HomeMy WebLinkAboutAgenda Report - May 2, 1990 (34)C UNCIL C O M M U N I C� ION
TO: THE CITY COUNCIL OJLJNIL MffiTNG DATE
FROM: THE CITY MANAGER'S OFFICE MAY 2, 1990
SUBJECT: AUII40RIZE SFLF4ISLJFJ TG OF CITY'S LONG-TERM DISABILITY PROGRAM
PREPARED BY: Assistant City Manager
RECOMMENDED ACTION The City Council authorize self-insurance of the
City's long-term disability insurance program.
BACKGROUND IlVFCR IMM The City currently pays a premium of 1.01% of payroll
for long-term disability insurance coverage for
non-public safety employees to Standard Insurance of
Oregon. This level of coverage provides two-thirds
of the first $2,250 of an employees gross monthly
earnings and one-half of the next one thousand earned per month (a nud nml total
benefit of $2,000 per month). While the City of Lodi self -insures and
self -administers the first two years of coverage, continuing cases are turned
over to Standard Insurance, which administers and indemnifies claims thereafter.
Since most long-term disability insurance claims are of only a short duration,
the majority of program expenses are being directly paid by the City of Lodi and
not Standard Insurance, even though 1Ae are paying approximately $6,100 per month
to Standard Insurance for coverage. Our claims history indicates that Ae have
had only five claims in calendar year 1988, five claims in 1989, and no claims
i n 1990 to date. Only two of these claims, both in early 1988, were referred to
Standard Insurance for a continuation of coverage. Also, City of Lodi claims
expenses for 1989 and 1990 to date have only teen $13,351 while me have paid
$91,313 in long-term disability insurance premiums to Standard Insurance.
Currently there is only one long-term disability claim being handled by the City
of Lodi. However, it will be another year and one-half before this claim would
be referred to Standard Insurance for continuation. Hence, Standard Insurance
will not incur any additional benefit expenses during the next one and one-half
years since no new City of Lodi claims will be eligible for coverage.
Given our excellent claims record and low rate of self-insured benefit expenses,
it would be prudent to self -insure the long-term disability program. This would
be carried out by continuing to fund the long-term disability program at the
1.01% of payroll level and build up a fund excess to cover benefit costs. At
current rates this would provide over $73,000 per year to fund the long-term
disability program. W would proceed by maintaining the long-term disability
program in its current form, which would include referrals for vocational
rehabilitation following two years of disability in order to assist employees in
returning to employment as soon as possible. Due to our low case load, the City
would also continue to self-administer its own claims. This would also be
beneficial in terms of minimizing program costs.
Authorize self-insuri n, of City's Long Term Disability; ogram
May 2, 1990
Page - 2 -
Another advantage of self-insuring is that it could provide protection against
sudden •premium increases, which have occurred before and resulted .in the City
increasing its self-insured period from one-half year to -two- years. = Although
the City could potentially face a higher volume of claims, :the risk. is ,balanced
b the benefit mmmun of ' $2,000 per month for each disabled employee and the
fact that benefits are offset by workers' compensation ltemp6rary disability,
sick leave, and Public Employees Retirement System (PERS) retirement benefits.
W have discussed this with our agent of record, William McCormack of Delta
Benefit Plans, and he regards this as a prudent action.
JLG/EW.br
A ttachmalt
COUNC808
Respectfully submitted,
erry L. Glenn
Assistant City Manager
ennife� Perrin
Deputy City Clerk
RES9066/TXTA.02J