bargained, in a plan document. All benefits must meet any applicable
Federal or State requirement.
Subject to the County's obligations
under collective bargaining agreements and the collective bargaining
laws, to the extent applicable, the Chief Administrative Officer may
amend a plan document at any time.
Subject to the County's
36
37
38
39
obligations under collective bargaining agreements and the collective
bargaining laws, to the extent applicable, any retiree benefit plan may
be terminated at any time for any reason.
No retiree benefit is
40
41
42
43
44
45
guaranteed, except as expressly provided by a contract entered into by
the County.
(b)
Establishment of Trust.
An Other Post Employment Benefits Trust,
known as the Consolidated Retiree Health Benefits (RHB) Trust,
[effective July 1, 2007,) is established to fund all or a portion of
benefits provided under the County retiree benefit plans or
~
County­
funded agency retiree benefit plan. The Trust is intended solely as a
funding mechanism to pay for County or County-funded agency
retiree benefits provided under the terms of any applicable retiree
46
47
48
49
F:\LAWISILLSlll17 OPES TrustlBill 9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
50
51
benefit plan, and does not create any obligation by the County to
provide any benefit listed in any County or County-funded agency
retiree benefit plan. Any participant in a retiree benefit plan, any
current or former County or
~
52
53
54
55
56
57
58
County-funded agency employee, or
any current or former participating agency employee, has no right to
any asset in the Trust fund.
The Trust Fund may be, but is not
required to be, the sole source of funding for any County or County­
funded agency retiree benefit plan.
(c)
Type afTrust.
The County intends that the Trust Fund:
(1)
be used to perform its essential government function of
providing benefits, including health and life insurance benefits,
to participants and eligible dependents; and
(2)
qualify as a tax exempt trust under Internal Revenue Code
Section 115.
(d)
Assets of Trust Fund.
All contributions and all earnings and other
additions, less payments, constitute the assets of the Trust Fund.
59
60
61
62
63
64
65
66
67
68
W
County-funded agency Participation.
A County-funded agency may
participate in the Trust Fund as
benefit plans.
~
funding mechanism for its retiree
A participant in any County-funded agency retiree
69
70
benefit plan, or any current or former employee of
~
County-funded
agency, has no right to the assets in the Trust Fund. The County is not
responsible for establishing, maintaining, or providing any benefit for
any County-funded agency retiree benefit plan.
71
72
F:ILAW\BILLS\1117 OPEB TrustlBili 9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
73
74
75
[(e)]
ill
Exclusive Benefit.
The Trust Fund must be held for the
exclusive benefit of participants in retiree benefit plans and eligible
dependents, and used only to provide benefits and defray reasonable
expenses of administering retiree benefit plans.
Trust Fund assets
76
77
must not revert to the County or
f!
County-funded agency unless the
County or the County-funded agency terminates all retiree benefit
plans. Some funds may partially revert to the County if at least one
benefit plan is terminated under Section 33-166.
78
79
80
81
82
83
84
85
86
33-160.
Board
of Trustees.
Establishment.
The Consolidated Retiree Health Trust Board of
ill
Trustees is established to manage the Trust. The Board has
[[U]]
19
members.
(hl
Membership.
ill
ill
Each member of the Board of Investment Trustees established
under Section 33-59 is also
f!
member of the Board.
The County Executive must appoint, subject to County Council
confirmation,
[[1]]
87
88
89
l
voting [[member]] members nominated
Qy
90
91
the Montgomery County Board of Education, who must serve
indefinitely while remaining the designee of the Montgomery
County Board of Education. The members must include:
92
93
94
95
!AJ
!ll1
a designee of the
Superinten~
an active employee of the Montgomerv County Public
Schools who is a member of a bargaining unit; and
96
97
98
99
ad
ill
a retiree of the Montgomerv County Public SchQols.
The County Executive must appoint, subject to County Council
confirmation,
[LU]
l
voting [[member]] members nominated
Qy
the Board of Trustees of Montgomery College, who must serve
F:\LAW\BILLS\1117 OPEB Trust\BiII9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
100
indefinitely while remammg the designee of Montgomery
College. The members must include:
101
102
103
104
tAl
mJ
~
a designee of the President;
an active employee of Montgomery College who
member of a bargaining
uI1it~
a retiree of Montgomery College.
IS
a
105
106
107
108
109
110
111
112
113
!£}
Vacancies.
ill
A trustee who is absent from more than 25 percent of the
scheduled meetings of the Board during any 12-month period
has resigned from the Board. Scheduled meetings mean
meetings held at least
1
days after notice of the meeting.
ill
@
A vacancy on the Board must be filled for the unexpired term in
the same manner as the previous trustee was appointed.
Compensation.
The trustees must serve without compensation from
any source for seryice rendered to the Board, except that an active
employee trustee may receive administrative leave to serve on the
Board. The Board must reimburse
~
trustee for any expense approved
.Qy
the Board. A trustee must not receive reimbursement for expenses
114
115
116
117
118
119
120
121
122
from any other source.
ill
Written policies.
The Board must establish written policies to
administer and invest the funds created
.Qy
this Article and to transact
the business of the Trust Fund.
ill
Officers.
The Board must select
from the Board's members.
~
chair, vice chair, and secretary
123
124
ill
The chair must preside at meetings of the Board and may take
administrative action, including executing an instrument, on
125
F:\LAW\BILLS\1117 OPEB Trusl\BiII 9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
126
127
128
behalf of the Board. A person may rely in good faith on an act
of the chair as legally valid.
ill
The vice chair must perform the duties and exercise the powers
of the chair when the chair is absent from the County or
disabled, or the Board determines
perform the duties of the chair.
IS
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
otherwise unable to
ill
The secretary must record the proceedings and actions of the
Board and may certify
!!
document or action of the Board. A
person may rely in good faith on the secretary's certification as
proof of the document or action.
W
Meetings and actions.
ill
The Board must meet at least once during each calendar
quarter. The chair, or
~
members of the Board, may call
!!
meeting of the Board, in the manner and at times and places
provided under the policies of the Board. The Board is
!!
public
body under the State Open Meetings Act.
ill
A.
B.
C.
Eight trustees constitute
!!
quorum.
Each trustee has one vote.
Eight trustees must agree for the Board to act.
ill
The Board may act without
!!
meeting. All of the trustees must
concur in writing for the Board to approve any action the Board
takes without
!!
meeting.
(±)
The Board may adopt procedures consistent with this Section.
The Board may authorize
!!
trustee to execute instruments on
behalf of the Board. The authority must be in writing and
specifically describe the instrument and how the trustee must
execute the instrument.
F:\LAW\BILLS\1117 OPEB Trust\BiII 9.Doc
ill
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
®
Records.
ill
The Board must keep investment accounts and records
necessary to calculate the value of each retiree health benefit
trust fund and evaluate the experience and performance of the
Trust Fund.
ill
ill
The Board may designate
£!
person to maintain the records.
Accounts and records are subject to State law on public records.
With the Council's approval, the County
ill
Removal
gf
trustee.
Executive may remove
£!
trustee for violating this Article or other
good cause.
ill
(k)
Legal adviser.
The County Attorney is the legal adviser to the Board.
Management.
[The Board of Investment Trustees established under
Section 33-59 is responsible for managing the Trust Fund.]
The
Board must hold legal title to all assets of the Trust Fund, but may
transfer some incidents of ownership to the Board's agents as
provided in this Article. The powers and duties of the Board under
this Article are not effective until the Board members have accepted
the Trust Fund in writing. Within 10 days after the Council confirms
a Board member, the member must certifY in writing to the Chief
Administrative Officer that the member accepts the Trust Fund and
will administer its affairs with care, skill, prudence, and diligence.
33-161.
Contributions and payments.
(a)
County Contributions.
The County may contribute to the Trust Fund
those amounts that the Council appropriates.
The County is not
required to make any contribution to the Trust Fund unless a written
contract with one or more beneficiaries so requires.
F:\LAW\BILLS\1117 OPEB Trust\BiII 9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
(b)
County-funded Agency Contributions.
The County may contribute to
the Trust Fund, on behalf of
~
County-funded agency, those amounts
that the County Council appropriates. A County-funded agency may
also make contributions to the Trust Fund in its discretion.
Notwithstanding the preceding sentence, the County must make any
contribution necessary to
lli!Y
~
County-funded agency's pro rata cost
of the expenses of the Trust Fund. Contributions to the Trust Fund
made on behalf of
~
County-funded agency or
121
~
County-funded
agency must be attributed to the County-funded agency for actuarial
valuation and financial reporting.
[(b)]
ill
Acceptance of Contributions.
The Board must accept all
contributions deposited in the Trust Fund and held by the custodian as
Trust Fund property. The Board is not responsible for calculating or
collecting any contribution, but is only responsible for contributions
deposited to the Trust Fund and amounts held in the Trust Fund. The
Board must separately account for any contribution made on behalf of
~
County-funded agency and earnings and expenses attributable to
that contribution.
[(c)]
@
Payments.
Payments fOr County Retiree Benefit Plans.
Payments may be
made from the Trust Fund attributable to the County in those
amounts directed by the Chief Administrative Officer only to
pay for all or part of the benefits provided by any County retiree
benefit plan, administrative expenses relating to a retiree benefit
plan.!. and expenses of the Trust Fund. The Board is not liable
for any payment directed by the Chief Administrative Officer
ill
F:\LAW\BILLS\1117 OPEB Trust\Bill 9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
205
206
207
208
209
210
211
212
213
214
and is not required to confinn compliance with any retiree
benefit plan.
ill
Payments for
f?
County-funded Agency Retiree Benefit Plan.
The Chief Administrative Officer may direct that payments be
made from the Trust Fund attributable to
agency as authorized
Qy
~
~
County-funded
County Council appropriation
resolution. Payments from the Trust Fund must be used to
IlliY
for all or part of the benefits provided
Qy
~
County-funded
agency retiree benefit plan and expenses of any County-funded
agency retiree benefit plan. The Board is not liable for any
payment made under the direction of the Chief Administrative
Officer and has no responsibility to confirm compliance with
any retiree benefit plan.
[(d)]
215
216
217
218
W
Expenses.
The Board must be reimbursed for expenses solely
219
220
incurred in the administration of the Trust Fund and must pay from
the Trust Fund expenses reasonably incurred by the Chief
Administrative Officer to administer any County retiree benefit plan
to the extent that those expenses have not been paid by the County.
The Board may pay expenses incurred under Section 33-162(h)(1l)
without direction of the Chief Administrative Officer.
reasonably incurred
Qy
retiree benefit plans.
33-162.
Trust Fund management.
~
221
222
223
224
The Chief
225
226
227
Administrative Officer may direct the Board to
IlliY
expenses
County-funded agency to administer its
228
229
230
*
(i)
*
*
III
Prohibited Transactions.
The Board must not engage
any
231
transaction between the Trust and the County or any entity controlled
F:\LAW\BILLS\1117 OPEB Trust\8ill 9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
232
233
by the County, including
f!
County-funded agency, or a participating
agency in which the Board:
234
235
236
(l)
lends any part of its Income or corpus without reCeIVIng
adequate security and a reasonable rate of interest;
(2)
pays any compensation more than a reasonable allowance for
salaries or other compensation or services actually rendered;
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
(3)
(4)
makes any service available on a preferential basis;
makes any substantial purchase of securities or other property
for more than adequate consideration;
(5)
sells any substantial part of its securities or other property for
less than adequate consideration; or
( 6)
engages in any transaction which results In a substantial
diversion of its income or corpus.
0)
To comply with Section 315 of the County Charter, a firm of certified
public accountants, under contract with the Council, must complete an
annual independent audit of the Trust Fund. The complete audit must
be filed with the Council and each County-funded agency, and copies
made available for public inspection.
33-165.
Indemnification of Board Members.
*
(h)
*
*
County Attorney.
(l)
The County Attorney must determine whether a Board member
is eligible for indemnification with respect to any matter and the
reasonableness of any fee, expense, or settlement.
(2)
Unless the County Attorney approves the settlement, a Board
member cannot settle a claim against another Board member
usmg:
F:\LAW\BILLS\1 I 17 OPEB Trust\BilI 9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
(A)
(B)
County funds;
funds of a participating agency;
County-funded agency funds;
©
[(C)]
CD)
funds provided by a self-insurance program of the
County; or
[(D)]
®
funds provided under a policy the County has with an
Insurance company.
33-166.
(a)
Amendment and Termination.
Termination.
Except on termination, no part of the Trust Fund may
revert to the County or a participating agency or be used for any
purpose other than the exclusive benefit of participants of a retiree
benefit plan. If all County retiree benefit plans are terminated and all
benefit claims and expenses are paid, any remaining assets in the
Trust Fund relating to contributions made by the County and
participating agencies must revert to the County and the participating
agencies. The Trust Fund must terminate in its [entirely] entirety on
the earlier of the termination of all County retiree benefit plans or the
depletion of the Trust Fund. Funds may partially revert to the County
or participating agencies if one or more retiree benefit plans is
terminated.
When a County or
~
County-funded agency retiree
benefit plan is terminated, the assets in the Trust Fund attributable to
that plan after expenses and benefits have been paid must revert to the
County and the participating agencies as provided in the adoption
agreement. If the County terminates all of its retiree benefit plans and
~
County-funded agency continues to maintain at least one retiree
benefit plan, the assets attributable to each County-funded agency
F:\LAW\B1LLS\1117 OPEB Trust\BiIl9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
285
286
287
288
289
290
291
292
293
294
295
296
297
298
299
300
retiree benefit plan must be transferred to
~
trust which meets the
requirements of Intemal Revenue Code Section 115.
(b)
Amendments.
Any provision of this Article may be amended at any
time. No amendment may:
(1 )
authorize any part of the Trust Fund to be used for any purpose
other than the exclusive benefit of participants of retiree benefit
plans and eligible dependents; or
(2)
cause or allow any part of the Trust Fund to revert to or become
the property of the County or
~
County-funded agency, except
as provided in Sections 33-166(a).,. [orJ33-167.,. or 33-169.
*
33-168.
Protection from Creditors.
*
*
Any asset held by the Trust Fund is not subject to any creditor of the County
or
~
County-funded agency and is exempt from execution, attachment, prior
assignment, or any other judicial relief or order for the benefit of any creditor or
third person.
301
302
303
33-169.
County-funded Agency Participation.
County Liability.
Except for any obligation to refund or transfer
~
ill
assets under subsection
(hl
or
no legal liability for benefits must
~
304
305
accrue to the County
l2y
including
Trust Fund.
(hl
County-funded agency in the
306
307
Termination
gf
Participation
In!..
fl.
County-funded Agency.
Any Trust
Fund assets must not revert to
~
County-funded agency. Assets may
308
309
310
partially revert to the County if
~
County-funded agency terminates at
least one retiree benefit plan.
Only funds attributable to the
terminated retiree benefit plan, after benefits and expenses have been
paid,
!llilY
revert to the Countv.
311
F:\LAW\SILLS\1117 OPES Trust\Bi1l9.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 17-11
312
313
(f)
Transfer gfTrust Fund:
If
the County decides to tenninate
~
County­
funded agency's participation in the Trust Fund, the County must
notify the County-funded agency in writing. If the County-funded
agency continues to maintain
transferred to
~
314
315
316
317
318
319
320
321
322
323
324
325
326
327
328
329
330
~
retiree benefit plan, assets must be
trust which meets the requirements of Internal
Revenue Code Section 115. Any transfer of assets from the Trust
Fund resulting from the tennination of participation in the Trust Fund
must comply with the Internal Revenue Code.
Sec. 2.
Transition.
The Consolidated Health Benefits Trust Fund mentioned in County Code
§33-159, as amended by Section 1 of this Act, does not create a new trust. The
Trust Fund is the same legal entity first created in County Code §33-159 and
inserted by Chapter 3, Laws of Montgomery County 2008. Any reference to the
Retiree Health Benefits Trust in any document produced before the effective date
of this Act must be treated as referring to the Consolidated Retiree Health Benefit
Trust referenced in County Code §33-159, as amended by Section 1 of this Act.
Sec. 3.
Expedited Effective Date.
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on July 1, 201l.
Approved:
331
332
333
Valerie Ervin, President, County Council
334
Date
Approved:
335
Isiah Leggett, County Executive
Date
®
F:\LAW\BILLS\1117 OPEB Trust\BiIl 9.Doc