Hart due back pay for insurance snafu
By Rudy Hemmann
The Berthoud Board of Trustees discussed the structure of the entire benefits package offered to the Town Administrator Mike Hart at its Tuesday meeting.
Following stern questioning by Trustee Suzie White, the board voted unanimously to authorize Town Attorney Greg Bell to review and redraft certain sections of the benefits package embodied within the employment contract between the town and Hart. The issue before the board, which brought the matter to a head, dealt with the health insurance portion of the benefit package.
Bell stated in a memorandum to the board, “Hart was hired as the Town Administrator for the period of December 1, 2012 through November 30, 2017, contingent on annual appropriation of funds.”
The terms of the Employment Agreement state that Hart is entitled to a fixed base salary and numerous other benefits. One of those benefits is the provision of health insurance. In calendar year 2014 the Town paid $812.48 per month towards Hart’s health insurance premiums and $545.84 towards his Health Savings Account (HSA). Due to annual increases in rates, the Town was anticipating paying $953.71 per month towards Hart’s health insurance premiums and $554.17 per month towards his HSA, Bell states in the memo.
Hart recently (in February 2014) turned 65 and is now ineligible to receive health insurance through the Town’s group policy, placing the Town in default of its contractual obligations as of 2014. While he is eligible for Medicare, a supplement policy which would bring his benefits somewhat in line with the group policy that he lost is an out of pocket after-tax expense to him of over $400 a month for something that was previously fully covered with pre-tax funds, Bell wrote.
Bell engaged a medical benefits specialist (Diane Gross, formerly counsel to Poudre Valley Hospital) to explore options for a tax advantaged option to provide the benefits contractually required. The essence of her opinion, according to Bell’s memo, was that under the Affordable Care Act, the Town could not pay tax-free reimbursements for health costs to an individual not participating in an employer sponsored plan. Further, because the town would not be paying for Hart’s health insurance premiums, “they would not be able to continue to fund his HSA,” the memo states.
According to Bell, an agreement was reached with Hart where he would accept an increase in salary of $900 per month to offset the lost benefit which would have totaled about $1,350 per month, thus saving the town approximately $450 per month. Bell also stated he had heard rumblings from anonymous sources this was a ploy to increase Hart’s salary.
“I can’t, for the life of me, understand that,” Bell said, “We are going to fail to supply something that is in your contract and when we make it up in another way it’s a raise.”
Trustee Jan Dowker stated, “I think it is important for the public to have the comprehension that under the Affordable Care Act we were limited in what we could do, and that [Hart] agreed to this, which is basically a downgrading of his healthcare plan for what we are obligated for, we are not paying more; we are paying less.”
White’s contention was that Hart should have informed the town before turning 65 that he would no longer be able to participate in the town-offered healthcare plan so other arrangements could have been made in advance. She also cited what she thought was a conflict of interest in that the town attorney was, in essence, working for Hart.
Bell was quick to answer the conflict of interest charge by saying, “I’m not representing Mike. The town is in default on a contract. I represent the town and our attempt here was to find a solution to solve the town’s default on an employment contract that was economically sound for the town.”
Hart noted, in spite of the months it’s taken to resolve the issue, he had not brought legal action against the town.
White stated the contract between Hart and the town could be reviewed and amended on a yearly basis.
“This could have been much easier if before Mike turned 65 he had brought this up. Now we are looking at back pay for a year and a lot of cost to the town,” said White.
Bell also challenged those assertions by pointing out the town’s responsibility for benefits coverage remains the same. When Hart dropped off the plan coverage the premiums stopped an alternative needed to be paid. He added that his office learned of this issue last summer and that a simple “work around” could be found – which turned out to not be the case.
After more discussion, the trustees agreed a review of the entire benefits package for the town administrator was in order.
For her part, White stated she hoped there were some lessons learned from this episode that could be applied to future issues.
In other action the board heard a brief presentation from Business Development Manager Walt Elish concerning the sale of the Berthoud Common property. Elish shared a sales brochure which had been developed by Loveland Commercial, the broker working with the town on the sale of the property. He received input from the trustees concerning additions to the information given in the Brochure. Elish noted the property would soon be offered on numerous websites.
The trustees listened to a presentation by Paul Zilis, the town’s water attorney regarding a few minor “housekeeping” changes to the language of the new water policy document which was adopted in September 2014. According to an information sheet provided by staff, “The changes will make it easier for staff and developers to interpret the intended definitions found in the code.” The trustees voted unanimously to accept the changes suggested for incorporation into the ordinance governing the town’s raw water dedication policies.
The trustees ratified a February 11, 2015 action by the Berthoud Community Library District Board of Directors to appoint Paul Schumacher to fulfill the term of Lara Bonilla, who resigned from the board due to personal reasons.
The trustees approved a motion authorizing the town administrator to sign the 2015 agreement between the town and the Larimer County Humane Society.
During a power point slide presentation, Bill Porter, director of animal control for the Humane Society, revealed the charges for many of the services provided by animal control had increased over what was charged in 2014.
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