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PEBB Board Decisions

PEBB Board Decisions. June 16, 2007 Board Decision:

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PEBB Board Decisions

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  1. PEBB Board Decisions June 16, 2007 Board Decision: PEBB Board voted to increase the Employer Provided Basic Life Insurance from $5,000 to $10,000 effective January 1, 2009. Agencies will continue to pay the premiums for the initial $5,000. PEBB will use some or all of the $17 million accumulated in the PDA to pay premiums for the additional $5,000. At the current state staffing level, this will cost $594,241. July Board Decision Pending: The Board must authorize the funding arrangement.

  2. Standard InsuranceClaims Fluctuation Reserve, Premium Deposit Account$5,000 Employer Sponsored Life Insurance • Claims Fluctuation Reserve CFR):A reserve of funds (minimum of 15% of the annual premiums) PEBB is required to provide to Standard for use in the event of bad claims experience. • Premium Deposit Account (PDA): Funds deposited from the CFR when it reaches the maximum balance as set by the Board.

  3. OPTION 1: Transfer all PDA Funds ($17 Million) to the Stabilization FundMaintain the current cap of $3 million in the CFR Continue the PDA with Standard Board Actions Required: • Authorize the transfer of PDA funds to Stabilization Fund • Authorize monthly premium payments from the designated Stabilization Funds Considerations: where the funds are held, interest rate obtained and financial impact • Funds are held by the State in the appropriate account • Stabilization Fund can include a designate account for funds transferred and held for payment of monthly premiums • Interest earned will be at the Treasury Rate. Interest earned in the CFR and PDA do not change • PEBB can “call” funds from the PDA on demand not to exceed the minimum required balance of 15% of the premium • Risk charges (optional life, long and short term disability) will increase in the future 2008 at an estimated cost of $200,000

  4. OPTION 2: Transfer all PDA Funds ($17 Million) to the CFREliminate the PDA with Standard CFR will be over $20 million and will grow Board Actions Required • Eliminate or raise the CFR Cap • Authorize the transfer of all PDA funds to CFR • Authorized the “call” of funds annually from CFR to Stabilization Fund for the premium costs Considerations: where the funds are held, interest rate obtained and financial impact • Interest earned will be at the CFR rate • PEBB can “call” funds from the CFR on demand not to exceed the minimum required balance of 15% of premium • Funds are not held by the State. Funds will not be on the State ledger • Risk charges would approach zero • Optional life premiums for 2008 and 2009 will be reduced by an additional 13% • Pay monthly premiums to Standard from the Stabilization Fund • Establish schedule to “Call” funds from the CFR on an annual basis to replace expended Stabilization Funds Will need to begin funding in 2009

  5. OPTION 3: Transfer $7 million from the PDA to the CFRContinue PDA with StandardCFR will be $10 million, PDA will be $10 million and growing Board Actions Required • Eliminate or raise the CFR cap • Authorize transfer of PDA funds to CFR • Authorize monthly premiums from Stabilization Fund • Authorize “call” of funds annually from PDA to Stabilization Fund for premium costs Considerations: where the funds are held, interest rate obtained and financial impact • Requires Board action to change the cap on the CFR • Interest earned will be at the CFR and PDA rates • PEBB can “call” funds from the CFR and PDA on demand not to exceed the minimum required balance of 15% of premium • Funds are not held by the State. Funds will not be on the State ledger • Risk charges would not increase in 2008 • Pay monthly premiums to Standard from the Stabilization Fund • “Call” funds from the PDA on an annual basis to replace expended Stabilization Funds • Optional Life would experience an additional rate reduction of 5 – 7%

  6. OPTION 4: Transfer $7 million from the PDA to the CFR and 10 million to the Stabilization FundEliminate the PDACFR would be $10 million and continue to grow Board Actions Required • Eliminate or raise the CFR cap • Authorize transfer of PDA funds to Stabilization Fund • Authorize payment of premiums from Stabilization Fund • Eliminate PDA Considerations: where the funds are held, interest rate obtained and financial impact • Requires Board action to change the cap on the CFR • Interest earned will be at the CFR rate and the Treasury rate (funds held in the Stabilization Fund) • PEBB can “call” funds from the CFR on demand not to exceed the minimum required balance of 15% of premium. • Stabilization Fund can establish account for funds transferred and held for payment of monthly premiums • CFR funds are not held by the State. Funds will not be on the State ledger • Risk charges would not increase in 2008 • Optional Life would experience an additional rate reduction of 5–7%

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