Shock Loss Fund Policy

Originally Adopted by MVRMA Board: March 18, 1996
Amended by the MVRMA Board: December 16, 1996, September 20, 2004

The Shock Loss Fund (SLF) was established in 1996 from member contributions that were preliminarily budgeted for stop loss insurance premiums. In a departure from previous decisions, the MVRMA Board determined it would be wiser to build an internal shock loss funding mechanism by retaining funds that otherwise would be spent with external carriers.

The purpose of this policy is to prescribe a consistent procedure for handling this fund.

Each year a moving target equal to the annual loss fund will be established. MVRMA members will fund approximately 15% of that amount annually with an expectation that over a period of time, the balance of the SLF will be equivalent to the current year’s annual loss fund. Contributions to the SLF will be recorded with separate accounting designed to preserve each member municipality's percentage ownership. Each member's SLF balance will be reviewed annually in conjunction with MVRMA's preliminary budget process. Any member whose balance is equivalent to its upcoming annual loss fund contribution will not be required to make an additional deposit. Unless otherwise waived by the MVRMA Board, any member whose balance falls below its targeted amount, will be required to contribute the amount needed to reach the targeted amount or 15% of the current annual loss year contribution, whichever is less.

All interest will be allocated proportionally to each member’s percentage ownership in the SLF. Monthly, quarterly and annual financial reports will track contributions into the fund and expenditures from the fund by city. Special assessments which qualify for payment from this fund will be determined by the MVRMA Board. They only apply to those cities who were MVRMA members during the loss year for which the special assessment is required.

When a MVRMA member withdraws from the Association, their portion of the SLF must remain on deposit with MVRMA until such time as all loss years in which they participated are closed.

Once a member municipality has at least the current year's regular loss fund contribution on account in MVRMA's SLF, it will not be asked to contribute additionally to the SLF.

A municipality which joins MVRMA after January 1, 1996, shall not be required to make a SLF contribution in the first membership year or part thereof. SLF contributions shall be made by each new member in all subsequent membership years in the same manner as all other MVRMA members.

Once members have their "fair share" on account with MVRMA, the MVRMA Board may authorize the distribution of SLF interest income to participating members in proportion to each member's percentage ownership in the SLF as calculated at that time. Such distributions, if any, shall occur annually as part of MVRMA's regular budgetary/invoicing cycle, and shall be given as a credit against future charges/contributions to MVRMA.