TO:Andrew P. Powers, City Manager
FROM:Tim Giles, Human Resources Director
DATE:November 14, 2023
SUBJECT: Excess Workers’ Compensation Insurance Final Premium RECOMMENDATION:
1. Authorize additional expenditure in an amount not-to-exceed $2,555 from A/C #712-0520-686-6321 (Internal Workers’ Compensation Fund) for Final Premium payment of excess workers’ compensation insurance for FY 2022-23.
2. Find that this is not a project as defined by the California Environmental Quality Act.
FINANCIAL IMPACT:
No Additional Funding Requested. The Final Premium payment amount of $2,555 is included in the Adopted FY 2023-24 Internal Workers’ Compensation Fund Budget.
BACKGROUND:
The procurement of insurance policies, including excess workers’ compensation insurance, is overseen by the Human Resources Department. As a part of a more comprehensive risk mitigation strategy, Human Resources helps to ensure that the City is adequately protected against various liabilities and risks by securing various insurance policies.
On June 28, 2022, City Council approved the purchase of Excess Workers’ Compensation Insurance through Arch Insurance Company with coverage up to the limits prescribed by statute for costs exceeding the City’s self-insured retention of $0.5 million. The policy was secured via the City’s contracted insurance broker, Alliant Insurance Services, Inc. for FY 2022-23. At that time, City Council granted contract authority in an amount not-to-exceed $108,300 (Attachment #1). The premium was based on payroll projections. In September 2023, the City was subject to a final audit via Arch Insurance Company. Final payroll amounts were
Excess Workers’ Compensation Insurance Final Premium
November 14, 2023
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0 remitted to the insurance provider and a final premium amount was calculated, resulting in an additional invoice of $2,555.
DISCUSSION/ANALYSIS:
The practice of determining final premium amounts for excess workers’ compensation insurance policies, after the policy period concludes, is standard industry practice and is included in the policy’s terms of agreement (Attachment #2). This underlying structure of insurance premium determination is intended to ensure that premiums accurately reflect the risk exposure and services covered during the policy period.
A key element in determining premium calculations is payroll disbursed during the policy period for all officers and employees engaged in activities covered by the policy. At the time of underwriting, the payroll was estimated at $39,156,667. Final payroll amounts came in slightly higher at $40,305,746, of which $673,929 was overtime. For the purposes of a Workers’ Compensation Insurance audit, only 2/3 of overtime amounts are used to determine final premium amounts. The payroll amount used by Arch Insurance to determine the City’s final premium was $40,081,103. This amount is approximately 2.4 percent higher than original estimates and results in an additional premium payment calculation of $2,555.
COUNCIL GOAL COMPLIANCE:
Meets the following City Council goal:
C. Operate City government in a fiscally and managerially responsible and prudent manner to ensure that the City of Thousand Oaks remains one of California's most desirable places to live, work, visit, recreate, and raise a family.
PREPARED BY: Sheri Johnson, Deputy HR Director-Talent Development Officer
Attachments:
Attachment #1 – June 28, 2022 Staff Report
Attachment #2 – Excess Workers’ Compensation Insurance Policy HRD:180-30\sj\H:\COMMON\StaffReports\2023\Excess WC Final Premium\11142023 Staff Report Excess Workers Compensation Insurance Final Premium