katie e webb - townshipofabington.fall2011

8/2/2019 KATIE E WEBB - TownshipofAbington.fall2011

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Part III: Benefits Analysis

Township of Abington

RMI 3501: Fall 2011

912488801

912789091


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Part I: Benefits Matrix

Loss Exposure Covered? Coverage/Benefit Provided

Medical ExpensesHospital/Physician Yes AETNA: HMO

Dental Yes Delta Dental Premier PPO; Fidelio

Dental Plan

Vision Yes AETNA: HMO

Prescription Yes Medco Prescription

Long Term Care No

Retiree Health Care Yes AETNA: HMO; Medicare Parts A & B;

Humana Medicare Regional PPO

Loss of Income: Death

Non-Accidental, Non-OccupationalDeath

Yes OASDI, life insurance

Accidental Death Yes OASDI, life insurance, AD&D

Occupational Death Yes OASDI, workers compensation, life

insurance, AD&D

Loss of Income: Unemployment Yes Unemployment insurance

Loss of Income: Disability

Short Term, Non-Occupational Yes OASDI, paid time off, sick leave

Long Term, Non-Occupational Yes OASDI, paid time off

Short Term, Occupational Yes OASDI, workers compensation, paidtime off, Heart and Lung Act

Long Term, Occupational Yes OASDI, workers compensation, paid

time off, Heart and Lung Act

Loss of Income: Retirement Yes ICMA 457, Abington Employees

Pension Plan

Other Exposures

Educational Assistance Yes Tuition Reimbursement

Work/Life Yes Wellness Initiative, Bereavement Leave,

Employee Assistance ProgramDependent Care No

Property/Liability No

Legal Expenses No


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Part II: Inventory of Benefits

Introduction to the Healthcare Plan

Township of Abington is located in Montgomery County, Pennsylvania. The township

provides coverage for 825 employees and dependents, including retirees and spouses under the

age of 65. Eligible employees are defined as full-time employees who work a minimum of 35

hours per week. The majority of the healthcare plan is funded by means of a Trust. Township of

Abington is part of a collective bargaining unit with Delaware Valley Health Insurance Trust

(DVHIT).

Medical Expenses

Health Maintenance Organization Plan (HMO)

Township of Abington offers their eligible employees and dependents an HMO plan

through Aetna, which received an A.M. Best rating of A+. Eligible employees are defined as

employees who work a minimum of 35 hours per week and are considered full-time. Eligible

dependants are defined as spouses and children until the age of 26. Employees contribute to the

plan through bi-weekly payroll deductions of $25. The plan is self-funded through Delaware

Valley Health Insurance Trust (DVHIT). DVHIT is governed by a Board of Trustees that is

made up of a representative from each municipality with each representative being given one

vote of equal weight. Annual contributions are made to the Trust that must be sufficient to fund

expected claim costs, administrative expenses, and a recommended risk margin. If there are any

excess funds they are returned to members through rate stabilization fund (RSF) credits. The

members can choose to use the credits allocated to reduce annual premium contributions due or

to roll the balance forward to future years. The Trust contracts with Aetna for use of its medical

provider network. Aetna allows members to choose whether to stay in network or go out of


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network. If members stay in network they will have either a $15 copay or 100% coverage,

depending on the service; if members go out of network they are forced to bear all costs as if

they did not have insurance. Members are able to use Aetnas website to see whether their doctor

or specialist is in network and the comparative costs for choosing to stay in network versus going

out of network. Employees have the option of waiving coverage in return for $1,000 which is

distributed each January.

Dental

Township of Abington offers employees the choice between two dental plans in the form

of Delta Dental Premier Plan (PPO) or Fidelio Dental Plan. Delta Dental received an A rating

from A.M. Best while Fidelio Dental was not rated. Both plans are offered to all eligible

employees and dependents on a non-contributory basis. The plans are funded through Trust

dollars that are then used to purchase insurance. Delta Dental is administered by DVHIT.

Eligible members for Delta Dental are full-time employees, spouses and eligible dependent

children to age 19 or to the end of the month of their 23rd birthday if the dependent is a full-time

student. Once an employee enrolls, some limitations or waiting periods may apply for some

benefits. There is a $25 per person or $75 per family deductible for each calendar year, with a

$1,500 per person each year maximum. Deductibles for diagnostic and preventive (D & P) and

orthodontics are waived, but they do count towards the maximum and there is a $1,000 lifetime

limit for orthodontic care. Delta Dental provides the same percentage of coverage whether the

member chooses to stay in network or go out of network; although costs are usually lowest when

you use a PPO dentist. The other option that employees have is dental coverage through Fidelio

Dental Plan. Eligible employees for this plan are full-time regular employees that work at least

35 hours per week. Eligible dependents are spouses, unmarried children who are less than 19


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years old or less than 23 years old if he/she is a full-time student, and unmarried children who

are mentally or physically incapable of earning a living. Fidelio Dental Plan offers its members

three choices: Core Dental Office, PPO Panel, and Out of Network Offices. The Core Dental

Office uses Dr. Cacovean and has no balance billing, no deductible, no pre-determination

requirement, and accepts Fidelios payment as payment in full except Periodontia, where there is

a 50% co-pay. The PPO Panel has ten office locations to choose from and has no balance billing,

no deductible, a minimal co-payment and requires pre-determination for any treatment plan over

$200. If members choose to go to out of network offices then they are responsible for balance

billing, deductibles, and co-payments and are required pre-determination testing for any plan

treatment over $200. The predetermination that is used for members of the PPO panel and out of

network is done to provide the dentist with verification of the patients eligibility and availability

of benefits. This also allows the patient to be aware of the out of pocket expense before work is

started. The maximum benefit per year for the PPO panel and out of network offices is $1,500

per person for covered dental expenses, whereas members who choose to use the core dental

office receive an annual benefit of $2,000.

Vision

Township of Abington offers coverage for vision through their HMO with Aetna for

eligible employees and dependents. Members of the HMO are covered 100% with no copay for

vision exams every 24 months. In addition, members also receive a lens reimbursement of $150

every 24 months.

Prescription Drug

Township of Abington offers prescription drug coverage on a contributory basis for all

full-time employees and their eligible dependents through Medco Prescription coverage with


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Delaware Valley Prescriptions. Medco Prescription received a rating of A- from A.M. Best. The

plan makes it mandatory that generic drugs be given if available. When filling prescriptions, the

plan allows for a maximum 30-day supply if done at a pharmacy and a 90-day supply if done

through mail-order. The Township of Abington provides and pays for the prescription insurance,

but members are required to share the costs through a co-pay of $10 generic/$20 non-generic and

$10 mail order generic/$20 mail order non-generic. Employees have the option to waive

prescription drug coverage in return for a payment of $500, which is distributed every January.

Retiree Health Care

Township of Abington offers retirees and their spouses continuation coverage of health

insurance for all full time employees who retire with the township. Those members who are

eligible and choose to retire before the age of 65 stay on the Aetna HMO plan. Those members

who retire at age 65 must apply for Medicare coverage A and B. Eligible retirees can receive

supplemental coverage through the Humana Passive RPPO, who administers the plan. The plan

received an A- rating from AM Best. The plan includes a prescription drug schedule and is

broken down into four tiers, with corresponding copayments for each tier. Members may receive

prescriptions either through the mail or through pharmacies within the network of the RPPO. If a

member goes outside the network of pharmacies, then the member must contribute the same cost

sharing as they would in the network, as well as the difference between the out of network

pharmacy price and in network pharmacy price. Along with this, RPPO plan retirees are given

the option to buy up for prescription drugs, but will have to pay the difference in the premium.

Loss of Income: Death

Township of Abington provides life insurance for full-time employees through The

Hartford Life Insurance Company, which received an A.M. Best rating of A+. The value of life


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insurance is equal to two times the employees base salary. The township also provides a policy

of life insurance for each retired employee with a value of $3,500. In addition Township of

Abington provides AD&D to full-time employees, also through The Hartford. This benefit is

provided on a non-contributory basis and is funded with Trust dollars.

Loss of Income: Unemployment

Township of Abington only offers unemployment insurance through the social insurance

program.

Loss of Income: Disability

Short-Term Disability

Township of Abington provides short-term disability for both non-occupational and

occupational disabilities on a noncontributory basis. Full-time employees who require short-

term, non-occupational disability receive full pay up to 90 days. They are granted only one

ninety day period of full pay within a twelve month time frame for any lost time due to the same

illness/disability. For disabilities that occur while on the job, full-time employees receive their

full pay, less any workers compensation, up to 90 days. Full-time employees also have the option

of purchasing disability insurance through AFLAC, which has an A.M. Best rating of A+. The

benefit is offered on a voluntary, fully contributory basis. There is no enrollment period for this

benefit and employees may enroll at any time during the year. To help employees with loss of

income due to sickness, Township of Abington provides paid time off for sickness. Full-time

employees receive an unlimited amount of paid sick days. If the employee is sick for three or

more consecutive days a doctors note is required in order to qualify for sick leave.

Long-Term Disability

Township of Abington provides long-term disability for non-occupational and


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occupational disabilities. Starting on the 91st day of disability full-time employees receive one-

half of his/her gross pay, less any taxes and compensation from OASDI. Full-time employees

that become disabled on the job are offered the same benefit, less any payment from workers

compensation. These payments continue until the age of 65, unless the employee elects early

retirement. In addition to the benefits provided by Township of Abington, full-time employees

have the option of purchasing disability insurance. As previously stated this disability insurance

is offered on a voluntary, fully contributory basis by AFLAC.

Temporary Disability: Police Officers

Police Officers can receive an additional benefit due to occupational disability. This

benefit is self-insured and funded through the DVHIT. Under the Heart and Lung Act, police

officers, and other public safety personnel, who become temporarily disabled in the line of duty,

are removed from the workers compensation system and are given more comprehensive benefits.

To be eligible the employee must be injured while on-duty and while performing an act within

the realm of their job description. The injury must be temporary with recovery in the foreseeable

future and officers must apply to receive the benefits. Each case is analyzed and eligibility is

determined by the borough. The employee is entitled to their full pay, which is not subject to

state or federal income tax, but is subject to Medicare and FICA taxes for the first six months.

The benefit begins on the next regularly scheduled work day after the injury was sustained. In

addition to pay, the employee is entitled to the accumulation of vacation, sick, personal, and

other leave time which they would not have otherwise been entitled to past 45 days. Also,

employees are compensated for any medical or hospital bills. Benefits are provided until the

employee returns to work or it is determined that the injury is permanent.

Retirement


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All employees of Township of Abington are to participate in the Abington Employees

Pension Plan. The plan is self-funded by the township and is done on a contributory basis

through payroll deductions. In order to receive full pension, full-time employees must meet

retirement conditions, which can either be a combination of years of service or the normal

retirement age. Civilians are able to retire with full pension when their age and years of service is

equal to 85 and sworn officers are able to retire with full pension when they are at least 50 years

of age and have at least 25 years of service. The normal retirement benefit is calculated by

multiplying 2% of the Average Applicable Compensation by the number of years of

participation completed. Employees are 100% vested after five years of service. Employees who

are under extreme financial distress are allowed to withdraw from the plan. Township of

Abington also offers an ICMA 457, which is a deferred compensation plan. Full time employees

can take a portion of their salaries and place it into this supplemental retirement savings with pre

taxed dollars. The plan is financed through an employee pay all basis and is administered by

ICMA.

Other Exposures

Educational Assistance

Township of Abington offers tuition reimbursement for job related courses or degree

programs for all full time employees based on years of service. For one year of service an

employee will receive 20% tuition reimbursement and after five years of service the tuition

reimbursement is 100%. Reimbursement will only be paid if the employee receives a C or better

and they must file a copy of their transcript with their employer. Employees are also eligible to

receive a 50% book reimbursement. If the employee leaves the Township for reasons other than


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retirement within a specified amount of time per degree they are responsible for repaying a

portion of the tuition.

Work and Life Benefits

As part of the DVHIT, Township of Abington offers a member wellness initiative, which

promotes healthier living styles. Members who want to join the program are required to get a

comprehensive physical from a doctor. Once a member receives the physical the DVHIT will

pay participants $100.00. After this payment, members will be eligible to receive treatment plans

and educational programs in smoking cessation, weight management, healthy heart programs,

and diabetes management classes. Members and their spouses have the option of participating in

a fitness program which will reimburse members and spouses $250 each year after completion of

100 visits. Members and their eligible dependents are also eligible to participate in the Employee

Assistance and Work life program provided by Human Management Services through DVHIT.

The program offers counseling for work life issues including anxiety, depression, substance

abuse, mental issues, and child, adolescent, and elder care. Another benefit Township of

Abington provides is bereavement leave. Employees will receive paid time off for up to six days

for the death of an immediate family member and three days paid time off for all other family

members. If a full-time employee has less than six months of service then they are only eligible

to receive three unpaid days off.


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Part III: Table of Contents

Introduction

Overall Design Considerations in Offering Employee Benefit

Goals

Importance of Joining DVHIT

Demographics

Unions

Funding and Financing Considerations

Problems, Issues, Concerns, and Considerations in the Design of Health Benefits

Aetna Indemnity vs. Aetna HMO

Retirement: Combination of Years Served and Age

Disability: Moral Hazard and Catastrophic Event

Heart and Lung Act

Problems, Issues, Concerns, and Considerations in the Design of Non-Retirement Benefits

Education Reimbursement

Impact of Regulatory Compliance

Health Reform

Conclusion


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Part III: Benefits Analysis

Introduction

Township of Abington is a small community located in the southeastern portion of

Montgomery County, Pennsylvania. The community is continuously voted one of the Top 100

Best Places to Live by CNN Money magazine1. It is 15.5 square miles and, as of a 2010 census,

has a population of 55,310. Township of Abington employs a full-time staff of 600: including

police officers, waste collectors, clerical staff and other employees needed to smoothly run the

township.

During the process of analyzing the Township of Abingtons employee benefits plan we

were in contact with Tara Wehmeyer, the Human Resource Coordinator, and Lieutenant Steven

Hochwind, the Administrative Division Commander. Tara Wehmeyer is the administrator of the

Township of Abingtons benefits plan and had key information in regard to the specifics in the

plan. Before his promotion from sergeant to lieutenant, Lieutenant Hochwind was an executive

board member of Abington Police Association. He had a major role in the design of the benefits

given to sergeants, detectives, and patrol officers. This contributed to his vast knowledge on the

philosophy behind the plan and the townships relationship with Delaware Valley Health

Insurance Trust.

Overall Design Considerations in Offering Employee Benefits

Goals

The Township of Abingtons goal has been to attract and retain capable employees by

offering an extensive benefits package; so far it appears to be proven true. Lieutenant Hochwind

said that when he was first hired as a police officer for Abington Township one of his friends

from the Police Academy told him to switch to another township so he could make more money.


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It was an easy decision for Lieutenant Hochwind to stay with Abington because, he said,

although his pay was lower than that of his comrades from other townships, he had a more

extensive benefits package which he valued. Lieutenant Hochwind knew that with time and

experience his pay would increase and he would have the best of both worlds: great pay and

great benefits.

When designing their benefit plan, the Township of Abington had to the cost of the plan

and how much of it would be transferred to its employees. The main issue concerning employee

benefits for townships is getting coverage for employees who are a much higher risk to insure,

such as police officers, waste collectors, and sewer workers. In the past, the township was

underwritten individually by an insurance company that specifically looked at the demographics

and the risks associated with insuring the Township of Abington. By seeking insurance through

the traditional market the township found that costs were sky rocketing and became too

expensive for the township to afford. They had to seek other options that would keep costs down

for their employees, while still offering lucrative benefits that attracted and retained employees.

Importance of Joining DVHIT

The Township of Abington is a member of Delaware Valley Health Insurance Trust

(DVHIT). The trust was formed in 1999 with just fifteen members to insure; DVHIT has since

grown substantially and today insures 83 public entities. DVHIT is owned, operated, and

controlled by the members of the trust. The purpose of the trust is to create a large risk pool of

similar exposures in order to spread the risk among all its members and receive a discount from

insurance carriers. In order to become a member of DVHIT, a municipality seeking membership

must provide the trust with copies of current invoices from medical, prescription drug and dental

providers, current plan designs, current plan summaries, a current employee census, and a three-


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year health, dental and pharmacy rate history. Once they receive this information the current

members of DVHIT will vote if two thirds agree then the municipality is accepted. This process

that DVHIT uses is very critical because by looking at the past information of the township and

then voting the trust members are essentially only pooling risks that they believe will be good

and sustainable. This has led to the success of DVHIT, which over the past fifteen years has

exceeded financial expectations; in fact it has been so successful that each year DVHIT has

excess funds that are returned back to its members in forms of multi trust discounts and rate

stabilization funds. By joining DVHIT, the Township of Abington was able to control the largest

factor in designing there employee benefits package - costs. DVHIT also eliminated some of the

administration and claims processing that were a burden on a township.

The Township of Abington did not face any problems when applying to become a

member of DVHIT because they had similar characteristics as the members previously in the

trust and exhibited excellent claims history. The similarity among the members of the trust is

important because it reduces adverse selection and prevents other members from subsidizing

their costs. Without this process the trust would not exist and could not be sustainable in the long

run.

Demographics

One of the most important factors that the Township of Abington needed to consider was

the unique risks associated with the occupations that it must employ. When designing the benefit

plan they need to consider these risks and offer plans that tailor towards the individuals needs.

For instance, police officers are in the way of danger each time they are on duty; therefore they

need to have an extensive benefits plan that will protect their health and financial needs. The

Township of Abington does not use classes because they have determined that occupation, not


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class, is the best way to determine pricing.

Unions

Many of the employees of the Township of Abington are members of unions; the police

officers are members of Abington Police Association, the waste collectors are in a union, and so

on. The unions collectively bargain with the township as to which benefits they want to be

offered. Lieutenant Hochwind noted that the township has negotiated fairly and none of the

unions have had to go into arbitration. Union negotiations are a major consideration in the

townships offering of employee benefits. The township must make sure that they follow the

contracts provided to each occupation. Since clerical workers are not members of a union the

Township of Abington must consider how they choose to offer benefits to these workers. They

have typically offered benefits that are fairly consistent with the union contracts.

The Township of Abington must also carefully consider who to appoint as their Trustee

on the Board of Trustees of DVHIT. This is a key consideration because the township wants to

be able to offer as many of their benefits through the trust as possible. Since each municipal

member has only one vote of equal weight, the Trustee must have good communication skills

and knowledge of employee benefits. This will be shown to be important when the Trustee for

the Township of Abington brings to light a benefit that they feel should be offered or other

considerations to the Board of Trustees.

Funding and Financial Considerations

The Township of Abington contributes money to DVHIT which then purchases insurance

to provide their employees benefits. Employees contribute a percentage of their salary based on

their occupation to the trust through payroll deductions. Since different occupations are

associated with different amounts of risks it is important for the township to require a higher


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percentage of salary deduction to higher risk occupations. For example, clerical workers face a

much lower risk than police officers, therefore the percent of their contribution is 3/4 ths of one

percent compared to the one percent that police officers contribute. The trust has largely been

attributed to containing costs and keeping employee contributions to a minimum. This has been

proven by the lack of an employer contribution.

DVHIT is the crucial factor in funding and financing because the Township of Abington

is able to spread their risks with a larger pool. This keeps costs down and allows the township to

offer meaningful benefits. DVHIT determines how much each entity contributes by assessing

past claims experience and the demographics each entity has. It is then the job of the township to

determine how much each employee needs to contribute in order to meet the necessary

requirements established by DVHIT. The Township of Abington goes through DVHIT for all of

its benefits and pays for the benefits through trust dollars. The issue with going through DVHIT

is that choices are limited to what they offer, but because this trust is tailored to townships with

police departments it is able to offer benefits that meet members needs.

Problems, Issues, Concerns, and Considerations in the Design of Health Benefits

Aetna Indemnity vs. Aetna HMO

The Township of Abington previously was enrolled in an indemnity plan offered by

Aetna before switching to their current HMO. Under the indemnity plan costs were increasing

rapidly and at a high rate. This became too costly for employees and the Township of Abington

realized that the freedom of choice was not necessarily needed. Since the majority of the

townships employees live within Abington or the surrounding communities an HMO was a

better option. The HMO offered by Aetna allowed the employees healthcare costs to decrease


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by limiting the providers in the network. Lieutenant Hockland noted that he has not received

negative feedback from the change, and in fact it was viewed positively. This change was viewed

positively by employees because the cost decrease was significant enough that they did not mind

the limited network. Also, the majority of employees did not have to switch providers when the

indemnity plan was dropped which was another positive aspect.

Another consideration that went into this change was the impact on the townships

contributions. As the costs to offer an indemnity plan increased, so did the amount that the

Township of Abington was forced to contribute to the trust. Since the switch, the township has

not been forced to contribute any funds and their contributions to the trust were stabilized.

Another issue that an HMO addresses is overutilization. Traditional indemnity plans increase

consumption of health care goods and services because people enrolled in those plans see the

cost as the price of their premium or payroll deduction. By switching to an HMO the employees

are forced to educate themselves and become more aware of the costs associated with their

health care, resulting in rational consumption. This has been proven by the decrease in claims

made by employees of the Township of Abington in the years following the switch from an

indemnity plan to an HMO.

Retirement: Combination Years of Service and Age

The Township of Abington had to consider the different occupations and their demands

when designing their plan. A major consideration that had to be taken into account was the

eligibility requirements for demanding occupations, such as police officers. The township chose

to follow suit of other municipalities that had police forces and base their retirement eligibility

on a combination of years of service and age. In order to be eligible for retirement police officers

must be at least 50 years old and have 25 years of service. This was done because the township


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had to consider what was best for the township and their citizens. Since police work is

considered a young persons job and very demanding it was necessary to have retirement

eligibility start at 50 instead of 65. Without taking into account the demands of the occupation,

the Township of Abington could end up having a police force of seniors who are not at the

physical fitness which is required to perform their duties 100%. This consideration was

necessary to protect both the officers and citizens.

Disability: Moral Hazard and Catastrophic Event

One of the biggest potential problems with this benefit plan is the townships choice to

offer short term and long term disability on a non-contributory basis up to a certain amount of

days. The plan allows any full time employee who becomes disabled on the job or off the job to

get full paid salary up to 90 days for a short term disability and if they become disabled in the

long term, they can receive one half his/her gross pay less any workers compensation. The

money that is paid for disability claims comes from DVHIT. As a township that employs police

officers and other hazardous occupations, it is necessary to protect them if they become injured

on the job and off the job; however by allowing them to go on disability without contributing,

Township of Abington is faced with a moral hazard issue. Most employers handle disability

through insurance or workers compensation, which both force employees to contribute. By

having employees contribute the employer is not as much at risk for false claims, which can

drive up the cost of the program. The Township of Abington should change this program so they

do not cover non-occupational injuries. With the program the way that it is currently, it is

difficult for the township to protect against false short-term, non-occupational claims, which are

hard to prove to be false.


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Another issue with funding disability on a non-contributory basis is that the township is

at risk for a catastrophic event that could leave them insolvent. Given the nature of the

occupations at the township if a large event were to occur and left several police officers injured,

then the Township could be at risk for not having adequate funds to pay all the claims. This is

why the Township of Abington may want to consider getting some excess coverage for disability

to protect their solvency. By having insurance take over at a certain point the township can save

them from losing all their funds from one event.

The final part of disability that needs some consideration is the fact that these claims are

paid by the trust. This means that both moral hazard and catastrophic events will have an effect

on all the members involved in the trust. The trust can control the moral hazard from each

township because if a township or entity has a large number of claims, their contributions to the

trust will increase the following year or they will be forced out of the trust and required to get

insurance elsewhere. It is important for the Township of Abington to understand that the DVHIT

will not allow itself to go insolvent and any costs that go beyond the townships contributions will

not be paid for by the trust. This puts a certain amount of responsibility back on the employer

and helps protect the DVHIT.

Heart and Lung Act

Township of Abington is required to comply with the Heart and Lung Act for its police

force. Similar to short-term disability, officers that have injuries that fall under the Heart and

Lung Act are paid their full salary. Compliance with the Heart and Lung Act creates a moral

hazard issue for the Township of Abington. While on disability officers are paid their full salary

but their salary is not subject to state or federal income tax and only subject to FICA taxes for the

first six months; this typically results in an increase in the amount the officers are receiving each


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paycheck. Taking the pay into consideration and the fact that the benefits may not be terminated

without the permission of the officer, a large moral hazard issue is created. The Act states that

individual municipalities must pay for the claims, which is an issue the township must greatly

consider. The Township of Abington must make sure they are setting enough funds aside to pay

for any claims that arise and consider purchasing Heart and Lung coverage. This coverage is not

available through the traditional market and the township would have to purchase it from Penn

PRIME.

Problems, Issues, Concerns, and Considerations in the Design of Non-Retirement Benefits

Education Reimbursement

Township of Abington offers all full-time employees an opportunity to receive

reimbursement for education they receive while employed. Offering education reimbursement

was an important consideration when they approached the issue of the lowered retirement age for

police officers. By offering education reimbursement police officers can receive a degree which

can open them up to opportunities once they retire. Lieutenant Hockland noted that many

officers do not necessarily like being eligible to retire at 50 but with other opportunities available

to them it was not as bad. One of the Deputy Chiefs of Police received his PhD through the

education reimbursement program and now teaches at three colleges and universities, in addition

to his full-time job as Deputy Chief. With opportunities such as this the township is more likely

to fulfill their goal of having officers retire early.

Impact of Regulatory Compliance

The benefit plan that the Township of Abington offers is excluded from ERISA because

it is considered a local government. This means that they do not have to comply with the

requirements under ERISA such as fiduciary duty, communication requirements, and minimum


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standards of operation. An issue that arises without the ERISA requirements is that the township

is not required to have a summary plan description. SPDs are a huge factor in communicating

the employee benefits and explaining what employees have coverage for. In place of an SPD, the

township uses an employee manual that has the same content; however the manual the Township

of Abington uses is old and not updated. Without the presence of an updated manual the

employees are not receiving the right information about their plan because it has changed since

the manual was created. The township should update their manual each year to provide

employees with the correct information that is up to date.

Without federal regulation the Township of Abington has to abide by the standards set

forth by the DVHIT and must follow any state laws that apply to them. The DVHIT makes all

members comply with COBRA and HIPAA requirements. One of benefits of being part of the

trust is that they handle all the administration and on DVHITs website employees can fill out

applications for COBRA coverage and the site provides a contact number for any questions with

the coverage. On top of this, it is also the job of the township to communicate this information

and explain to employees the details about COBRA. The township does this through emails and

information sessions where employees can find out more and ask questions concerning COBRA

coverage. HIPAA release forms are provided to employees on DVHIT website and must be filled

out in order to file a claim. The role that the DVHIT plays in administering these requirements

relieves the township of some responsibility, but places them in a position where they must

communicate effectively in order for employees to understand what these requirements mean for

them. For example, it is the job of the township to inform employees that pre-existing conditions

may affect their ability to get coverage for the first twelve month unless they were previously

insured.


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The Township of Abington is required to follow any state laws that apply to them and

must comply. An example of this is, Act 600 of 1956The Municipal Police Pension Law

which applies to police pension plans. The act applies to any township with two or more police

officers and it sets for guidelines for police pension plans and when they can retire. This is

important act for the Township of Abington to understand because they must comply with the

guidelines set forth by the act. This act has been in place for a long time and it is part of the

townships routine to comply with this act. The township already budgeted to account for the

changes in the police pension when the act first was established and today they do not have any

issues complying with this act.

Health Reform

When we interviewed Lieutenant Hochwind he did not seem concerned about the

changes that were coming in the future. His was confident that the trust would inform them of

any changes and that the township would simply just have to comply with the trust changes. The

issue with this is that the Lieutenant is underestimating what these changes could mean for the

township. Some of the changes in health reform directly affect the current benefit plan the

township has. The first change that will impact the townships health benefits plan is the no

preexisting condition exclusion2. This exclusion will no longer allow plans to exclude

participants because of a previous health condition. The township will face an issue with this

because by accepting participants with preexisting conditions the members of the benefit plan

without a pre-existing condition may be subsidizing the cost of that participant. This can lead to

issues with how much of this cost falls on the members of benefit plan and how much will be

retained by the employer. Most likely this extra cost will fall on plan members and will drive the

cost up and could result in healthy individuals dropping out to get coverage elsewhere.


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Another health reform change that will impact the Township of Abington is the no cost

sharing for preventive care2. This change will impact the administration of the plan because if it

no longer done through cost sharing than their needs to be another way to get payments for this

type of care. Another issue facing administration will be explaining to employees what is

considered preventive care and what is not. This will probably be done through the trust;

however it will be just important for the Township of Abington to understand so they can explain

this change to their employees. The biggest change Township of Abington will face in general is

adjusting to the changes and communicating them to the employees. One problem that may arise

in these changes is a cost shift that the DVHIT may put on the townships in the trust. That is why

it is important for the Township of Abington too understand the changes ahead of time, so they

can implement ways to deal with the new problems that arise from the changes.

Conclusion

In the past few years, the Township of Abington has been able to offer a benefit plan that

meets employees needs and keeps cost down. This was made possible through the membership

in DVHIT. The membership was a simple solution to the past problems they faced with

increasing costs; however the trust will have to undergo some changes in the next years to

comply with health reform. The changes the trust makes could spark huge changes in the

townships plan design in the upcoming years and as of right now Lieutenant Hochwind is not

concerned.


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Works Cited

1. "Best Places to Live 2010 - Top 100: 26-50 - from MONEY Magazine." CNNMoney - Business, Financial

and Personal Finance News. Cable News Network, Aug. 2010. Web. 01 Dec. 2011.

.

2. Jones, Mark C. "Health Care Reform Update: Changes Plan Sponsors Should Make This Year." Pillsbury

8 Sept. 2010.


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December 3, 2011

Tara WehmeyerHuman Resource CoordinatorAbington Township

1176 Old York RoadAbington, PA 19001

Dear Tara,

We want to start by saying thank you for all the documents you sent us and all thequestions you were able to answer. The documents you sent us were extremely informative andgave us good in sight on what benefits the township offers and how they are funded. We reallyappreciate your ability to answer questions we sent you via email because we know how busyyou are working and we hope we did not distract you too much. Without the documents andquestions you answered we would not have been able to do the project. Once again Tara, thankyou for taking the time out of your day to help us complete this project.

Sincerely,

Corey McCann and Katie Webb


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December 6, 2011

Lieutenant Steven HochwindAdministrative Division CommanderAbington Township

1176 Old York RoadAbington, PA 19001

Dear Lieutenant Hochwind,

Thank you for taking the time out of your day to let us interview you. Your informationregarding Abington Townships benefit plan and their membership in DVHIT allowed us to do aproper analysis of the plan. Your interview was a critical part of our project because if we did notget enough information we could not have done the project at all. Thank you for your insideknowledge about negotiations and how exactly the trust functions. We really appreciate yousharing that knowledge with us because all of your information provided us with the tools to dothe project. Thank you again and we hope everything runs well this year with the townships

employee benefit plan.

Sincerely,

Corey McCann and Katie Webb

katie e webb - townshipofabington.fall2011

Documents