RESTRICTED  
  
WT/BFA/W/431  
 
26 October 2017  
(17-5700) Page: 1/13 
Committee on Budget, Finance and Administration  Original: English  
 
SUMMARY REPORT BY CHAIR OF THE ASHI FUND WORKING GR OUP  
1  INTRODUCTION  
1.1.  The introduction of new accounting practices under the International Public Sector Accounting 
Standards (IPSAS) required long -term liabilities under the WTO Medical Plan (WTOMP) – and in 
particular its After Service Health Insurance (ASHI) part covering retired staff – to be reflected in 
the WTO’s accounts. This has resulted in the WTO registering financial deficits  since 2012, with 
CHF 111 Million estimated for ASHI liabilities as at end 2016.  
1.2.  In April 2014, the Committee on Budget, Finance and Administration (CBFA) established a 
Working Group on ASHI with a view to making recommendations on the long -term financial  
viability and sustainability of the WTOMP and particularly of its post -employment ASHI liabilities. 
The Working Group on ASHI, in its report to the CBFA (WT/BFA/W/370) in July 2015, 
recommended that the Director -General develop a multi -faceted strategy, w hich should, inter alia, 
contain targets towards the overall goal of halting the growth of the ASHI liability and setting the 
WTOMP on a sustainable footing.  
1.3.  A Strategy for managing the WTOMP and its ASHI liabilities was prepared by the WTO 
Secretariat (W T/BFA/406/Rev.1) and presented to the CBFA in February 2017.  It notably outlined 
budget projections for the WTOMP as well as cost control measures by the Secretariat. On the 
issue of funding the ASHI liability, the Strategy proposed a partial funding appr oach which would 
move beyond the current pay -as-you-go model. More specifically, the Strategy proposed to 
establish an ASHI Fund using WTO’s accumulated budgetary surpluses as well as savings1 from 
cost control measures under the WTOMP. Such a Fund could b e used to at least partially absorb 
rising costs generated by the ASHI portion of the WTOMP. At the same time, this would slow the 
growth of the ASHI liability and eventually, once the WTOMP had fully matured, start reducing that 
liability.  
1.4.  The CBFA took note of the Strategy, and concurrently established an ASHI Fund Working 
Group to look into how ASHI liabilities could be addressed under WTO’s budget, including by 
considering whether the accumulated budgetary surplus could be used in that context.   
1.5.  Since its establishment in February 2017, the ASHI Fund Working Group met a total of 14 
times. The Working Group was open to all CBFA Members, and materials circulated and considered 
in the Working Group w ere sent to all CBFA Members in the interest of transpare ncy. In this 
summary report, which I have prepared under my own responsibility as the Chair of the ASHI 
Fund Working Group, I attempt to summarize the deliberations that have taken place in the 
Working Group as well as the ideas and options that have arise n from these discussions. This 
report also identifies the points of convergence reached within the Working Group.  
2  CONTEXTUAL ELEMENTS  
2.1.  The Working Group noted the following contextual elements undergirding our discussions:  
a. The cost of providing the WTOMP  to active and retired staff and their eligible dependents 
is expected to increase substantially in the coming years. Annual contributions by WTO 
Members to the WTOMP are projected to grow from CHF 7.3 million as of 2015 to 
                                                
1 For the meaning of “savings”, see paragraph 4.2 below.  WT/BFA/W/431  
 
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  CHF 26.6 million in 20352. These  cost increases are driven by a variety of factors, the 
most important one being the ASHI part of the WTOMP.  
b. However, the medium to long term forecast for the WTOMP is complex with many 
variables. For instance, a few serious cases involving major insurance  pay-outs could 
significantly affect the WTOMP’s finances. This volatility is due in part to the relatively 
small number of participants in the WTOMP (2  226 participants, including eligible 
dependents, as at June 2017). 
c. The WTOMP operates on a cost -sharing  basis between the WTO Members and WTO staff. 
The established practice has been that on average, WTO Members cover 60% of the 
costs, and WTO staff cover 40%. Any cost increases to the WTOMP will need to be borne 
proportionat ely by the respective parties.  
d. The implementation of the WTO Secretariat Strategy for managing the WTOMP and its 
ASHI liabilities by the WTO staff (WT/BFA/ W/406/Rev.1) is underway. Some savings 
have already been realised from cost control measures. A summary of these measures 
prepared b y the Secretariat is at Annex I .  
e. While recognising the need to put the WTOMP, and in particular its ASHI part, on a more 
sustainable footing, WTO Members face budgetary constraints domestically, especially in 
an environment of depressed global economic an d trade growth.  
f. Beyond the rising cost of the WTOMP, the WTO faces several other challenges which are 
expected to create significant pressures on the overall WTO budget in the future. These 
challenges include dispute settlement, staff -related costs, WTO se curity equipment and 
IT services, the Building Renovation Fund, and negative interest rates. A paper on the 
medium term budget outlook in the context of the WTOMP prepared by the Secretariat is 
at Annex II .    
g. There are untapped accumulated budgetary surpl uses from recent  years of 
approximately CHF  50 Million, as well as savings from cost reduction measures 
undertaken so far as part of the overall ASHI Strategy.  
3  KEY DELIBERATIONS  
3.1.  With the above context in mind, the Working Group delved into extensive discussions on the 
key issues of (i) whether the WTOMP should move beyond the current “pay -as-you-go” funding 
model; and (ii) how to meet anticipated ASHI cost increases.  
Moving beyond the current “pay -as-you-go” funding model?  
3.2.  The Working Group noted th at the WTO, under the IPSAS, has a registered financial deficit 
arising from ASHI liabilities. That said, the Working Group also discussed the differences between 
a financial liability and a budgetary cost increase. It was noted that every future liability  is 
calculated on certain assumptions and that changes in the parameters of these assumptions will 
affect the liability calculations. In contrast, there is an anticipated budgetary cost increase due to 
rising ASHI costs that will have an impact on the WTO budget.    
3.3.  Given the complexity of the issue, we discussed if it was realistic to set ambitious targets to 
halt the growth of the ASHI financial liability, for instance, by setting a 50% funding target. To do 
so would require significant pre -funding by WTO  Members. This would also mean moving away 
from the current “pay -as-you-go” funding model. My sense is that the Working Group generally 
felt that given the budgetary constraints faced domestically by Members, any pre -funding of the 
ASHI financial liability  should remain limited and take into account other challenges faced by the 
WTO. As such, the current “pay -as-you-go” model should remain the basis for WTOMP funding.  
3.4.  The Working Group felt that the more pressing concern was to find ways to meet the 
antici pated budgetary increases in ASHI in the medium term. One of the key considerations was 
                                                
2 WT/BFA/W/406/Rev.1  (para. 2.5.2 Budget Implications) . WT/BFA/W/431  
 
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  the impact a growing WTOMP budget line due to rising ASHI costs would have on the other 
functions of the WTO, especially if the overall WTO budget was kept at zero nomi nal growth. Many 
Working Group participants felt that resources should not be diverted from the core functions of 
the WTO just to pay for rising ASHI costs. A solution had to be found to meet the growing ASHI 
costs without unduly affecting the WTO’s core w ork. At the same time, it was also acknowledged 
that the scope for pre -funding future ASHI cost increases through the WTO’s regular budget is 
extremely limited in a zero nominal growth budget environment.  
How to meet anticipated ASHI cost increases?  
3.5.  Three possible funding models came up in the course of the Working Group’s discussions on 
ways to meet anticipated ASHI cost increases. It was generally agreed that it would be prudent to 
start with a simple structure/set -up which could evolve over time as nec essary. Several Working 
Group participants also pointed out the need to keep administrative costs low in any eventual 
solution that was found.  
3.6.  The first model was to take the current WTOMP budget line out of the regular WTO budget 
and shift this to a special account . To relie ve the WTO from budgetary pressure, whereas the 
regular WTO budget is subject to a zero nominal growth environment, Members could agree not to 
apply this principle to the special account . An inflation rate would then be conditional ly applied to 
that special account  to ensure a prudent  budgetary  solution through a package of measures. This 
would include:  
a. the continuation of zero nominal growth in the regular budget;  
b. in which case, cost increases in the special account  will be possi ble but they will be 
financed by:  
i. savings generated from cost reduction measures undertaken thus far;  
ii. untapped budgetary surpluses to smooth inflation increases in the special account , 
which must go along with an adequate additional contribution (either f inancial or on 
the benefit side, or both) from WTO staff that itself must diminish the inflation 
increase in the special account ;  
iii. surpluses from the regular budget made in a year with a zero nominal growth 
environment could be shifted to the special accou nt;  
iv. any unexpected positive balances accumulated in the special account  should also be 
used to diminish any applied inflation increase.  
3.7.  It was noted that the above approach could keep administrative costs low and create 
incentives for the WTO to continue  sound budgetary management, and for staff to actively 
contribute to cost containment. However, some Working Group participants pointed out that a 
linkage between zero nominal growth in the regular budget and the funding of the special account  
would not be  practical, notably as there were also other areas in the WTO creating pressure on the 
budget. Some Working Group participants felt that it would not be prudent to create a “parallel 
budget” for the WTOMP in the form of the special account , and were concer ned about the 
precedent this would set for other areas in the WTO budget. Others were of the view that it would 
not be possible for their governments to agree to a commitment to allow for cost increases/an 
inflation rate to be applied to the special accoun t while a zero nominal growth principle applies to 
the rest of the WTO budget. The complication of having an account comprising monies from WTO 
Members and WTO staff in terms of governance and decision -making was also highlighted.   
3.8.  The second  model was fo r the creation of an ASHI Reserve Fund comprising solely WTO 
Members’ monies. This would be used only to meet Members’ share of ASHI costs. Members could 
set a baseline year, e.g. 2017, beyond which the Members’ share of the additional ASHI costs 
could be drawn, partially or in full, out of the Reserve Fund. A principle would have to be 
established that WTO Members and staff would continue to bear proportionately the burdens of 
increasing ASHI costs, based on the current average cost sharing ratio (i.e. rou ghly 60% by 
Members and 40% by staff). For instance, sh ould ASHI costs increase by CHF  1 Million in a WT/BFA/W/431  
 
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  particular year over and above the baseline 2017 figure, Members could cover pa rt or all of the 
additional CHF  600,000 out of the Reserve Fund, whereas st aff would cover their share of 
CHF 400,000. This would mean that both sides would continue to have an incentive to control 
costs and promote sustainability. The Reserve Fund would be invested according to an investment 
strategy which would be approved by t he CBFA. Its sources of funding would comprise:  
a. contributions from the WTO budget, including savings from cost reduction measures 
undertaken;  
b. proceeds from the investment of assets;  
c. any other income which may include monies from untapped accumulated sur pluses 
(either in part or in full).  
3.9.  The Working Group considered that one advantage of a model comprising solely WTO 
Members’ monies would be the full control the CBFA would have over the Reserve Fund’s usage, 
governance and investment. The investment str ategy could be taken up separately in a next phase 
of work. S ome suggestions were made that the investment administration of the Reserve Fund 
could be coordinated with the WTO Pension Plan (WTOPP) Secretariat for efficiency. The Reserve 
Fund could also rid e on investment advice from the WTOPP investment advisor which would likely 
result in very low additional costs due to consolidated asset pricing (see Annex III  for a paper on 
possible investment options prepared by the Secretariat).  
3.10.   Many Working Group pa rticipants expressed support for the usage of untapped accumulated 
budgetary surpluses  in the second model . However, several cautioned that the accumulated 
budgetary surpluses  should not solely be allocated for ASHI, as there were other areas in the WTO 
budget which were also under significant pressure. Others noted that the auditors had explicitly 
flagged ASHI as a WTO liability under IPSAS, and that ASHI was a well -established long term 
liability. Therefore, if the accumulated budgetary surpluses were not  used fully for ASHI, a 
qualified opinion could be raised by the auditors on the WTO’s accounts.   
3.11.   A third model was proposed  for the creation of a Fund with the current accumulated 
budgetary surpluses, where the savings from the WTOMP could also be include d, without deciding 
now on its possible future uses and letting that decision be taken by the CBFA at a later stage. The 
Fund wou ld be invested as a whole , and according to an investment strategy which would be 
approved by the CBFA , with a view to reserve for foreseeable and unforeseeable  fiscal challenges 
that the WTO may face . The monies in the Fund would comprise solely Members’ monies  
3.12.   Some Working Group participants, while favouring other models would only be able to 
accept the ab ove model with the understanding that the monies in the Fund would be primarily 
used to meet future ASHI costs, though the CBFA would have the discretion to utilise the mon ies 
in the Fund for other uses.  It was also generally felt that discussions on the t hird model which 
would potentially allow for the use of the accumulated budgetary surpluses for purposes other than 
ASHI, was beyond the scope of the Working Group. As such, this discussion should be elevated to 
the CBFA for further consideration.  
4  POINTS OF CONVERGENCE  
4.1.  The Working Group was unable to come to a consensus on recommending any of the above 
three funding models to the CBFA. However, from the three models considered, there were several 
points of convergence which the Working Group identified.  
4.2.  First, the Working Group agreed with the principle that savings from the WTOMP line in the 
WTO budget which have accrued as a result of cost reduction and containment measures should 
only be used to meet ASHI costs and should not be used to cross-subsidise other parts of the WTO 
budget.  This would serve to incentivise greater cost savings and containment.  These savings would 
be calculated by  deducting actual expenditure from the approved budgetary allocation for the 
WTOMP budget line . The Working Group noted  that if no action was taken to ri ng-fence these 
WTOMP savings before the close of the 2017 budget  in December 2017 , the money could be used 
for any other purposes. O nce the 2017 budget closes, any leftover amounts  (including from the 
WTOMP savings)  would flow to the accumulated budgetary surpluses.  WT/BFA/W/431  
 
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  4.3.  The Working Group noted that to capture and ring -fence the WTOMP savings , it would be 
necessary to create a Special  Reserve Account  (SRA), which could  only be used to meet future 
ASHI costs . The Working Group’s  view wa s that pending the CBFA’s decision on the funding 
models  which would take into account the zero nominal growth  budget context , the SRA, once 
established , should remain limited to accumulating savings, and be managed under the normal 
treasury polici es of the WTO.  This would limit any non -cash holdings to low risk non -speculative 
investment vehicles.  It would  be up to future CBFAs to decide on when to draw on the monies in 
the SRA for ASHI costs.   
4.4.  Second, as a matter of principle, WTO Members and sta ff must each contribute and bear their 
proportionate share of the burden. It is noted that the established practice has roughly been a 
60:40 share of the costs between WTO Members and staff.  
4.5.  Third, cost saving and containment measures must continue to be taken so as to promote the 
sustainability of the WTOMP.  
4.6.  Fourth, it is not financially prudent for the accumulated budgetary surpluses to be left to sit 
idle, especially given today’s negative interest rate environment.  
4.7.  Fifth, as there are various views o n the utilisation of the accumulated budgetary surpluses, 
with some suggestions for the surpluses to be used for purposes other than ASHI, it is beyond the 
scope of the Working Group to discuss this issue. As such, this discussion should be elevated to 
the CBFA for further consideration.  
5  RECOMMENDATIONS TO T HE CBFA  
5.1.  The Working Group therefore makes the following recommendations to the CBFA:  
5.2.  One,  for the establishment of a Special  Reserve Account ( SRA) to capture and ring -
fence savings from the WTOMP  line in the WTO budget which have accrued as a result of 
cost reduction and containment measures. The proposed guidelines for the SRA are set 
out in  Annex IV .  
5.3.  Should the recommendation in paragraph 5.2 be accepted by the CBFA, a draft 
decision is contain ed at Annex V  for the CBFA’s approval.  
5.4.  Two, as consensus was not reached in the Working Group on the three proposed 
funding models identified in paragraphs 3.5 to 3.12 , that this discussion be further 
deliberated in the CBFA.   
 WT/BFA/W/431  
 
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  ANNEX I  
SUMMARY OF COST CONT ROL MEASURES IN MEDI CAL PLAN  
(Information provided by the Secretariat)  
1. It is important to note that staff members already bear a proportionate share of any increases 
in medical plan costs with the Members. T his includes increases related to ASHI liabilities as 
they impact the overall premiums. Typically WTO Members cover 60% of the costs and WTO 
staff members 40% on average.  Additionally, there are participants in the plan who do not 
receive any subsidy from  the WTO budget who pay the full premiums (e.g. secondary 
dependents, non -dependent spouses and children). In this way the incentives to be cost 
conscious are well aligned for both WTO Members and WTO staff.  
2. In 2016, the WTO Secretariat conducted a procure ment process for a new insurer and 
administrator of the WTOMP.  
3. It is important to note that good decision making requires good data. As part of the new 
insurance contract, the WTO Secretariat will now receive quarterly reports from the 
administrator of th e WTOMP which will enable it to continue its evaluation of the benefit 
structure. The MIMC intends to continuously examine the benefits as the WTO Secretariat 
receives better data.  
Cost Controls to improve the financial situation of the Plan  
o As of 1 Januar y 2017, the WTO Secretariat has selected a provider that has very favourable 
negotiated rates with the local and regional hospitals. It is estimated that this alone will result 
in at least a 5 per cent reduction in premiums, which should have a significant  cumulative 
impact over the costs of the Plan in the coming years.  
 
o Prior to 2017 staff members were able to insure their secondary dependants on the WTOMP. 
The Director General has approved a recommendation that no new secondary dependants be 
allowed on t he WTOMP after 1 January 2017.  
 
o All in patient procedures and hospitalizations other than emergencies already require pre 
authorisation. With respect to out patient procedures, the Director General has approved 
adding pre authorisation for orthodontia for those over 18 to ensure that it is for medical 
rather than cosmetic purposes.  
 
o For the benchmark rate for coverage outside Geneva, the Director General has approved that 
the benchmark be reasonable and customary with reference to those of the local area, so long 
as they do not exceed the Geneva rate.  
 
o With respect to private room, coverage is capped at CHF 700 per day for the room rate (18% 
lower than several  comparator organizations). It should be noted that with the new 
negotiated rates and due to the larger co share for private rooms, shorter hospitalizations in a 
private room can often result in lower costs to the WTOMP than in a semi private room.  
 
o The WT O Secretariat has improved information to plan participants about its in -network 
(cheaper) providers and has sought to increase the direct billing arrangements with providers 
for high cost treatments as an incentive to steer plan participants to them. To t hat end, the 
new insurance administrator has a mobile app that plan participants can download onto their 
smartphones to identify network providers. The new administrator has also agreed to pursue 
direct billi ng arrangements for planned out patient treatment s (other than dental) if they 
exceed CHF 1,000. As noted, the WTO Secretariat intends to continuously monitor the 
performance of the WTOMP and will return to this issue if these measures are not effective.  
 
o The Secretariat has implemented one change in pol icy to incentivize travel for lower cost 
treatment. As of 1 February 2017 a staff member may be authorized to use sick leave rather 
than annual leave for travel time to and from another location for treatment if, inter alia, the WT/BFA/W/431  
 
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  cost of treatment would be significantly reduced compared to that in Geneva. Similarly, the 
WTO Secretariat is looking at other incentives, such as a reimbursement for travel.  
 
o The WTO Secretariat examined other parts of the benefit package as part of this process and 
in the context  of the procurement. Based on a recommendation from the MIMC the Director 
General agreed to  place an individual cap of CHF  2,000 on alternative th erapies while 
retaining the CHF  6,000 cumulative cap.  
 
o A primary mechanism for controlling costs is to maintai n or increase the "healthy" population 
that does not use the maximum benefits every year. A variety of measures can be taken to 
promote a healthy culture and prevention amongst employees and retirees. The exact 
amounts of medical costs that have been avoid ed or the extent to which the cost for a chronic 
illness has been reduced cannot be defined. Nevertheless, the positive impact on medical cost 
reduction and individual productivity of the workforce cannot be underestimated.  
 
o Discouragement of unhealthy beh aviours and promotion of wellness through in house 
initiatives as well as through products offered by the provider of the WTOMP. Increased 
vaccinations as well as other preventative screenings have been identified as potential areas 
where the WTO could hav e a positive impact on the rate of cost growth. These would also 
reduce absenteeism due to illness.  
 
o As part of the procurement, the WTO Secretariat inquired as to the effect on the premium of 
adding 100% coverage for prescribed or over the counter vaccina tions as well as smoking 
cessation medication. The selected insurer indicated that it would not increase the premium 
but might have a positive impact on long -term costs by preventing the onset of expensive 
diseases such as lung cancer, emphysema, measles, meningitis, etc. The Director -General 
accepted the MIMC's recommendation to augment the coverage for vaccination and this took 
effect with the new contract on 1 January 2017.  
 
o The Secretariat is restructuring its medical service to include a physician who will be able to 
provide some primary c are and prescribe medications. This should reduce costs on the 
WTOMP and the WTO as staff will not necessarily need to leave work for routine matters.  
  WT/BFA/W/431  
 
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  ANNEX II  
MEDIUM TERM BUDGET O UTLOOK IN THE CONTEX T OF THE WTO MED ICAL PLAN  
(Information provided by the Secretariat)  
1. This paper addresses three topics. 1) It responds to a request for additional information about 
long term liabilities in relation to accounting standards and the WTO budget outlook. 2) It 
projects what the medium term outlook for the medical plan is in isolation from other budget 
considerations. And 3) It identifies the pressure points foreseen in the overall WTO budget 
over the upcoming biennium.  
Accounting For Long Term Liabilities And The WTO Budget  
2. Currently, the two contributors to the WTO’s financial deficit are the ASHI and Pension IPSAS 
actuarial costs. The two elements are not included in the regular budget of the WTO, but are 
considered long term liabilities for the WTO under the IPSAS. While th e WTO has experienced 
positive budget results (surpluses), the financial results have been negative (deficits) due to 
the ASHI and Pension IPSAS actuarial costs.  
3. On the other hand, while the Building Renovation Fund caters for medium to long term costs, 
we have a reasonable expectation of these future costs. The building costs are not an IPSAS 
liability in the same sense as ASHI or the Pension. This is because the building itself is treated 
as an asset under IPSAS whose value is adjusted over time accordin g to depreciation and new 
investment.  
4. With the implementation of IPSAS, the budget surplus is not available for distribution to other 
uses as it is technically used to compensate partially the negative effects of IPSAS adjustments 
for the estimated long te rm liabilities associated with ASHI and the Pension.  
5. For example, the Auditors have certified the accounts of WTO for 2015 and 2016 with Profit & 
Loss Stat ement result of negative CHF 6  million and negative CHF 28 million respectively. The 
budgetary surpl uses of CHF 6 million and 1 million reported for these periods are completely 
offset by the IPSAS actuarial costs.  
6. From an auditor point of view, the accumulated budgetary surplus must be used to offset the 
deficit situation. If the accumulated budgetary surplus were to be allocated to other uses 
besides the causes of the deficit (i.e. ASHI and Pension), the organisation would be spending 
money that does not exist because such expenditure would further simply increase the deficit 
situation by the correspon ding amount.  
7. What can be done, while remaining IPSAS compliant is to "earmark" the accumulated 
surpluses (currently about CHF 45 million) to be dedicated exclusively to off -set the ASHI 
liability. (Although the Pension Plan also contributes to the IPSAS li abilities, there already 
exists a mechanism for accumulating assets to funding pension obli gations on an on -going 
basis.). This would also allow for the establishment of a dedicated investment strategy to place 
these amounts into financial products that co uld generate revenues as happens for the Pension 
Fund.   
Projected Evolution Of Retiree Health Insurance Premiums (Budget View)  
8. Since 2010, the number of retirees has steadily increased, which contributed to an increase of 
the retiree health insurance prem iums between 3% - 9%. In the years 2015 and 2016, the 
number of retirees has nearly doubled compared to five years ago. The high number of 
retirees has been accelerated by the voluntary terminations pursued to reallocate resources to 
dispute settlement act ivities. The increase of the expenditure is generally realized in the year 
following the high rate of retirements.  
9. Building on the actual expenditure figures for 2016, the increase of the expenditure for the 
next three years is projected at 8%, 7% and 5%. These figures differ from the pure statistical WT/BFA/W/431  
 
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  modelling view that includes several simplified and stylized assumptions. For example, the 
timing of early terminations has not been factored in to the statistical modelling.  
10. Based on the high number of retire es in 2016 and the fact that this has an impact on the 
increase of costs as demonstrated above, the retiree health insurance expenditures are 
projected to rise by 8% in 2017. This generates an estimat ed deficit of approximately 
CHF 80,000 on that budget li ne for the end of 2017. On the staff side, due to the high number 
of vacant posts at the beginning of the year and the cost containment measures already 
implemented, the health insurance premiums are expected to generate a saving around 
CHF 500,000 for 201 7. 
11. If we project this situation further to the next three years and assume a vacancy factor of 15 
vacant posts, the increase in health insurance premiums for retirees can be (roughly) covered 
until 2019. As from 2020, the increases can no longer be covered  by reallocation between 
these budget lines.  
Table 1 Compensation of Retiree HI Premiums by savings on WTO Staff HI Premiums – 
assumption 15 Vacant Posts  
  2017  2018  2019  2020  
Saving on WTO Staff Health Insurance Premiums  483,000  430,000  410,000  390,000  
Retiree Health Insurance Premiums Deficit  -81,000  -280,000  -432,000  -623,000  
Balance  402,000  150,000  -22,000  -233,000  
 
12. There does exist already a medical plan reserve fund held by the third party administrators 
that can be used to further off -set future increases in medical plan costs.  The exact amount 
available in this reserve fund is estimated to be between CHF 1 and 2 million, but will not be 
known until the transition from Cigna to Allianz is complete sometime in mid -2018. However, it 
is reasonable to assume that these funds could provide a further level of insulation for the 
WTO budget and staff from increases for at least another biennium.  
13. If Members were to consider using accumulated budget surpluses to smooth future budgetary 
impacts, it is estimated that these could extend protection to the medical plan budget lines for 
an additional 10 -15 years depending upon how the overall experience evolves. Of course these 
estimates become quite speculative as they depend on many variables that cannot be reliably 
estimated at this time. For instance, if there were to be a serious case involving a major 
insurance pay out, this w ould affect the projections significantly.  
  WT/BFA/W/431  
 
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  Challenges for the Budget from 2017 -2019  
Table 2 Challenges for the budgets 2017 - 2019  
Elements1 2017  2018  2019  
Salary Increments (+ bonus + promotions)  1,950,000  3,955,000  5,915,000  
Provision Invalidity (2 cases)2 3,100,000  1,800,000  0 
Dependency Allowances  2,000,000  2,030,000  2,050,000  
Retiree Health Insurance  80,000  280,000  430,000  
Panellist Fees  200,000  250,000  250,000  
Other staff related costs  550,000  550,000  550,000  
Security  Equipment  500,000  500,000  0 
Conference Equipment + Maintenance  0 500,000  400,000  
ICC and Service Desk  500,000  500,000  500,000  
Negative Interest  350,000  500,000  400,000  
Appellate Body Operating Fund  0 0 500,000  
Building Renovation Fund  700,000  700,000  700,000  
Short term Dispute Settlement Lawyers (12) G7   0 1,600,000  1,600,000  
Total  9,930,000  13,165,000  13,295,000  
 
1. On an overall level, several challenges are foreseen for the budgets of 2017 through 2019. In 
a ZNG  environment, the salary increments as well as the bonus and promotion e lements, 
which total around CHF  2 million per year, have to be absorbed. A part of these increases can 
be absorbed by the savings generated by replacing higher -graded staff by the recr uitment of 
lower graded staff, but over the years this cannot offset indefinitely the increases due to the 
increments. In addition, the provision for two invalidity cases not covered by the insurance is 
to be added to the salary expenditure of 2017 and 201 8.  
2. As mentioned above, the progressive increase of the retiree health insurance costs due to a 
growing number of retirees (even without projecting increases of the medical premiums) will 
become important over the years.  
3. As can be seen in Table 2 above, s everal other areas are also expected to create significant 
pressures on the budget. These include:  
4. Dispute settlement: panellist fees, Appellate Body Operating Fund and short term lawyers  
5. Other staff related costs.  
6. WTO security equipment and IT services . 
7. Negative interest . 
8. Building Renovation Fund . 
9. While it is theoretically possible to isolate the budgetary impacts of the medical plan and ASHI, 
these costs must be understood in the context of the overall budget situation.  From that 
perspective the medical plan in isolation is, in the medium term, a modest contributor to 
pressure on the ZNG budget approach. Other pressures on the budget will be more significant. 
The figures above are based on a normal vacancy factor of 15. However, in order to generate 
a pos itive balance under the budget section: Staff Expenditure (all other things being equal) a 
vacancy factor of 20, 30 and 42 vacant posts would be needed respectively for the years 2018, 
2019 and 2020.  
10. Nonetheless, it is important to continue planning to ens ure that the medical plan can be 
sustainable over the longer term. Reconciling Member's budgetary constraints with IPSAS 
accounting will continue to pose challenges that will have to be monitored and adapted to.  
                                                
1 In the case of voluntary termination agreements, an amount of approximately CHF 5.5 million would 
need to be added. This figure corresponds to the average cost of terminations over the last two years.  
2 This element follows a recommendation of the external auditors in their 2016 report.  WT/BFA/W/431  
 
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  ANNEX III  
INVESTMENT OPTIONS  
(Information provided by the Secretariat)  
1. Generally as you seek more returns, the risks of price volatility and even permanent capital 
impairment increase.  Portfolio complexity also increases investment costs. However, 
historically and over the lo nger term a more diversified portfolio accepting some risks of short 
and medium term price volatility has provided higher returns in the longer term.  
2. Capital Preservation (avoid negative interest)  
 Short term bank deposits (3 -12 months duration)  
 Minimum counter -party risk of default  
 
3. Low-risk returns (~1%)  
 Government bonds . 
 Risks vary depending upon individual bonds v. bond funds.  So do costs of investment . 
 In extreme circumstances short term price volatility can exceed 20%, although a buy 
and hold orien ted approach should limit the risk of permanent capital impairment . 
 
4. Medium risk returns (~2%)  
 Corporate bonds and other higher yielding fixed income . 
 Higher risks of individual defaults, but normally compensated by higher yields . 
 In extreme circumstances price volatility can exceed 35% . 
 
5. Higher risk returns (~3%)  
 Diversified portfolio of asset classes that might include equities, bonds, loans, or real 
estate.  
 If asset classes have low correlation the higher risks of volatility can be mitigated. 
However, eq uities, while providing historically high average returns can have price 
volatility.  
 
6. As the WTOPP does not have legally separate status from the WTO, a decision to seek 
investment advice from the same investment advisor as the WTOPP would likely result in  
minimal marginal costs due to consolidated asset pricing (based on the fee conditions of the 
current WTOPP investment advisor). Similarly, investments placed with the same fund 
managers could well be eligible for reduced fees based on the consolidated ass ets even given 
that the accounts would be kept segregated.  
7. For the purposes of investment administration, the efficiency of coordinating with the WTOPP 
Secretariat could be explored. For example, given the existing capabilities and expertise within 
the WT OPP Secretariat, it could be made responsible for the administrative coordination of the 
investment portfolio. In carrying out its functions, WTOPP Secretariat would have such 
authority and power with respect to the Fund as it has with respect to the WTOPP  portfolio. 
Additional costs of administering and managing the investments, both direct and indirect, will 
be borne by the WTO and the fund, but not the WTOPP.  
 
 
  WT/BFA/W/431  
 
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  ANNEX IV  
PROPOSED GUIDELINES FOR THE SPECIAL RESERVE ACCOUNT  (SRA) 
1. The monies in the SRA shall only be used to finance ASHI costs;  
 
2. The source  of funding for the SRA shall be any s avings from the WTOMP line in the  WTO 
Budget, as calculated by the difference between the approved budgetary allocation and the 
actual expenditure;   
 
3. Unless otherwise decided by the CBFA, the monies in the SRA shall be managed in 
accordance with the normal treasury policies of the WTO;  
 
4. Usage of the monies in the SRA shall be subject to the approval of the CBFA;  
 
5. The closure of the SRA shall be decided  by the CBFA;  
 
6. The Secretariat shall provide updates on the SRA as part of its dedicated reporting on the 
WTOMP and implementation of the ASHI strategy1. 
  
                                                
1 This reporting would initially be biannual, evolving into annual reporting when operationally stable.  WT/BFA/W/431  
 
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  ANNEX V  
SPECIAL  RESERVE  ACCOUNT  (SRA)  
Introduction  
1. This document proposes to establish a Special Re serve Account  (SRA) to capture and ring -
fence savings from the WTO Medical Plan (WTOMP) budget line in the WTO budget which have 
accrued as a result of cost reduction and containment measures.  
2. The recommendation  contained in this document follow s and build s upon the work of a 
previous ASHI Working Group (WT/BFA/W/370) , a subsequent ASHI Strategy prepared by the 
WTO Secretariat (WT/BFA/406/Rev.1) , and the work of the most recent Working Group on 
ASHI Funding  (WT/BFA/W/431) . 
3. The SRA shall be governed by, and administered in accordance  with, the following provisions . 
General Guidelines  
4. Scope : While the SRA is in existence, t he resources of the SRA shall be considered  separate 
from other  property and assets of the WTO and accounted for  separately from  other accounts .  
5. Approving Authority : The CBFA has the full authority to take decisions about the SRA.  
6. Administration : The WTO Secretariat administers the SRA on a day -to-day basis .  
Specific Guidelines  
7. The monies in the SR A shall only be  used to finance ASHI costs;  
8. The source of funding for the SR A shall be any savings from the WTOMP line in the WTO 
Budget, as calculated by the difference between the approved budgetary allocation and the 
actual expenditure;  
9. Unless otherwise decided b y the CBFA, the monies in the SR A shall be managed in accordance 
with the normal treasury policies of the WTO;  
10. Usage of the monies in the SR A shall be subject to the approval of the CBFA;  
11. The closure of the SR A shall be decided by the CBFA;  
12. The Secretariat  shall provide updates on the SRA as part of its dedicated reporting on the 
WTOMP and implementation of the ASHI strategy.  
Recommendation  
13. The ASHI Fund Working Group proposes that the Committee adopt the following decisions :  
a. The Committee decides that a Special  Reserve Account (SRA) be established.   
b. The Committee decides that the SRA be governed by the a bove  general and 
specific guidelines.  
 
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