HomeMy WebLinkAboutMinutes - Minutes - Risk Management and Worker's Compensation Trust Board - Meeting Date: 5/31/2017 Minutes
Workers' Compensation Trust Fund
Thursday, May 31, 2017 — 10:05 AM
Human Resources Training Room
City Hall - Basement
5850 W. Glendale Avenue
Glendale, AZ 85301
Members Present
Gary Deardorff, Chair
Tom Duensing, Member
Yvonne Knaack, Vice-Chair
Ray Malnar, Member
Staff Present
Dianne Shoemake, Risk Manager
Lorena Sanchez, HR Program Manager
Kathy Thomas,Risk& Safety Analyst
Hillary Zagara, Risk Management Specialist
1. Call to Order
Gary Deardorff called the meeting to order at 10:05 AM.
2. Roll Call
Gary Deardorff took roll call and the following Board members were present: Gary
Deardorff, Tom Duensing, Yvonne Knaack and Councilmember Ray Malnar.
3. Citizen Comments
No citizens present.
4. Approval of Minutes
The December 7, 2017 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 4 Ayes and 0 Nays. Motion carried.
5. Motion to Enter into Executive Session
Ray Malnar moved to enter into executive session. The motion was seconded by
Yvonne Knaack. The motion carried with 4 Ayes and 0 Nays. Motion carried.
6. Discussion of Workers' Compensation Claims
The following claims were discussed:
Claim# 0487-WC-15-0000252 DOI: 5/1/2015
Claim# 0487-WC-18-0000181 DOI: 2/12/2018
Claim# 0487-WC-17-0000223 DOI: 11/2/2016
Claim# 0487-WC-14-0500025 DOI: 9/29/2013
Claim# 0487-WC-18-0000193 DOI: 3/5/2018
Claim# 0487-WC-18-0000191 DOI: 3/2/2018
Claim# 0487-WC-05-0500030 DOI: 8/5/2004
Claim# 0487-WC-16-0000312 DOI: 2/1/2016
7. Motion to Reconvene Regular Session
Yvonne Knaack moved and Tom Duensing seconded to return to regular session. The
motion carried with 4 ayes and 0 nays. Motion carried.
8. Discussion of Actuarial Report as of April 20,2018
Staff reported that Aon Risk Solutions completed their actuarial analysis of the
Workers' Compensation Trust Fund from data extrapolated to June 30, 2018. A copy
of the report was provided. Staff provided the following information. 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 provided 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 $6,330,503, see page 3 of the report. The prior minimum amount was
$5,021,572. The $1,308,931 increase is attributed to the following:
• +$1.7 million from the additional year(2017/2018) of exposure,
• -$1.3 million for claim payments made during 2017/2018, and
• +$0.9 million due to an increase in projected ultimate losses for claim periods
2016/2017 and prior. In particular,there was a large increase in case reserve for
two claim periods:
• To 1998/99: 3 claims (0487-WC-97-0500016, 0487-WC-97-0500122, and
0487-WC-97-0500155)with a total reserve increase of$501,000.
The Industrial Commission of Arizona(ICA) required 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 analyzed claims data provided December 1 each year and
determined 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 2018 is $5,093,161, which is lower than the current Actuarial analysis
at a 55% confidence level which is $6,330,503. Therefore,the Actuarial amount is
required.
The projected ultimate losses (future claims)to be paid for fiscal year 2017/2018 is
estimated at$1,807,000 see page 4. For budgeting purposes, they are projecting during
fiscal year 2018/2019 that we will make claims payments totaling $2,127,940, see page
5.
Based upon the actuarial analysis and the current budget for fiscal year 2017/18,the
fund is anticipated to be adequately funded. This item was for discussion only.
9. Discussion of Workers' Compensation Trust Fund FY 2017/2018 Revenue,
Expenses and Fund Balance.
Staff provided to the Trustees a spreadsheet of the Workers' Compensation Trust Fund
(2560) for FY 2017/18. Staff provided the following information to the Trustees. The
information provided in the spreadsheet is for expenses, revenue and fund balance on a
budget basis as of May 28, 2018. In the column entitled"2018 FYTD",the total
revenue received to date is $1,145,794. Of that amount$79,198 is from interest
income, $1,064,873 from self-insurance premiums and$1,723 from miscellaneous
revenues. Self-insurance premiums have been deposited through April 2018. There are
two months of premiums to be deposited for the remainder of the fiscal year or
$106,487 monthly.
Total expenses paid to date are $1,690,632. Of that amount$1,384,621 is for payment
of claims, $388,749 for payment of professional and contractual fees and$161,573 for
administrative and general expenses. There are $244,311 received from insurance
claims recoveries. Over the next two months,traditionally we experience a greater
number of claims; but we anticipate claims payments to come in as budgeted.
On January 1, 2018 the ICA calculated the required minimum balance at 125%of
known liabilities equaling $5,093,161. The ICA requirement is below the actuarial
55% confidence level. The actuarial report was completed on April 20,2018. The
actuary is recommending $6,330,503 for payment of known liabilities at a 55%
confidence level; therefore,we must keep the fund minimum balance above the
actuarial number. We have recently experienced two claims that will affect the
required minimum fund balance. This will have a future impact on the minimum
balance required by the ICA and actuary.
The fund's current balance is $8,063,794 which exceeds the actuarial minimum by
$1,733,291. ICA best practice is to keep the fund balance above the minimum and
have funds to pay the actuarial projected losses for the year. Actuarial projected losses
are $1,772,011. Adding the actuarial minimum balance to the projected losses equals
$8,102,514. The fund balance is slightly below that amount. For the next two months,
we expect the insurance premiums and interest income will result in sufficient money to
pay losses and to keep the fund balance above the minimum required.
ICA also recommends having funds available to pay at least three self-insured
retentions (SIRs) in the event of a catastrophic loss. Our SIR is $800,000. Three SIRs
would total $2,400,000. The fund balance does not have the ability to pay three SIRs at
this time. At this time,the fund is performing well and meets the required minimum
balances.
Risk Management benchmarks itself against the industry based upon the total cost of
risk(TCOR)to the organization. The TCOR is determined by adding all costs of the
risk management and workers' compensation programs (TCOR) and dividing the
TCOR by the City's operating budget. The TCOR benchmark for public entities is
generally no more than 3 percent of the City's operating budget. Currently our TCOR
is at 1%. This indicates that the trusts and Risk Management are operating very lean
and efficient. No motion as item was for discussion only.
10. Authorization to Renew FY 2018-19 Workers' Compensation Excess Insurance
Staff provided the following information to the Trustees. 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".
We have been working with our broker,Alliant Insurance Services on the renewal of
the excess workers' compensation program. Alliant has been placing insurance for
cities for over 26 years. They have been our broker the past 8 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. Payroll is estimated at$134,034,588,
a 6.96%increase from expiring. Alliant also went out to the market and obtained
quotes from Midlands Management, Midwest Employers Casualty, Arch Insurance and
Travelers. The other carriers quoted with higher self-insured retentions, limited
coverage and greater premiums. Therefore, we chose to remain with Safety
National. Their projected not to exceed cost for this coverage is $268,873 versus
$235,588 for last fiscal year. Staff recommended placing the coverage with Safety
National not to exceed$268,873.
The premiums are paid from the Workers' Compensation Trust Fund. The amount
being recommended is included in the budget that was approved by City Council on
May 22, 2018.
Tom Duensing moved to recommend to City Council approval of the renewal of FY
2018/19 workers' compensation insurance program not to exceed$268,873. The
motion was seconded by Yvonne Knaack. Motion passed 4 ayes and 0 nayes Motion
carried
11. Discussion and Approval of FY 2016/17 Workers' Compensation Annual Report
to City Council
The Annual Report was previously reviewed in the Risk Management Trust Fund
Board meeting held earlier. Staff provided the following information to the Trustees.
Glendale City Ordinance, Chapter 2,Article V., Division 6, Section 2-217 requires the
Trustees to provide to City Council a report as to the status of the risk management
trust fund. The report shall include a summary of all monies collected and all
payments made and any recommendations the trustees deem necessary to meet their
joint fiduciary obligations for administering the risk management trust fund.
The Trustees were provided a draft of the Workers' Compensation Trust Fund Report
to Council for the period of July 1, 2017 for review and approval. As in past years,the
following information is included in the report.
• Introduction
• Risk Management Structure& Functions
• Risk Management Trust Fund Audit
• Self-Insurance and Excess Insurance
• Property and Liability Revenues and Expenses
• Workers' Compensation Revenue and Expenses
• Accomplishments
• Safety and Loss Control
• Claims Management
• Total Cost of Risk
Gary Deardorff made motion to recommend approval of the Report to City Council for
the Workers' Compensation Trust Fund for Fiscal Year End 2017 and it was seconded
by Yvonne Knaack. 4 ayes 0 nayes Motion carried
12. Industrial Commission of Arizona (ICA) Self-Insurance Approval
Staff reported the following information to the Trustees. The ICA self-insurance board
reviewed our renewal request and on February 1, 2018 and the ICA formally approved
our request. There were no questions from the ICA and we were approved on the
consent agenda. Minutes from the ICA meeting of the February 1, 2018 was provided
to the Trustees. The ICA granted approval to continue to self-insurance without
providing a security deposit unless revoked. During the meeting, ICA Chairman Shultz
and Commissioner LeMarr commended the City of Glendale on its experience
modification rating and denial rate.
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). The
ICA minimum deposit required is $5,093,161.
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, 2018, recommended a minimum Fund balance
totaling$6,330,503. Therefore,moving forward the minimum amount to be held in our
workers' compensation trust fund is the Actuary's recommended minimum Fund
balance or$6,330,503. The actuarial projection for loss to be paid in the upcoming
fiscal year is $2,127,940.
Risk Management continues 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
no less than quarterly. No motion. For discussion only.
13. Next Meeting
The next regular meeting of the Workers' Compensation Trust Fund Board will be held
at a date to be determined in fall, 2018 at 10:00 a.m. at 5850 W. Glendale Ave.,
Glendale,Arizona, 85301.
14. Adjournment
Yvonne Knaack moved to adjourn the meeting which was seconded by Tom Duensing.
The meeting was adjourned at 10:24AM.
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Submitted by:
Dianne Shoemake