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Audit committee backs raising employee benefits fund reserve to 20%
Summary
Committee members supported a recommended change to the city’s employee benefits fund reserve from 10% to 20% to align with actuarial guidance; staff said the current fund balance is sufficient and the change will be implemented through the FY2026 budget.
The Audit and Finance Committee reviewed and approved proposed financial policy changes for fiscal year 2026 at its May 19 meeting, including one substantive change to the employee benefits fund reserve.
Carrie Lang, director of the Budget and Organizational Excellence Office, told the committee the Human Resources Department recommended increasing the employee benefits fund reserve from the current 10% to 20% based on actuarial guidance that a reserve equal to two to three months of claims is prudent. Lang said the fund currently has sufficient ending balance to achieve the 20% reserve without an immediate budget transfer; staff will manage the reserve target through annual budgeting and contributions across departments.
Lang also reviewed several administrative language updates to Austin Energy financial policies, including aligning the annual comprehensive financial report acronym with GASB changes and clarifying references to “power supply adjustment.” Committee members asked technical questions about how the reserve change is implemented; Lang said staff will adjust the city’s contribution amounts year to year so the reserve is maintained close to the 20% target.
Without objection the committee directed staff to include the 20% reserve policy change in the FY2026 budget documents for council consideration. Committee and staff agreed the budget process will incorporate the policy updates and that the posted budget documents will reflect the changes.
