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HomeMy WebLinkAboutMinutes - Minutes - Risk Management and Worker's Compensation Trust Board - Meeting Date: 4/1/2013 (3) MINUTES WORKERS' COMPENSATION TRUST FUND BOARD MONDAY, APRIL 1, 2013, at 7:00 PM COUNCIL CHAMBERS ROOM B3 CITY HALL—BASEMENT LEVEL 5850 W. GLENDALE AVE. GLENDALE, AZ. Members Present John Stern, Chairman Sandra Oates, Trustee Julie Stiak, Trustee Yvonne Knaack, Vice Mayor and Trustee Staff Members Present Dianne Shoemake, Risk Manager Lorena Sanchez, Risk& Safety Analyst Nick DiPiazza, Acting City Attorney Members Absent Diane Goke, Finance Director, Trustee 1. Call To Order Chairperson Stern called the meeting to order at 7:30 p.m. 2. Approval of Trust Board Minutes Mrs. Stiak made a motion to approve the Minutes of the November 29, 2012 Workers' Compensation Trust Fund Board Meeting. Ms. Knaack seconded. The motion passed. The minutes were approved. 3. Executive Summary Workers' Compensation Trust Fund Fiscal Year-End 2012 Report Mrs. Shoemake presented the final Executive Summary to the Trustees. For workers' compensation, the City began self-insuring its workers' compensation program in July, 1994. Prior to that date the City was insured on an occurrence basis through the Arizona State Compensation Fund. The 2011/2012 self-insured retention was $600,000. The City's third party administrator(TPA), Matrix Absence Management, Inc., administers the workers' compensation claims for the City. The City works closely with the TPA to reduce costs, return people to work and administer the modified duty program. In addition, staff manages the drug and alcohol program. The Industrial Commission of Arizona(ICA) oversees and approves self-funded programs. They analyze and recommend the minimum fund balance based upon current open claims and estimated expenses. The ICA monitors the fund balance to ensure it does not fall below their recommended balance or the balance required by the actuarial analysis, whichever is greater. The actuary recommended a balance of$2,476,983 for fiscal year 2011/2012. The fund balance at the end of the fiscal year was $1,928,910. This was due to high and ongoing claims. Staff notified the ICA that the balance fell below the actuary minimum. The ICA gave the city until December, 2012 to bring the level up. The City transferred $1,200,000 in December, 2012 to bring the fund to an appropriate level. The workers' compensation trust fund ended the fiscal year above both the ICA and actuarial funding levels. Costs paid out of the fund consisted of third party administration and Industrial Commission of Arizona (administrative and special fund taxes) at $226,071, insurance at $125,332 and claims paid at $1,577,490. Claim costs increased 82 percent compared to the prior fiscal year due to a fatality claim and an increase in re- opened older claims. Insurance costs have increased due to a hardening insurance market. All staffing and expenses were removed from the fund and paid by the general fund. Mrs. Shoemake advised that City Council and Glendale management had been provided with a copy of the report. 4. Workers' Compensation Trust Fund City Ordinance Mrs. Shoemake presented the draft changes to the ordinance. This item came up as a result of the Risk Management Trust Fund audit. After discussing the Code at our November 29, 2012 meeting, Risk Management reviewed and revised the code to try to incorporate the following changes. - Create separate code citations for Risk Management and Workers' Compensation Trust Funds which should be treated separately and addressed separately in the code. Update and add definitions for better clarification - Clarify the roles of risk management and city attorney's office Clear definition of a covered entity and coverage provided and what should be excluded - Clear definition for funding, allocation and use of the fund Address Trustees terms, when they end, what constitutes a quorum, how often to meet and their responsibilities Expand on responsibilities for claims and litigation management responsibilities and referrals to outside law firms Address insurance or other alternative risk management financing - Address appropriate expenditures, clarify when and type audits needed. - Include indemnification language that supports our contacts Risk Management provided our draft, very broad changes to the City Attorney. Risk Management and Human Resources met with the attorney's office, reviewed the changes and discussed our intent. At that time, the City Attorney felt that some of the changes conflicted with other areas of the code or rules and he would need to review and provide a new draft for consideration. Due to all the recent changes within the City, the Code has not yet been reviewed. . Mrs. Shoemake advised that the City Attorney's office was reviewing the ordinance. Risk Management and Human Resources is working closely with the City Attorney's office to determine a timeline for completion. A final draft will be presented to the Trustees once completed. 5. Workers' Compensation Policy on Fund Transfer Process Mrs. Shoemake presented the policy on transferring funds into or out of the workers' compensation trust fund. The following procedure was presented. Risk Management and Workers' Compensation Guidelines Policy:Funds transfer process The City Code, Chapter 2 —Administration, Article V. —Financial Affairs, Division 5. —Risk Management Trust Fund and Workers' Compensation Trust Fund requires that a fund be established for self-insurance. The Risk Management Trust fund is established for payment of defense, losses, anticipated losses and insurance premiums related to losses for bodily injury or property damage. The Workers' Compensation Trust Fund is established for the payment of workers' compensation losses, insurance premiums and awards by the Industrial Commission of Arizona for injuries incurred by an employee or volunteer as covered by the Arizona Workers' Compensation laws and statutes. Risk Management Trust Fund (RMTF) RMTF is funded through appropriation to city departments. RMTF minimum fund balance is determined by actuarial analysis. Risk Management is responsible for monitoring the RMTF to ensure that the balance of the fund is maintained at the minimum level. Monthly Risk Management reviews the revenue, expenses and balance of the Fund. Risk Management analyzes the balance to determine if existing claims or anticipated claims versus revenue will reduce the RMTF below the minimum level. Risk Management provides an update to the Board of Trustees monthly. If losses or an emergency occurs that reduce the Fund below the minimum, Risk Management notifies Financial Services Department and Board of Trustees. Risk Management determines the amount of funds needed to bring the balance at or above the minimum requirements. Financial Services Department determines how to fund the deficiency based upon Financial Policies and Procedures. Risk Management recommends the amount of additional money needed for the RMTF. The RMTF Board of Trustees meets to discuss Risk Management's recommendation for fund transfer. The Board of Trustees provides a recommendation to City Council. Any transfer of funds into or out of the RMTF must have prior approval of the RMTF Board of Trustees and City Council. Workers' Compensation Trust Fund (WCTF) WCTF is funded through appropriation to city departments. WCTF minimum fund balance is determined by Industrial Commission of Arizona(ICA) and actuarial analysis,whichever amount is greater. To maintain a self-insured status, ICA requires that the balance does not drop below the minimum. Risk Management is responsible for monitoring the WCTF to ensure that the balance of the fund is maintained at the minimum level. Monthly, when large claims occur, Risk Management reviews the revenue, expenses and balance of the Fund. Risk Management analyzes the balance to determine if existing claims or anticipated claims versus revenue will reduce the WCTF below the minimum level. Risk Management provides an update to the Board of Trustees monthly. If losses or an emergency occurs that reduce the WCTF below the minimum, Risk Management notifies ICA, Financial Services Department and Board of Trustees. Risk Management determines the amount of funds needed to bring the balance at or above the minimum requirements. Financial Services Department determines how to fund the deficiency based upon Financial Policies and Procedures. Risk Management recommends the amount of additional money needed for the WCTF. The WCTF Board of Trustees meets to discuss Risk Management's recommendation for fund transfer. The Board of Trustees provides a recommendation to City Council. Any transfer of funds into or out of the WCTF must have prior approval of the WCTF Board of Trustees and City Council. ICA is notified of the transfer and plans to maintain the WCTF at or above the minimum. After review and discussion of the draft policy,the Trustees agreed with the policy and recommended no changes. 6. Workers' Compensation Trust Fund Balance Mrs. Shoemake reported the workers' compensation ending fund balance as of March 5, 2013 at $4,844,461. The actuary's recommended minimum balance is $4,217,568. The current ending fund balance is $626,893 above the required minimum. Mrs. Shoemake reported the revenue received to date is $2,170,134, claims payments at $538,865, recoveries at $31,012 and professional and contractual expenses at $256,432. Mrs. Shoemake advised that due to the hardening of the insurance market and past claims experience,the cost of reinsurance is expected to increase next fiscal year between 12 to 15 percent. Mrs. Shoemake advised that she has notified the Budget Office so that premiums charged to departments next fiscal year will need to be increased. 7. Request for Proposal for Workers' Compensation Third Party Administrator Mrs. Shoemake presented the solicitation for a request for proposal for third party claims administration to the Trustees. The solicitation requests quotes for fees on a per claim basis and take over claims for indemnity and medical only claims for up to five fiscal years. In addition the proposal asks for costs for allocated fees and costs charged to claim files. The proposals are due April 12, 2013 with intent to award by May 1, 2013. Mrs. Shoemake advised the final selection will be presented to the Trustees. 8. City of Glendale Request for Self-Insurance Authority from Industrial Commission of Arizona(ICA). Mrs. Shoemake presented the December, 2012 request to ICA for renewal of self- insurance and exemption from posting a security deposit. The following was reported. On December 18, 2012 City of Glendale submitted our 2013 self-insurance renewal and request for exemption from the requirement to post a statutory deposit. The statute provides that if funds are not available to pay for claims, the public entity must post a security deposit with the ICA. Due to a large claim that had occurred in FY 2010/11, our minimum ICA required balance dropped below the required amount. Risk Management worked with Budget and Finance and presented to council a recommendation to deposit an additional $1.4M into the trust fund to bring the fund above the minimum ICA and Actuarial recommended requirements. This was done on December 17, 2012. When we submitted our renewal request to ICA we advised them of the additional funds that we deposited into the account, $1.4M. On January 1, 2013, we received a letter from ICA granting our self-insurance request and were not required to post a deposit. Verbally,the ICA advised that the Commission may want to review the financial stability of the fund. At the beginning of February, 2013,the ICA advised that they would be reviewing our request in front of the ICA Board to determine if we needed to post a security deposit. The ICA 3/6/13 renewal request to the Board recommended renewal but would require posting a security deposit for 125% of our total unpaid liabilities ($3,915,832) and$560,670 to cover closed claims that have the potential to reopen. ICA made this recommendation due to Glendale's weak funding source, low bond and credit ratings. Risk Management responded to the Board and provided information that indicated our balance was at$4,516,715, above the ICA minimum requirements and above the $4,217,568 actuarial requirements. Risk Management along with the Budget Office presented to the ICA Board on March 6, 2013 advising that the fund meets all the statutory requirements for self-funding and explained the City's plans to continue to shore up the fund and its confidence level, in accordance with city policy and upon City Council approval. On March 6, 2013 the ICA Board granted continuation of self-insurance renewal exempting the posting of a security deposit. The ICA will probably want to review our self-insurance status once a new actuarial analysis is done. All documentation regarding the information was provided to the Trustees. The Trustees directed staff to ensure that the fund balance does not drop below the minimum as required by the Industrial Commission of Arizona. Any fund transfers made into or out of the fund shall be done in accordance with the policy approved by the Trustees. 9. Request for Quotation for Fiscal Year 2013/14 Actuarial Study of the Workers' Compensation Trust Fund Mrs. Shoemake presented the solicitation request for quotation for an actuarial study of both the risk management and workers' compensation trusts. She explained the timeline for receiving the proposals. The requests for quotation asks for an analysis of both the liability and workers' compensation trusts for each fiscal year, a midyear actuarial review, if needed, a projection of losses at different self-insured retention levels and a cost allocation plan critique. The cost allocation plan critique would be to evaluate the formula's used to charge department for their insurance/self-insurance premiums. Mrs. Shoemake advised the final selection will be presented to the Trustees. 10. Matrix Workers' Compensation Annual Report for Glendale, March 20, 2012 Mrs. Sanchez presented the Workers' Compensation Annual Report to the Trustees. She provided an historical overview of the program. In 2012 there were a total of 141 claims reported, 14.9% or 21 claims reported as lost time or indemnity claims, 85.1% or 120 claims reported as Medical Only claims and no death claims reported. The total number of claims reported and cost per claim in 2012 has decreased from the prior year. Graphs were presented demonstrating the financial development from year to year for all claims reported; a comparison of reserved dollars related to claims incurred in a specific year, number of claims by value and the primary injury types for the past three years. She advised the number one exposure is sprains and strains. The City has an excellent return to work program that greatly reduces the cost of claims 11. Workers' Compensation Claims Report for 1st Quarter for Calendar Year 2012 and 2013 Mrs. Sanchez presented the claims status for claims that have occurred as of March 31, 2013 and compared them to claims received this same time for 2012. Mrs. Sanchez provided a cumulative loss run as of March 31, 2012. There were a total of 25 claims received with 22 open and 3 closed. The total incurred is $222,352 with total paid amounting to $30,358. 12. The meeting was adjourned by Chairman Stern. Submitted by: 19AAVAAAA' Dianne Shoemake Risk Manager