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Consideration of recommendation to utilize the 2024 Health Insurance surplus to establish a sick leave pay-out, provide a dividend to employees and create a flood reimbursement reserve
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Submitted by:
John Ruggini and Beth Mbow
Department
Finance and Human Resources
A. Issue
The Health Life Fund posted a $1,286,023 surplus in 2024. Given that a significant driver of that surplus was better than expected member claims, we recommend sharing a portion of that surplus with employees.
B. Background/Options
The City of Wauwatosa maintains a self-insured health insurance program. Being self-funded, the City pays for claims expenses up to $100,000. As a result, employee and dependent personal health decisions have a direct financial impact on the City's budget. The Health Life Fund posted a $1,286,023 surplus in 2024. As part of the year-end process, $415,324 was rebated to fund balance leaving $870,699. Given that member health claims savings compared to budget provided $691,044, we recommend sharing a portion of that surplus with employees.
In order to determine an appropriate amount, we recommend reviewing and adopting a fund balance policy for the Health Life Fund. The following was presented last year to the Financial Affairs committee in draft form. The underlined portion has been added.
Based on 2024 results, the fund balance target is $5.13 million based on 30% of $7.9 million in 3-year average claims and a $2.7 million sick time payout accrued liability. As of the end of 2024, the Health Life Fund had a fund balance of $7.3 million. This places it at 143% of target with a surplus of $2.2 million.
We recommend dividing the $1.3 million three ways ($425,000 each). One-third allocated to fund balance (which already took place via year-end), one-third allocated to employee dividends and one-third held in reserve pending determination of FEMA reimbursement. If we have unreimbursed flood expenses, then that 1/3rd would be used to offse...
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