Title
Consider a memorandum/resolution authorizing the termination of the Employee Benefits Trust Fund, effective February 4, 2025.
Body
DATE: February 4, 2025
TO: Kent Cagle, City Manager
FROM: Kate McDaniel, Executive Director of Human Resources
SUBJECT: Terminating the Employee Benefits Trust Fund
BACKGROUND AND FINDINGS:
Chapter 222.002 of the Texas Insurance Code creates an annual tax that is imposed on insurers for gross premiums received from their policy holders. Gross premiums paid by some entities, which includes municipalities, can be exempt the taxes being collected by the insurer. This exemption from taxes can be claimed if a municipality establishes something called a single entity benefits trust.
On July 21, 2010, the City Council executed a Declaration of Trust to create an Employee Benefits Trust (EBT) and has taken advantage of the exemption from paying the state taxes on the premiums paid by the City.
On October 1, 2021, the City of Killeen became self-insured for healthcare/RX. Being self-insured has allowed the city cost savings, flexibility, control, and has improved cash flow.
Currently, the City uses the EBT for dental premiums. However, there are no tax-saving benefits associated with Dental premiums because the vendor already provides exempt pricing. Terminating the EBT will not affect these prices.
THE ALTERNATIVES CONSIDERED:
N/A
Which alternative is recommended? Why?
N/A
CONFORMITY TO CITY POLICY:
Yes
FINANCIAL IMPACT:
What is the amount of the revenue/expenditure in the current fiscal year? For future years?
There is no expenditure associated with this action.
Is this a one-time or recurring revenue/expenditure?
N/A
Is this revenue/expenditure budgeted?
N/A
If not, where will the money come from?
N/A
Is there a sufficient amount in the budgeted line-item for this revenue/expenditure?
N/A
RECOMMENDATION:
Staff recommends terminating the Employee Benefits Trust Fund, effective February 4, 2025, as there are not tax-savings associated with dental premiums and the vendor already provides exempt pricing, and that the Trustees execute the attached Termination of Trust document.
DEPARTMENTAL CLEARANCES:
Finance
Legal
ATTACHED SUPPORTING DOCUMENTS:
Termination of Trust
Presentation