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HomeMy WebLinkAboutMinutes - Minutes - Risk Management and Worker's Compensation Trust Board - Meeting Date: 6/1/2017 (3) Minutes Workers' Compensation Trust Fund Thursday, June 1, 2017 — 10:12 PM Council Chambers, Room B3 City Hall - Basement 5850 W. Glendale Avenue Glendale, AZ 85301 Members Present Gary Deardorff, Chair Tom Duensing Yvonne Knaack, Vice-Chair Ray Malnar, Councilmember Ken Wixon Staff Present Lorena Sanchez, Risk& Safety Analyst Dianne Shoemake, Risk Manager Hillary Zagara, Risk Technician 1. Call to Order Gary Deardorff called the meeting to order at 10:12 AM. Roll call was taken and the following Board members were present: Gary Deardorff, Tom Duensing, Yvonne Knaack, Ray Malnar and Ken Wixon. 2. Approval of November 29,2016 Workers' Compensation Trust Fund Board Meeting Minutes The minutes were provided to the Trustees. Yvonne Knaack moved to approve the minutes as written and it was seconded by Tom Duensing. The motion carried with 5 Ayes and 0 Nays. 3. Fiscal Year 2017/2018 Workers' Compensation Excess Insurance Renewals Staff presented the costs for renewal of the excess workers' compensation insurance program as follows. City of Glendale Ordinance, Chapter 2, Administration, Article 5. Financial Affairs, Division 6. Workers' Compensation Trust Fund, Section 2-219 Insurance provides that"The city risk manager, acting for the city manager, is authorized to enter into, on behalf of the city, any appropriate commercial insurance, or alternative risk financing to be in the best interests of the city". Staff worked with our broker, Alliant Insurance Services on the renewal of the excess workers' compensation program. Alliant has been placing insurance for cities for over 25 years. Their insurance placements include all lines of coverage placed through a proprietary group purchase program for public entities across the United States. Placement is underwritten and priced on a group basis without sharing the risks of the entire group. Alliant obtained a quote from the incumbent carrier, Safety National for statutory excess workers' compensation coverage with an$800,000 self-insured retention and employer's liability with limits up to $2,000,000. Last year Safety National provided a two-year rate guarantee of 0.188 per $100 of payroll. Payroll is estimated at $125,312,870 and is based upon a 2.5%payroll increase over last fiscal year. The projected not to exceed cost for this coverage is $235,588 versus $229,765 for last fiscal year. Staff recommended placing the coverage with Safety National not to exceed $235,588. Gary Deardorff moved and Ray Malnar seconded to approve renewal of the program not to exceed $235,588. The motion carried with 5 Ayes and 0.Nays. 4. Discussion of Actuarial Study of the Self-Insured Workers' Compensation Program as of December 31,2016, extrapolated to June 30,2017 Staff provided the study to the Board, reviewed the actuary's analysis and answered questions. The actuary recommends a minimum fund balance at a 55% confidence level at$5,021,572. 5. Discussion of Industrial Commission of Arizona (ICA) Self-Insurance Renewal Staff reported the following information to the Board. Annually the city is required to submit a renewal request to the ICA for continuation of self-insurance and to request an exemption to post a security deposit. On November 30, 2016, staff submitted the documentation for the January 1, 2017 renewal and a copy of the documentation was provided to the Board. The ICA self-insurance board reviewed our renewal request and on January 26, 2017 the ICA formally approved our request. There were no questions from the ICA and we were approved on the consent agenda. Staff was provided with a January 1, 2017 letter from the ICA. The ICA granted approval to continue to self-insure without providing a security deposit unless revoked. During the meeting, ICA Chairman Shultz commended the City of Glendale for its excellent experience modification rating and safety programs. The ICA calculated the minimum-security deposit needed to be held in our workers' compensation trust fund, which is 125% of your net liability (reserved claims). Staff was provided with the workers' compensation liability form. The ICA minimum deposit required is $4,312,143. The ICA requires the balance to be held in our trust fund to be the greater of 125% of our liabilities or the actuary's 55% confidence level. The actuarial report completed from data extrapolated to June 30, 2017, recommended a minimum Fund balance • totaling $5,021,572. Therefore,moving forward the minimum amount to be held in our workers' compensation trust fund is the actuary's 55% confidence level or $5,021,572. Staff will continue to monitor the balance monthly to ensure that it does not drop below the required minimum and will continue to provide updates to the Trustees. 6. Discussion of Workers' Compensation Trust Fund Fiscal Year 2016/2017 Revenue and Expenses Staff provided a spreadsheet of the total revenues and expenses paid from the Workers' Compensation Trust Fund as of May 25, 2017. Staff reported the following information. Aon Risk Solutions completed their actuarial analysis of the Workers' Compensation Trust Fund from data extrapolated to June 30, 2017. The actuary conducted the analysis on a fiscal year basis. The actuary was provided with the following information: 3 year's annual payroll, 10 years claims data including claims payments and current reserves, city operating budget, interest rate and CAFR. The actuarial report provides the following: • Estimate of outstanding losses - This is an estimate of the total amount of expected losses or the money that will be needed to meet unpaid claims. Project Ultimate Limited Losses—This is a projection of future losses. Project Losses Paid—This is an estimate of the claims payments expected to be made. The actuary's amount of money needed to pay expected claims (estimate of outstanding losses) is $5,021,572, see page 3 of the report. The prior minimum amount was $3,831,036. The $1,190,536 increase is attributed to the following: • 1.5 million increase from the additional year (2016/2017) of exposure • 1.3 million decrease for claim payments made during 2016/2017 and • $1.0 million total increase due to decrease in projected ultimate losses for claim periods 2015/2016 and prior and increases in incurred losses for two 2010/11 claims by about$576,000, and two 2014/2015 claims by about 546,000; the reserve increase on these four claims was about$1.0 million. The Industrial Commission of Arizona(ICA) requires entities to fund based upon 125% of their liabilities or by actuarial analysis, whichever is greater. This is the minimum amount of funds that are needed in the trust fund to pay current unpaid claims (outstanding losses). ICA analyzes claims data provided December 1 each year and determines the' 125% of the City's liabilities. If there are sufficient funds available to cover these liabilities, they authorize continuation of self-insurance. They also require additional funds be set aside to pay new claims (future losses). The ICA's minimum funding level for 2017 is $4,312,143 which is lower than the current Actuarial analysis at a 55% confidence level which is $5,021,572. Therefore, the Actuarial amount is required. The projected ultimate losses (future claims)to be paid for fiscal year 2016/2017 is estimated at $1,509,000 see page 4. For budgeting purposes,they are projecting during fiscal year 2016/2017 that we will make claims payments totaling $1,216,607, see page 9. Based upon the actuarial analysis and the current budget for fiscal year 2016/17, the fund is anticipated to be adequately funded. 7. Workers' Compensation Claims Update Staff provided the Board with an update on claims reserved greater than $50,000 that have had significant development since the last meeting. 8. New Business No new business for discussion. 9. Adjournment Yvonne Knaack moved to adjourn the meeting which was seconded by Ray Malnar. The meeting was adjourned at 10:40AM. Submitted by: Dianne Shoemake