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Mineral Wells council names trustees, ratifies health-insurance trust expenditures and plans new IRS Section 115 trust
Summary
The City Council approved a resolution naming trustees for the city's employee health insurance trust, ratified prior trust expenditures and directed staff to create a new Section 115 trust to separate certain post-employment liabilities and return about $849,000 to the general fund.
The Mineral Wells City Council voted 7-0 on July 1 to name trustees for the City of Mineral Wells Employee Health Insurance Trust, ratify prior expenditures from the trust and direct staff to establish a new Section 115 trust under the Internal Revenue Code.
City staff told the council the original trust was created in February 2005 and amended in February 2009, and that the prior sole trustee resigned after retiring. The city has continued to operate the trust while a trustee position was vacant; staff said expenditures from the trust are paid to carriers such as Blue Cross Blue Shield and Aflac and that the trust structure has yielded carrier discounts.
According to staff, the trust balance at the close of the last fiscal year was about $849,000; council-approved actions include moving that balance back into the city's general fund before the close of the current fiscal year. Staff said the new trust will be structured as an Internal Revenue Code Section 115 trust, which the city expects will accomplish the trust's existing purposes while removing certain other-post-employment benefits liabilities from the operating fund balance sheet.
Council discussion included clarification that the previous trustee resigned because of retirement, and a staff explanation of how departmental staffing levels historically led to overfunding of premiums (for example, a department budgeted for five employees but staffed with three could have contributed premiums for the full five, producing accumulated surplus in the trust).
A councilmember moved to approve the recommendations regarding the Employee Health Insurance Trust as presented; the motion was seconded and carried 7-0.
Staff indicated they will proceed over the coming year to create the new 115 trust and implement the movement of funds as described. No additional action or ordinance was adopted beyond the resolution approving the trustee-designation and ratifying expenditures.
