CASH
FLOW PROJECTIONS:
An Example of the Rael & Letson Approach |
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Issue:
The Board of Trustees had determined there was a need for changes in their
benefit plans in order for the Fund to remain financially stable. Following
the receipt of the requests for proposals for insured benefits and the estimates
of benefit modifications to the self-insured benefits, the Board wanted
to know which of the combinations would best enable the Plan to maintain
adequate reserves over the next five years and offer the best benefit package
to its participants. |
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Process:
The various benefit plan options were discussed in detail. The financial
value of the changes, the impact on participants, and how the overall plan
design would compare to the average plan design within the same industry
were considered. Cash flow projections were prepared covering the three
most likely plan designs to determine if the five-year financial goals of
the Fund could be met. A number of modifications to the plans were examined;
some were rejected and some replaced features of the proposed three plans.
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Outcome:
The Board of Trustees reached agreement on the financial goals for the Fund.
They selected the plan design that would best support these financial goals
as well as meet the needs of the participants. The Board was able to agree
on a process to communicate the new benefits and explain the value of the
plan to the participants. |
