SUPPLEMENTAL AGENDA MATERIAL. Item Description: Fee Assessment State of California Self-Insurance Fund (Workers Compensation Program)

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1 Office of the City Manager SUPPLEMENTAL AGENDA MATERIAL Meeting Date: December 7, 2010 Item Number: 11 Item Description: Fee Assessment State of California Self-Insurance Fund (Workers Compensation Program) The City was informed in early September 2010 that the City s fee assessed by the Department of Industrial Relations for Fiscal Year 2011 was estimated not to exceed $205,000. In anticipation of the projected fee, staff recommended that Council authorize payment not to exceed $205,000 to the State of California Department of Industrial Relations. On December 1, 2010, the City received the Fiscal Year 2011 invoice totaling $127, from the California Department of Industrial Relations. The actual fee is $77, less than the projected amount. The Fiscal Year 2011 fee also represents a 13% reduction from Fiscal Year 2010 fees (from $146,336 in Fiscal Year 2010 to $127,963 in Fiscal Year 2011). The attached Resolution reflects the final Fiscal Year 2011 fee assessed by the State of California Department of Industrial Relations for administering the Workers Compensation Program. Distribution Checklist: Mayor Councilmembers City Manager City Attorney City Auditor City Clerk Total: 2 copies 8 copies (1 copy each) 5 copies 1 copy 1 copy 25 copies + ORIGINAL 42 COPIES (NOTE: This cover sheet should be used only if the agenda item the material refers to is in addition to or is a revision of the material included in the original report) 2180 Milvia Street, Berkeley, CA Tel: TDD: Fax:

2 RESOLUTION NO. ##,###-N.S. AUTHORIZING PAYMENT TO THE STATE OF CALIFORNIA DEPARTMENT OF INDUSTRIAL RELATIONS FOR FISCAL YEAR 2011 FEES IN AN AMOUNT NOT TO EXCEED $127,963 (WORKERS COMPENSATION PROGRAM) WHEREAS, THE City of Berkeley is self insured for Workers Compensation since 1979; and WHEREAS, the Workers Compensation Insurance Industry is administered and regulated by the State of California Department of Industrial Relations; and WHEREAS, the State of California, under California Labor Code Section 62.5 and 62.6, authorizes the Department of Industrial Relations to assess fees to employers for costs of administering the Workers Compensation Program; and WHEREAS, the City of Berkeley is assessed each year by the Department of Industrial Relations to support the state program; and WHEREAS, for Fiscal Year 2011, the City s share of assessments authorized by Labor Code Sections 62.5 and 62.6 is not expected to exceed $127,963; and WHEREAS, funds are available in the current budget in the Workers Compensation Fund, budget code NOW THEREFORE, BE IT RESOLVED by the Council of the City of Berkeley that the Council authorizes the City Manager to pay the State of California Department of Industrial Relations Self-Insurance Plans Invoice for Fiscal Year 2011 for Department of Workers Compensation (DWC), Fraud Prevention Investigation Assessment, Subsequent Injury Benefit Trust Fund Assessment, and Uninsured Employer Trust Funds Assessment in an amount not to exceed $

3 Office of the City Manager CONSENT CALENDAR December 7, 2010 To: From: Honorable Mayor and Members of the City Council Phil Kamlarz, City Manager Submitted by: David W. Hodgkins, Director of Human Resources Subject: Fee Assessment State of California Self-Insurance Fund (Workers Compensation Program) RECOMMENDATION Adopt a Resolution authorizing payment to the State of California Department of Industrial Relations for Fiscal Year 2011 for administering the Workers Compensation Program, in an amount not to exceed $205,000. FISCAL IMPACTS OF RECOMMENDATION The fee assessed by the Department of Industrial Relations for Fiscal Year 2011 is estimated not to exceed $205,000. The Fiscal Year 2010 assessed fee totaled $146,336, which was approximately 35% above prior year cost. Preliminary reports from the State of California Department of Industrial Relations indicate that the Fiscal Year 2011 fee will be no more than 40% above Fiscal Year 2010 fee. Funding for this annual fee is included in the Workers Compensation Self-Insurance Fund, budget code CURRENT SITUATION AND ITS EFFECTS The State of California Department of Industrial Relations regulates the workers compensation insurance industry. Every year, the City is assessed a fee by the Department of Industrial Relations to support the administration of the State s Workers Compensation Program. The assessments support the state program of data collection, rate setting, fraud investigation, and fund Trust Funds for subsequent injury and uninsured employers. The goal of the assessment is to provide a stable funding source to allow the courts to resolve claims more quickly and improve the overall operation of the state workers compensation system. BACKGROUND The City of Berkeley has been self-insured for Workers Compensation since The California Labor Code Sections 62.5 and 62.6 authorize the Department of Industrial Relations to assess all employers for administration of costs of the Workers Compensation Program. Every year, the City is assessed by the Department of Industrial Relations to support the state program. The state program includes administration of the Department of Workers Compensation (DWC) Assessment, Fraud 2180 Milvia Street, Berkeley, CA Tel: (510) TDD: (510) Fax: (510) Website:

4 Fee Assessment State of California Self-Insurance Fund CONSENT CALENDAR (Workers Compensation Program) December 7, 2010 Prevention Investigation Assessment, Subsequent Injury Benefit Trust Fund Assessment, and Uninsured Employer Trust Funds Assessment. The Labor Code Sections 62.5 and 62.6 requires allocation of the total assessment between insured and self-insured employers in proportion to payroll for the most recent year available. The City s assessments are calculated by multiplying the self-insured employer assessment factors for each assessment by the total indemnity paid by the City. In prior years, the total assessment was allocated between insured and selfinsured employers in proportion to payroll for the most recent year available. The assessment limited employer share to 20% of the total program cost. However, the major workers compensation reform in Senate Bill 899 (2004) contained provisions to increase the employer share to 100%. On November 17, 2009, Council approved Resolution No. 64,695 N.S. authorizing the Workers Compensation Administration payment to the State of California Department of Industrial Relations for Fiscal Year 2010 in an amount not to exceed $130,000. On December 11, 2009, the City was notified by the Department of Industrial Relations that the actual Fiscal Year 2010 fee assessed totaled $146,336, due on January 9, The fee was $16,336 greater than the original preliminary fee estimate of $130,000 conveyed by the State of California Department of Industrial relations. As a result, on January 19, 2010, Council approved Resolution No. 64,734-N.S. ratifying the action taken by the City Manager during the City Council recess authorizing payment to the State of California Department of Industrial Relations for Fiscal Year 2010 for administering the Workers Compensation Program, in an amount not to exceed $16,336. Because of the recent stabilization of Workers Compensation costs, the Fiscal Year 2011 fee is not expected to increase more than 40% above the Fiscal Year 2010 fee. The City s share for Fiscal Year 2011 assessment authorized under Labor Code Sections 62.5 and 62.6 for our self-insurance plan will be broken down as follows: I. Workers Compensation User Funding Assessment II. III. IV. Department of Insurance Fraud Investigation Assessment License Fee Assessment Subsequent Injury Benefit Trust Fund V. Uninsured Employer Benefits Trust Fund RATIONALE FOR RECOMMENDATION Required annual funding for the State of California Department of Workers Compensation. Page 2

5 Fee Assessment State of California Self-Insurance Fund CONSENT CALENDAR (Workers Compensation Program) December 7, 2010 ALTERNATIVE ACTIONS CONSIDERED None. This is a state-mandated fee assessment. CONTACT PERSON David W. Hodgkins, Director of Human Resources, Attachment: 1. Resolution Page 3

6 RESOLUTION NO. ##,###-N.S. AUTHORIZING PAYMENT TO THE STATE OF CALIFORNIA DEPARTMENT OF INDUSTRIAL RELATIONS FOR FISCAL YEAR 2011 FEES IN AN AMOUNT NOT TO EXCEED $205,000 (WORKERS COMPENSATION PROGRAM) WHEREAS, the City of Berkeley is self insured for Workers Compensation since 1979; and WHEREAS, the Workers Compensation Insurance Industry is administered and regulated by the State of California Department of Industrial Relations; and WHEREAS, the State of California, under California Labor Code Section 62.5 and 62.6, authorizes the Department of Industrial Relations to assess fees to employers for costs of administering the Workers Compensation Program; and WHEREAS, the City of Berkeley is assessed each year by the Department of Industrial Relations to support the state program; and WHEREAS, for Fiscal Year 2011, the City s share of assessments authorized by Labor Code Sections 62.5 and 62.6 is not expected to exceed $205,000; and WHEREAS, funds are available in the current budget in the Workers Compensation Fund, budget code NOW THEREFORE, BE IT RESOLVED that the Council of the City of Berkeley authorizes the City Manager to pay the State of California Department of Industrial Relations Self-Insurance Plans Invoice for Fiscal Year 2011 for Department of Workers Compensation (DWC), Fraud Prevention Investigation Assessment, Subsequent Injury Benefit Trust Fund Assessment, and Uninsured Employer Trust Funds Assessment in an amount not to exceed $205,000.

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