Here is how it works:
- Beginning fund balance
- Add premiums from the City of Worcester and the employees
- Minus claims and all other expenses associated with the plan
- Ending fund balance
Right now our ending funding balance ($21,000,000) is 3 times the monthly expenses, while all the other Gateway Cities are between 1 to 1.69 of their monthly expenses. The proposal being presented by Councilor Gaffney is that we have too much in reserves. Based on the other cities, there is no law requiring this much in reserves and it reducing it will have no repercussions to our Bond Ratings, we do…
Although we have been saying to remove monies from the Self-Insurance Trust, the actual mechanism is not add as much as we have planned to reduce the fund balance at the end of the year. By doing this, we would drop the reserves from 3 months down closer to what the other Gateway Cities have. For example, if we were to cut the planned contributions (premiums) this year by 7,500,000:
- 1,875,000 (25%) would go back to the employees
- 5,625,000 (75%) would go back to the City of Worcester taxpayers and School Department
The 5,625,000 split would be:
- 3,375,000 to the School Department (60%)
- 2,250,000 to the Taxpayers (40%)
The ending funding balance would be approximately $14,000,000, which is 2 times the monthly expenses and will still be more then any other Gateway City. We can comfortable say this because as the City Auditor mentioned last week, we have:
- mature plan with consistent cash flows
- stop-loss coverage
Lastly this will no effect on the our Bond rating.. Still looking for one reason not to reduce the reserves in the Self-Insurance Trust fund to two months and return over $7,500,000 to the:
- employees (1,875,000)
- tax-payers (2,250,000)
- school department (3,375,000)
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