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Sarasota News Leader February 1, 2013 Page 16 Using city–supplied figures, Pollock pointed ery participating employee and retiree, and it out the city faces an estimated $514 million pays the premiums from the annuity income. in pension costs, but it has only $370 million When a participating employee or retiree to back them up. That means a $144 million dies, the insurance benefit is split among the shortfall. For the healthcare promises to retirtrust, the city and the decedent's beneficiary. ees, the cost is estimated to be $135 million, The trust gets half, or but the city has only $125,000 to cover tax$13 million available es on the annuity in— a $122 million gap. Seventy percent of Fortune 1,000 come, interest on the Together, the city has companies and 4,000 banks have bought loan, the insurance promised $265 million this type of product. premiums and "some in benefits to retirees trust fees," said PolMark Pollock that it does not have. lock. Pollock Financial Group Blame the stock marNovelty, OH ket meltdown. The other half is split further, with the city "About 18 months ago, we set out to find a receiving $100,000 and the decedent's benefisolution," said Pollock. "We came across a ciary getting $25,000 (an insurance payout for group that had done this before." He noted which the employee paid nothing). of the insurance, "Seventy percent of Fortune 1,000 companies and 4,000 banks have bought Pollock said the plan is called TRIPEB, an acthis type of product." ronym for trust-owned insurance for post-emPollock explained the city would have no lia- ployment benefits. And if every one of the bility, even if the scheme blew up. And the city city's current and prior employees — all 850 does not have to put up any money now or of them — desire to participate and receive later. Like many modern financial techniques, a free $25,000 life insurance policy, the city's share of the deal is $85 million. this one is a little tricky. The first step requires the city to set up "an in- That is not enough to fix the $265 million dependent multi-life trust," Pollock explained. shortfall in pension and healthcare promises. But without paying a penny, the city could reHe is working with a company called Wilming- duce the deficit by about one-third. ton Trust that will administer the plan, borrow the money and buy the life insurance. Each TOO GOOD TO BE TRUE? employee will be asked if he wants to partic"This was never meant to — quote — solve the ipate. problem," said Chris Lyons, the city's finance The trust borrows money from a bank at 3 director. "What would happen if the trust went percent interest; then, it buys an annuity that 'belly-up'? The employee wouldn't get their pays income to the trust. The trust takes out a coverage, and the city wouldn't get any money. $250,000 life insurance policy on each and ev- But neither is paying for this benefit."

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