Accounting Procedures Handbook

PENSION/BENEFITS 17.3 TRUST AND AGENCY FUNDS I. OVERVIEW The Board of Education provides its employees with various benefits. These include pension plans for retirement, 401(a) and 403(b) plans, and health insurance coverage. This section will also cover the worker’s compensation program. Teachers in the County are covered by the Teacher’s Retirement System or the Teacher’s Pension System of the State of Maryland. These pension systems are cost-sharing multiple- employer public employee retirement systems. Except for restricted programs (i.e. Federal grants), the State of Maryland pays the majority of the Board’s annual contribution into these plans. On-behalf payments are recognized as revenues and expenditures in the Board’s general fund. The Board has no contingent liability for funding deficits in the system should such occur. Employees not covered by the above plans (i.e. non-instructional positions) are covered by the “Retirement Plan for Employees of the Board of Education of Wicomico County”. This plan is a single-employer, defined benefit plan. The Board is responsible for 100% of contributions made to this plan. This plan is administered by Aetna. Employees may also participate in a 401(a)-matching plan. This is a self-directed defined contribution plan. The Board’s contribution is based upon the employee’s contribution to the 403(b) plan. Health insurance is currently provided through Blue Cross/Blue Shield. The Board is part of a public entities health care consortium with the City of Salisbury and Wicomico County. The Board funds a rate stabilization reserve of 14% of average annual premiums. Each year the health care insurance provider produces a settlement for all participating entities. If there is an experience loss, funding will come from the entities based on their individual experience. Under the contract, the health insurance carrier can only require payment against the deficit of up to 7% of the actual monthly premiums paid in the current fiscal year. If there is a surplus, the provider will refund a portion of the premium deposits. The Board sets aside these funds for future use as fund balance committed to the healthcare rate stabilization reserve (equal to 14% of average annual premiums) or assigned to the healthcare rate stabilization reserve (funds in excess of the 14% reserve requirement). The Board also offers its employees Flexible Spending Accounts for Medical and Dependent Care expenses. The Board is part of the Maryland Association of Boards of Education Worker’s Compensation Group Insurance Fund. Each Board pays an annual premium based on its projected payroll. Deficits in this fund must be made up through additional assessments of the Boards participating in the worker’s compensation fund. II. CONTROL OBJECTIVES To ensure: • Employee benefits are accounted for in accordance with generally accepted accounting principles. • All employee benefits are managed and funded in accordance with applicable laws and regulations.