TO: Mayor and City Council
FROM: Salem City Council Finance Committee
SUBJECT:
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Employee Benefits Self Insurance Fund Balance / Reserve Policy
Ward(s): All Wards
Councilor(s): All Councilors
Neighborhood(s): All Neighborhoods
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ISSUE:
Shall City Council adopt a policy for the Employee Benefits Self Insurance Fund?
RECOMMENDATION:
recommendation
Adopt Resolution 2019-2, establishing Council Policy C-16 for the Employee Benefits Self Insurance Fund.
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SUMMARY AND BACKGROUND:
The City is self-insured for health benefits, automobile physical damage, workers’ compensation, unemployment, and third-party liability claims.
On December 17, 2018, City Council’s Finance Committee recommended an Employee Benefits Self Insurance Fund Balance / Reserve Policy to City Council.
FACTS AND FINDINGS:
As with all operating funds, sound financial management practices include establishing the appropriate level of reserves or fund balances. Appropriate, prudent reserves allow the City to plan for contingencies. There will always be unforeseen emergent issues potential or revenue shortfalls. Adequate reserves prevent negative cash balances during the fiscal year. Reserves provide resources to support services during periods of increased expenditures or slow revenue growth.
Rate stabilization is of concern with the Employee Benefits Self Insurance Fund due to the volatility of operating expenses. During the past 18 fiscal years, the average annual growth rate of health benefits claims was 8.45 percent, and the standard deviation of that growth rate (a measure of volatility) was 11.74 percent.
Josh Eggleston
Senior Fiscal Analyst
Attachments:
1. Resolution 2019-2
2. Exhibit A - Resolution 2019-2 Council Policy C-16