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Lebanon retirees been paying for spouses insurance

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Alleged "multi-million-dollar mistake" wasn't made

Concerns that the City of Lebanon has been paying for the insurance of the spouses and children of city retirees - concerns which were raised by city officials at a Lebanon City Council work session last week - are simply not founded in fact, former City Attorney William Farmer says.

Lebanon city retirees have been paying for insurance for their spouses ever since the option was first offered back in 1987, according to Farmer, who is now a retired city employee himself.

"Retirees, to my knowledge, are paying insurance on their spouses," Farmer said in an interview Monday. "It's going in and someone's cashing the checks."

Also contacted Monday, Mayor Philip Craighead confirmed that in fact, retirees do make regular payments for their dependents' insurance, which they pay for as part of family plans provided to them by the city.

What the ordinances say

In 1987, under the administration of Mayor Willis Maddox, with William Farmer acting as city attorney, the city council passed that first ordinance which said, "The City of Lebanon shall pay for the (health and life insurance) benefits of an eligible pension employee, and the employee shall be granted the opportunity to purchase insurance for their spouse."
Later, under the administration of Mayor Don Fox in 1995 - again with William Farmer acting as city attorney - the 1987 ordinance was expanded.
This second ordinance allowed the city to pay for the insurance of 23 retirees - specified and listed by name - who had retired prior to 1987 and hadn't been covered previously.
Again, the 1995 ordinance specifically excluded spouses unless the retirees paid for their spouse's insurance, specifying that the city would only pay for the insurance of individuals named in the ordinance.

Farmer wrote the ordinances

Farmer said that he was the attorney who drafted the 1987 and 1995 ordinances authorizing the city to provide insurance for retirees and to offer them the opportunity to buy insurance for spouses.

"We have been paying. If they're saying we're not, it's a bald-faced lie," Farmer added. "This is a program of misinformation being fostered by the mayor and the commissioner concerning retirees' insurance benefits."

Another retiree - Terry Hobbs, who retired in 2001 - also confirms paying for his wife's insurance regularly.

In fact, his wife Grace Hobbs said, "We pay $150.24 a month. It has been different amounts at times, but that's what it is now."

Farmer also said he pays for his wife's insurance and that he has spoken with several other retirees who also pay.

On Thursday last week, at a budget work session of the city council, City Finance Commissioner Robert Springer informed the council that in going over the city's finances, he had come to the belief that the city has been paying for the insurance of retirees' spouses and children.

After the meeting, Springer said he could not give the exact amount that the alleged mistake had cost the city, since many of the records are filed away on paper and not entered onto the city's computer system. "That's still being researched," he said.

"Millions of dollars" at stake

But the figure was definitely "in the millions of dollars," Springer estimated Thursday, although he added that he simply was not sure when free insurance for spouses supposedly started to be offered.

The clearest indicator last week about how far back the alleged problem went, Craighead said Friday, is that employees hired in 1995 were told that the city would provide free insurance for both them and their spouses whenever those employees retired.

Yet apparently, the situation had not been sufficiently researched when Springer brought the issue before the city council last week.

Springer told the council about finding the 1987 and 1995 ordinances that authorize the city to pay for retirees' insurance. The ordinances allow retirees to purchase insurance for their spouses, but do not authorize the city to pay for spouses' insurance.

Speaking in the belief that the city was, in fact, paying for spouses' insurance in opposition to the existing laws, Springer told the council, "I'm troubled by the fact that we don't have the authorization to do what we've been doing ... This is not something that can be handled by me sending out a memo to retirees."

Mayor confirms retirees do pay

On Monday, however, confirming Farmer's statement that city retirees regularly pay for their spouses' insurance, Craighead said the retirees are indeed paying their share of their family insurance.

"Each year the budget contains a breakdown of what the employees pay, what retirees pay, and what the city pays," the mayor said. "We have reaffirmed this each year. The budget takes precedence, because we vote on it not twice but three times each year."

He also said that City Attorney Andy Wright is looking at annual budgets to confirm that there has been no problem.

"He has already looked over the budgets from 1988 through 1992, and everything looks good," Craighead said. "In '92 or '93, insurance started to increase, and the city voted to absorb part of that increase. That has been approved annually. Everything is by the book as far as I can see."

The mayor also pointed out that Lebanon is not the only government to be facing an unfunded mandate for retirees' insurance in the future. "Wilson County has about $68 million, and Nashville is looking at $2.3 billion," Craighead said. "It's a future cost that isn't in the budget yet."

He added that changes already passed for last year and this year have saved the city almost $900,000 on insurance costs. "It is our goal to provide quality insurance while saving the city money," he said.

Audits verify and budgets authorize

The city's spending is audited annually as well, and those audits have consistently been acceptable. They have shown no problems, according to both Craighead and Springer.

Springer also said Monday that if the city council had passed budgets including information about how insurance is to be paid, that would "trump" anything passed earlier.

"That probably means it will continue as it is, as long as the council passes the budget," he said. Springer had previously told the councilors, on Thursday, that they probably would need to address the issue somehow.

He also had mentioned that if the council did not continue paying for retirees' spouses' insurance, it could save half of the city's $18 million unfunded mandate for retirees' insurance, or about $9 million.

That possibility fades away, of course, when it is revealed that retirees already are paying for their spouses' insurance. A mandate is an obligation to pay for something - in this case, insurance - and this requirement has not been included in city budgets, nor does the city currently have a plan for how to obtain the money needed.

No sudden crisis for retirees

This week's disclosure about how the system is actually operating also means that retirees won't suddenly face personal financial crises if the council votes to change how retirees' spouses' insurance is paid for.

Insurance for retirees' children might not normally be expected to be an issue, since usually retirees' children are independent adults, but family policies under the Affordable Care Act can include children up to age 26.

The city is about to have employees eligible to retire with 30 years' service at age 49, likely to have children in their insurance policies, Springer said Thursday.

The number of city retirees who could have been affected by suddenly having to pay for their dependents' insurance is not known, but the city insures more than 100 retirees. According to Human Resources Director Sylvia Riechle, at least half of those retirees have living spouses.

Writer Connie Esh may be contacted at

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insurance, Lebanon, Lebanon City Council, retirees, retirement, Wilson County
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