The city of Ann Arbor and its police officers union have reached a deal on a new labor agreement that includes several concessions — including on health care.

Effective Jan. 1, members of the Ann Arbor Police Officers Association will start paying significantly more for their city-provided health care benefits.

They'll also start paying more toward their pensions, with employee contributions going up from 5 to 6 percent on pre-tax pay.

The new contract, which is retroactive to July 1, 2009, and runs through June 30, 2013, includes no across-the-board wage increases. It also reduces benefits for new hires.

Though the terms were voluntarily agreed upon by both the city and the union, they came through a stipulated award handed down by a state-appointed arbitrator.

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The arbitrator's decision was filed with the Michigan Employment Relations Commission on Wednesday, marking an end to an Act 312 binding arbitration process started last year.

"We're pleased with the outcome," said Tom Crawford, the city's chief financial officer. "It awarded the city the items that we've been seeking with the other unions, so we were pleased to see that. It's never a pleasant experience to go through the process of binding arbitration, which was regrettable, but we are happy with the results."

The city filed an arbitration petition in July 2010 to settle an unresolved contract dispute with the police officers union. Until now, the union refused the city's request to join the city's nonunion employees and other labor groups in paying more toward health care.

Jamie Adkins

Jamie Adkins, the union's vice president of bargaining, said officers weren't looking for an increase in compensation — they wanted to maintain their current health benefits given concerns about radon, asbestos and mold in areas of city hall where they worked for many years until recent times.

Adkins said it was the threat of a new state law about to take effect — one setting a hard cap on health care benefits for public employees in Michigan — that spurred the union to accept the "lesser of two evils" and agree to the concessions.

"The original reason we went to arbitration was because of health care," she said. "In light of the governor getting ready to sign Senate Bill 7, we felt this stipulated award offered our membership a choice in health care to meet their families' individual needs."

Senate Bill 7 was presented to Gov. Rick Snyder on Wednesday afternoon. Once he signs it into law, any collective bargaining agreements executed on or after Thursday of this week must limit the amount of money a public employer pays toward employee health care to $5,500 annually for individuals, $11,000 for married couples and $15,000 for families.

By a majority vote of their governing bodies, schools and local governments can elect to comply with an alternate 80-20 stipulation where the employer picks up 80 percent of total employee health care costs, while employees pay 20 percent.

Also, by a two-thirds vote taken annually, a local unit of government can exempt itself entirely from the requirements of the health care cap for the next succeeding year.

While members of the police officers union don't have to worry about the hard cap now, they will be paying more for their health care after agreeing to concessions.

Under the current plan, police union members pay no premiums and no co-insurance. They also have deductibles of $250 for individuals and $500 for families.

Their options starting Jan. 1 will be a new "low plan" and a "high plan" — similar to the plans offered to the city's nonunion employees — or they could opt for a 20 percent premium plan.

The low plan includes no monthly premium, but the tradeoff is that deductibles are set at $1,000 for individuals and $2,000 for families, plus 20 percent co-insurance.

The high plan includes a 10 percent monthly premium with deductibles set at $300 for individuals and $600 for families, with 20 percent co-insurance.

The third plan, as the name implies, includes a 20 percent monthly premium with deductibles set at $300 for individuals and $600 for families, with no co-insurance.

Adkins estimated a police officer with a family would have to pay about $270 a month — up from zero — in premiums under the 20 percent plan.

While those plans should save the city a sizable amount of money in health care costs, other concessions negotiated could save even more money.

Effective Jan. 1, new hires will have to clock 10 years of service to be vested in the city's pension plan, up from five years. Also, the final average compensation figure used to calculate pensions will be based on five years instead of three years for new hires.

New hires also will not receive health care at the city's cost in retirement. Instead, they'll receive a $2,500 annual contribution into a retirement health reimbursement account at the end of each year. That account can be used in retirement for health care expenses or to purchase, at the retiree's full cost, access to the city's health care plan in effect at that time.

Crawford said resolving the contract with the police officers leaves only the command officers union and the firefighters union as the last two bargaining units holding out from making the kind of concessions the city is looking for from all its employees.

The police department was looking at more than $1 million in budget cuts for next year, Crawford said, so the savings from the new contract could go a long way.

"This will certainly help mitigate the situation," he said. "The progress we've made with each of the employee groups helps us when we deal with the revenue reductions we've seen."

In other areas of the new contract, the police officers union came out on top. For instance, the union wanted to make sure that officers have the option of receiving comp time rather than overtime for hours worked on holidays. The union won on that issue.

The city also will continue to provide members of the police officers union $500 per year in longevity pay and, for those eligible, $250 per year as equipment allowance. Employees also will receive a one-time $500 contribution to their health reimbursement accounts on Jan. 1.

Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's e-mail newsletters.