How are reserves treated by the FHWA?
A. Owners may use federal funds for reserve accounts, however, the reserve account balance may not exceed the actuarially projected value of incurred claims and the reserve amount for any future payout, for such items as disability claims, may not exceed the present value of the expected payout. The interest earned on the account should pay any difference between present and future payouts. The reserve account must be adjusted every year and if the account balance is greater than the projected amount and any eligible program costs, the excess must be paid to the State’s federal-aid account immediately. See the Appendix for the FHWA policy.
