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PEBP board asks why reserves swung so much; executive officer says reserves were drawn to cover shortfalls
Summary
Board member Michelle Kelly questioned large quarter-to-quarter changes in IBNR, catastrophic and HRA reserves; Executive Officer Celestina Glover said staff drew reserves to cover budget shortfalls.
Board member Michelle Kelly asked why the board packet showed large changes in PEBP—s reserves over the 2024-2025 plan year, citing differences between actuarial reserve levels and the cash carried in board reports.
The issue: Kelly said Segal reported reserve needs as of June 30, 2024 that appeared higher than the reserves shown in subsequent board packets and asked why the IBNR, catastrophic and HRA reserves moved substantially between reporting dates.
Celestina Glover, executive officer, told the board, "The reserves set by Seigel are where they believe the reserves need to be for IBNR and catastrophic reserves as of June 30 of the plan year. ... The last 3 years, we have had a shortfall in our budget, both in expenditure categories and in our revenue stream. And in order to do a balance forward, the only place we could adjust was in the reserves." She said staff prorated reductions across reserve categories to address cash shortfalls and that the movement shown in the packet reflects tapping reserves because PEBP no longer had excess cash.
Board action: After discussion the board approved the pulled consent item containing the budget report (item 4.2.1). The motion to approve item 4.2.1 was made by Michelle Kelly and seconded by Jennifer McClendon; the board voice vote passed.
Why it matters: Reserves fund incurred-but-not-reported claims and catastrophic risk; drawing those funds reduces near-term program liquidity and affects the board—s options during budget shortfalls.
Follow-up: Staff agreed to provide additional details and make the reserves chronology easier to compare across reporting periods to help the board monitor reserve adequacy going forward.
