O-2006-2781-B (original in 2004)

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Explanation of Reconciliation of the Employee Health Services Budget The attached reconciliation shows how the City's budgeted revenues and expenditures vary from Neal Welch's premium and contribution projections. On the revenue side, the amount sent over for the City's contributions is based on budgeted positions (425 employees and retirees); whereas, on Neal's schedule the amount shown for the City contributions is only for participants in the insurance plans (374 employees and retirees participating). This variance is the non-participatory revenue and amounts to approximately $234,959. The other variance regarding revenues is that Neal does not include an amount for interest earnings. This brings the total variance in revenues to approximately $257,459. On the expenditure side, the City's budget includes Y4 of the salary of the Human Resources Manager, consulting costs, and the special programs (Short-Term and Long- Term Disability). These expenditures total $110,098. Neal's spreadsheet includes only the claims administration costs, claims paid and re-insurance premiums. In addition, we have added another $100,000 to the projected insurance claims. Initially, these were budgeted at the midpoint, but the $100,000 was added to reduce the City's potential exposure. This brings the total variance between the City's budgeted expenditures and Neal's numbers to approximately $210,098. The non-participatory revenue is used to cover the costs of the expenditures that are not included in Neal's schedules. Additionally, these revenues are used to contribute to the fund balance. We are projecting that the Insurance Fund will have approximately 60 days of working capital at the end of FY 2007, which is 30 days below the minimum. Lastly, the non-participatory revenues are helping to lower the cost to the employees. Without the inclusion of these revenues, the proposed increases to employees would be much higher. \