MEMO TO: Members of the City Council
FROM: Mayor John Marchione
SUBJECT:
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Approval of the Establishment of the Health Reimbursement Arrangement (HRA) Voluntary Employees' Beneficiary Association (VEBA) Accounts for Employees and the Use of Reserves in the Medical Self-Insurance Fund to Support the New Accounts
I. RECOMMENDED ACTION
recommendation
Approve establishing Health Reimbursement Arrangement (HRA) Voluntary Employees' Beneficiary Association (VEBA) accounts for employees based on eligibility requirements and the use of reserves in the Medical Self-Insurance Fund to support the new accounts.
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II. DEPARTMENT CONTACTS
Malisa Files, Finance Director
Cathryn Laird, Interim Human Resources Director
Nicole Bruce, Benefits Manager
III. DESCRIPTION/BACKGROUND
A health reimbursement arrangement (HRA) voluntary employees' beneficiary association (VEBA) is a tax-exempt trust instrument that provides employee benefits and is authorized under Internal Revenue Code section 501(c)(9). A HRA VEBA is a benefit plan that reimburses out-of-pocket medical care and premium expenses.
As reported for several years, the City's Medical Self-Insurance Fund is carrying excess reserves of approximately $5 million. The Employee Benefits Advisory Committee (EBAC) is proposing to use the funds to establish HRA VEBA accounts for eligible employees (see one-pager in Exhibit A). Eligible employees are those employees that were covered under the City's medical plans for the past five years (January 1, 2014 through December 31, 2018). Employees will receive a one-time pro-rated share determined by the number of months the employee was covered by the City. Eligible employees must also have been in active status on December 31, 2018.
A. Analysis
The Medical Self-Insurance Fund has been accumulating excess reserves due to conservative actuarial analysis as well as underutilization of the plan. The Fund currently holds approximately $10 million in fund balance. ...
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