1 PEBB Board Decisions June 16, 2007 Board Decision: PEBB Board voted to increase the Employer Provided Basic Life Insurance from $5,000 to $10,000 effective January 1, Agencies will continue to pay the premiums for the initial $5,000. PEBB will use some or all of the $17 million accumulated in the PDA to pay premiums for the additional $5,000. At the current state staffing level, this will cost $594,241. July Board Decision Pending: The Board must authorize the funding arrangement.

2 Standard Insurance Claims Fluctuation Reserve, Premium Deposit Account $5,000 Employer Sponsored Life Insurance Claims Fluctuation Reserve CFR): A reserve of funds (minimum of 15% of the annual premiums) PEBB is required to provide to Standard for use in the event of bad claims experience. Premium Deposit Account (PDA): Funds deposited from the CFR when it reaches the maximum balance as set by the Board. Account DetailClaims Fluctuation Reserve (CFR)Premium Deposit Account (PDA) Required Minimum Balance$3 Million (15% of annual premium)None Maximum Balance$3 Million. Board may elect to increase or eliminate the cap on the maximum None Interest earned on Account5.45% as of July, % as of July Risk ChargesShort Term Disability: 2% Long Term Disability: 3% Optional Life Insurance: 2.5% N/A Stabilization Fund Interest:5.20% for June 2007

3 OPTION 1:Transfer all PDA Funds ($17 Million) to the Stabilization Fund Maintain the current cap of $3 million in the CFR Continue the PDA with Standard Board Actions Required: Authorize the transfer of PDA funds to Stabilization Fund Authorize monthly premium payments from the designated Stabilization Funds Considerations: where the funds are held, interest rate obtained and financial impact Funds are held by the State in the appropriate account Stabilization Fund can include a designate account for funds transferred and held for payment of monthly premiums Interest earned will be at the Treasury Rate. Interest earned in the CFR and PDA do not change PEBB can “call” funds from the PDA on demand not to exceed the minimum required balance of 15% of the premium Risk charges (optional life, long and short term disability) will increase in the future 2008 at an estimated cost of $200,000

4 OPTION 2: Transfer all PDA Funds ($17 Million) to the CFR Eliminate the PDA with Standard CFR will be over $20 million and will grow Board Actions Required Eliminate or raise the CFR Cap Authorize the transfer of all PDA funds to CFR Authorized the “call” of funds annually from CFR to Stabilization Fund for the premium costs Considerations: where the funds are held, interest rate obtained and financial impact Interest earned will be at the CFR rate PEBB can “call” funds from the CFR on demand not to exceed the minimum required balance of 15% of premium Funds are not held by the State. Funds will not be on the State ledger Risk charges would approach zero Optional life premiums for 2008 and 2009 will be reduced by an additional 13% Pay monthly premiums to Standard from the Stabilization Fund Establish schedule to “Call” funds from the CFR on an annual basis to replace expended Stabilization Funds Will need to begin funding in 2009

5 OPTION 3: Transfer $7 million from the PDA to the CFR Continue PDA with Standard CFR will be $10 million, PDA will be $10 million and growing Board Actions Required Eliminate or raise the CFR cap Authorize transfer of PDA funds to CFR Authorize monthly premiums from Stabilization Fund Authorize “call” of funds annually from PDA to Stabilization Fund for premium costs Considerations: where the funds are held, interest rate obtained and financial impact Requires Board action to change the cap on the CFR Interest earned will be at the CFR and PDA rates PEBB can “call” funds from the CFR and PDA on demand not to exceed the minimum required balance of 15% of premium Funds are not held by the State. Funds will not be on the State ledger Risk charges would not increase in 2008 Pay monthly premiums to Standard from the Stabilization Fund “Call” funds from the PDA on an annual basis to replace expended Stabilization Funds Optional Life would experience an additional rate reduction of 5 – 7%

6 OPTION 4:Transfer $7 million from the PDA to the CFR and 10 million to the Stabilization Fund Eliminate the PDA CFR would be $10 million and continue to grow Board Actions Required Eliminate or raise the CFR cap Authorize transfer of PDA funds to Stabilization Fund Authorize payment of premiums from Stabilization Fund Eliminate PDA Considerations: where the funds are held, interest rate obtained and financial impact Requires Board action to change the cap on the CFR Interest earned will be at the CFR rate and the Treasury rate (funds held in the Stabilization Fund) PEBB can “call” funds from the CFR on demand not to exceed the minimum required balance of 15% of premium. Stabilization Fund can establish account for funds transferred and held for payment of monthly premiums CFR funds are not held by the State. Funds will not be on the State ledger Risk charges would not increase in 2008 Optional Life would experience an additional rate reduction of 5–7%