In 1994, after several years of lengthy discussions the International Association of Fire Fighters, Local 1264 (IAFF), the Anchorage Police Department Employees Association (APDEA) and the Municipality entered into a September 1994 Letter of Agreement concerning retiree health care. This letter of agreement included the idea that the three parties would mutually agree to undertake a renewed attempt to settle the issue of Police and Fire Retiree health care benefits. The result of this effort was a deadlock, which divided the community and created a significant fiscal uncertainty for the Municipality.
To advance beyond this problem the parties, in accordance with the Letter of Agreement, determined that the best interest of all involved required the removal of the Police and Fire Retiree medical coverage from collective bargaining. This understanding is memorialized in AM 1299-94 which provides in part as follows: "With the passages of AO 94-95 and 94-222(S-1) the Assembly will have addressed the major component of the Police and Fire Retiree medical issue.
Attached to AM 1299-94 is a Letter of Agreement recognizing that upon passage of AO 94-222(S-1) that Police and Fire Retiree health care would be removed as a subject of collective bargaining for all purposes between the Municipality and all current, active employees who are represented by APDEA and IAFF who retired subsequent to January 1, 1995, and who where members of the Anchorage Police and Fire Retirement System. This idea is codified at AMC 3.70.196 which provides:
AMC 3.70.196 Post retirement police and fire medical benefits. No matter related to post retirement medical coverage for active or retired police officers or firefighters shall be subject to the provisions of this chapter and negotiations on the subject of retiree medical coverage are prohibited for all such individuals in legislated pension plans and any employee organizations on their behalf. (AO No. 94-95, § 2, 5-24-94; AO No. 94-116, § 1(3.70.196), 1-1-95)
Subsequently the Assembly adopted AO 94-222(S-1) is codified at AMC 3.87, which establishes the Police and Fire Retiree medical funding program to provide those retirees with a Health Reimbursement Arrangement (HRA) for medical benefits. The ordinances are intended to create and fund the Police and Fire Retiree medical benefits thorough an HRA to cover the eligible medical expenses of the retiree's spouses, and eligible dependents. It is important to note that AMC 3.87 benefits are subject to Article 12, Section 7 of the Alaska State Constitution which provides that retiree benefits may not be diminished.