FY2018 Recommended Budget

Health Care Costs A comprehensive study of the Town’s health care history, costs and options was conducted this year in an effort to address escalating health care costs and develop safeguards for future increases. The wellness incentive introduced two years ago has been substantially embraced by our employees. Ultimately, this program will contribute to the health and well-being of the employee and help the Town manage health care costs long-term. Proactive attention to chronic conditions has empirically proven to have lasting benefit. Unfortunately, we cannot count on this solution alone to control overall growth in costs. The Town has historically paid 100% of the cost to provide health and dental insurance for each employee and contributes 30% towards the cost of dependent health and dental insurance premiums. The Town also utilizes a Health Reimbursement Account (HRA, implemented in 2011) as a cost containment strategy to help manage overall healthcare costs. The plan itself is a high quality, high-benefit plan to the employees, unmatched by peer communities. A comprehensive restructure of the health care strategy is recommended beginning with the July 1, 2017 health care contract renewal. The approach includes the introduction of a second plan with a modified level of benefits at a reduced cost to both the Town and the employee. In both plans, premiums have been restructured to reflect the true costs of coverage that have not been adjusted in over ten years. Our employees will become responsible for a share of the monthly premium. The dual plan option, with associated benefits and costs, will provide employees a choice while proactively engaging them in their health care decisions. Employees will continue to have an option to avoid an employee coverage premium if they choose the base plan and participate in wellness activities. This is a long-term approach for healthcare cost containment that has been used successfully in other government and private sector organizations. The net impact of these changes is expected to be a 2% increase in town health care costs, and reflects a reduction of almost 6% from the original renewal quote from our vendor. These changes will be reviewed and evaluated in the spring of 2018 and will be used to guide subsequent insurance carrier considerations and decisions. Employee Compensation/Merit Pay An updated performance pay plan model was implemented July 1, 2015. The performance year was changed from a calendar year to a fiscal year and allows for better alignment of annual work plan goals with fiscal year accomplishments. Lump sum awards and multiple salary range merit pay factors were eliminated, allowing for a more streamlined management of the compensation strategy. This eliminated a gap in performance assessment and reward for performance that further complicated the implementation and management of merit pay adjustments. Performance evaluations for Fiscal Year 2017 will be completed by June 30, 2017. An approximate 3% merit pay award for Fiscal Year 2017 performance has been included in the proposed Fiscal Year 2018 budget, subject to Town Council approval based on industry benchmarks for performance assessment ratings, historical ratings and trends for the Town of Morrisville. The average actual merit increase in Fiscal Year 2017 was 2.66% based on Fiscal Year 2016 performance ratings. In addition, a 2% adjustment to pay ranges is recommended to reflect rates of pay offered in the recruitment market and by competing jurisdictions to ensure the Town can continue to attract and retain qualified and skilled employees. This The Town’s basic dental care plan, offered through the North Carolina League of Municipalities, will have a plan premium increase of $1 per subscriber per month.

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