Cash Flow Projections
An Example of the Rael & Letson Approach
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.
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.
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.