Mercer projects $128.3M in 2026 health‑plan costs; Mercer and board debate reserve shortfall and employee contribution scenarios

David Keogh, a principal with Mercer, told the Virginia Beach School Board that Mercer’s updated projection using claims through Dec. 31, 2025, puts the 2026 gross cost for the division’s health plan at $128,300,000. “You’ll see that figure as a $128,300,000,” Keogh said while walking members through the exhibit.

Keogh said the projected 2026 funding mix is employer contributions of $103.5 million, employee and retiree contributions of $17.5 million and a planned draw of $7.3 million from the health fund. “The health fund balance as of December 2025 … was $13,300,000,” he added, and with the board’s previously announced $5.8 million reversion infusion he estimated an ending 2026 fund balance of about $11.8 million.

The administration and Mercer warned that the fund remains below an industry best‑practice reserve of roughly two‑twelfths of gross cost (about $21.4 million for the projected 2026 cost), leaving an estimated deficit of roughly $9.96 million. Keogh summarized three 2027 scenarios that vary only by the employee/retiree contribution (0%, 10% and 15% increases) and noted that if employee contributions are held flat the employer share would rise to cover the gap.

Board members pressed Mercer on assumptions and methodology. Miss Monique Melnick asked whether Mercer’s actuaries factor in emerging clinical trends and new studies; Keogh said Mercer’s actuarial team “take all known information” and that the projection process includes conversations with national and regional plans to account for new treatments and changing utilization. When a board member questioned a percentage calculation — noting that 17.5 million divided by 128.3 million appears to be ~19% rather than the 13.6% figure cited — Keogh explained he was framing the employee share relative to a total concept that included prior reliance on the health fund in 2026, a distinction that will change when the division transitions away from relying on the fund in 2027.

Timing and next steps: Mercer and the administration confirmed monthly updates through March data, with a final rate decision informed by March data and expected to be taken in May. The board and staff identified options for improving the reserve — added reversion funding, better plan performance versus budget and possible contribution changes — and encouraged more specificity at decision time.

The meeting’s discussion was deliberative and technical; no vote on contribution levels occurred at this session. The board will receive further Mercer updates and incorporate those figures into the operating budget deliberations ahead of the March 24 adoption timeline.