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HomeMy WebLinkAbout396_Establishing Trust Fund for Reserve Worker's CompBOOK 5137 PAGE 1660 753260 STATE OF OKLAHOMA TULSA COUNTY FILED OR RECORDED 88 NOV - 1 PM 4:04 JOAN HASTINGS TULSA COUNTY CLERK Ordinance No. 396 AN ORDINANCE ESTABLISHING A TRUST AND AGENCY FUND FOR THE PURPOSE OF RESERVING FUNDS FOR PAYMENT OF WORKERS' COMPENSATION CLAIMS PURSUANT TO AN AGREEMENT WITH THE OML MUNICIPAL ASSURANCE GROUP; PROVIDING FOR DEFINITIONS; PROVIDING FOR TRANSFER OF EARNED INTEREST; PROVIDING PAYMENT ONLY OF WORKERS' COMPENSATION CLAIMS; PROVIDING FOR RELEASE OF FUNDS; PROVIDING FOR SUBMISSION OF ANNUAL AUDITED FINANCIAL STATEMENT OF TRUST FUND; AND PROVIDING AN EFFECTIVE DATE. Be it ordained by the Council of the City of Owasso, Oklahoma Section 1. Policy. The Council of the City of Owasso, Oklahoma hereby deems it in the best interest of the City to stabilize workers' compensation premiums by establishing a trust and agency fund for the purpose of reserving funds for future payments of workers' compensation claims pursuant to an agreement dated March 1, 1988, between the City and the OML Municipal Assur- ance Group. Said agreement is made part of this ordinance (See Exhibit A.) Section 2. Definitions. As used in this ordinance the following words and phrases shall have the following meaning: Group: The OML Municipal Assurance Group. Plan: The OML Municipal Assurance Group Workers' Compensation Plan. Trust and Agency Fund: the City of Owasso, Oklahoma - OML Municipal Assurance Group Worker's Compensation Plan Trust and Agency Fund. BOOK 5137 PAGE 1661 Section 3. Trust and Agency Fund. A. There is hereby created a trust and agency fund for the purpose of reserving funds for future payment of workers' compensation claims pursuant to an agreement dated March 1, 19 8V with the OML Municipal Assurance Group. Said trust and agency fund shall be designated "the City of Owasso, Oklahoma - OML Municipal Assurance Group Workers' Compensation Plan Trust and Agency Fund." B. The (appropriate city officer) shall transfer into the trust and agency fund monies equal to the amount so designated and invoiced by the Group and approved by the City Council. Said monies are to be held in trust for future payments of workers' compensation claims as required by the Group or until released under the terms of Section 6 herein. C. In the event the City is unable to transfer the said amount invoiced into the trust and agency fund upon approval by the council, then the (appropriate city officer) shall take appropriate steps to make periodic payments into the trust and agency fund in order that the amount invoiced is available for payment to the Group by the next June 30. Section 4. Earned Interest Transfer. The (appropriate city officer) may transfer any interest earned from the trust and agency fund into the general fund (or other appropriate fund as designated by the City Council). Section 5. Workers' Compensation Claims. A. Only claims made by the Group pursuant to the agreement dated March 1, 1988 ,XPM between the Group and the City shall be paid from the trust and agency fund with the exception of j earned interest. transfers as described in Section 5. herein. BOOKS 5137 PAGE 1662 B. Upon presentation of a claim by the Group for any or all amounts in the trust and agency fund, the (appropriate city officer) shall make payment forthwith to the Group. Section 6. Release of Funds. In the event that the City receives written notice of release from the Group that monies reserved in the trust and agency fund are no longer needed, the (appropriate city officer) shall transfer said monies to (the general fund (or other appropriate fund as designated by the City Council). Section 7. Annual Audited Financial Statement. The City shall send to the Group the Annual Audited Financial Statement of the Trust and Agency Fund no later than January 1 following the end of each fiscal year. Section 8. The effective date of this ordinance shall beSept. 6, 1988. Mayor/ stacy P. Lamb Attest: City Clerk / Jane Buchanan Exhibit A to Ordinance No. 396. BOOK 5137 PAGE 1663 APPLICATION AND AGREEMENT to participate in the WORKERS' COMPENSATION PLAN of the OML MUNICIPAL ASSURANCE GROUP Article I. For the purpose of this Application and Agreement: (1) "Plan" means the Workers' Compensation Plan adopted by the Board of Trustees to provide statutory benefits as required by the Oklahoma Workers' Compensation Act; (2) "Board of Trustees" means the Board of Trustees of the OML Municipal Assurance Group; (3) "Group" means the OML Municipal Assurance Group; (4) "Member" means a city or town and any instrumentality of a city or town in which an Oklahoma city or town has a beneficial interest which is accepted for membership in the Plan; and (5) "Annual fee" means the total amount of contribution determined by the Board of Trustees required of a member for their participation in the Plan. Article II. The undersigned hereby makes application for membership in the Plan and agrees: (1) To participate in the Plan from fiscal year to fiscal year according to the schedule of fees set by the Board of Trustees and accepted by the member pursuant to entering into this Agreement or any addendum thereto; (2) To pay its annual fees from funds appropriated for this purpose for coverage according to the payment schedule established by the Board of Trustees; and (3) To comply with all requirements of the Oklahoma Workers' Compensa- tion Act. Article III. The undersigned hereby adopts, subscribes and agrees to be bound by the Workers' Compensation Plan and by all actions taken by the Board of Trustees pursuant to its powers and duties set forth in the Agreement Establishing the OML Municipal Assurance Group. The undersigned agency also agrees to abide by and comply with all the terms and conditions of the Agreement Establishing the OML Municipal Assurance Grouo and the Plan, and with such rules and regulations as the Board of Trustees may from time to time promulgate under such Agreement or Plan. Article IV. The undersigned grants to the Board of Trustees, or its designated agent, the right to audit at all reasonable times such books and records of the under- signed as necessary to determine or verify any monies owed for benefits provided to the undersigned and its employees pursuant to this Agreement and the Plan. APPLICANT FOR MEMBERSHIP: ACCEPTED FOR MEMBERSHIP: City of Owasso OPWA OEDA Name of Participating Agency For the OML Municipal Assurance Group Signature of authorized representative Mayor Title Title of authorized representative March 1, 1988 3/8/88 Date Affidavit Of Publication STATE OF OKLAHOMA, TULSA COUNTY, as: Bill R. Retherford, of lawful age, being duly sworn and authorized, says that he is the publisher of the Owasso, Reporter a weekly newspaper printed in the City of Tulsa Tulsa County, Oklahoma, a newspaper qualified to publish legal notices, advertisements and publications as provided in Section 106 of Title 25, Oklahoma Statutes 1971 and 1983 as amended, and thereafter, and complies with all other requirements of the laws of Oklahoma with reference to legal publications. That said notice, a true copy of which is attached hereto, was published in the regular edition of said newspaper during the period and time of publication and not in a supplement, on the following dates: Subscribed and sworn to before Notary Public My Commission expires: PUBLISHER'S FEE $66.75 Published in the Owasso Reporter, Owasso, 'plea County, Oklahoma, September 22, 1988. ORDINANCE NO. 396 AN ORDINANCE ESTABLISHING A TRUST AND AGENCY FUND FOR THE PURPOSE OF RESERVING FUNDS FOR PAYMENT OF WORK- ERS' COMPENSATION CLAIMS PUR- SCANT TO AN AGREEMENT WITH THE OML MUNICIPAL ASSURANCE GROUP; PROVIDING FOR DEFINI- TIONS; PROVIDING FOR TRANSFER OF EARNED INTEREST; PROVIDING PAYMENT ONLY OF WORKERS' COMPENSATION CLAIMS; PROVID- ING FOR RELEASE OF FUNDS; PRO- VIDING FOR SUBMISSION OF ANNUAL AUDITED FINANCIAL STATEMENT OF TRUST FUND; AND PROVIDING AN EFFECTIVE DATE. Be it ordained by the Council of the City Section 1: Policy. The Council of the City of Owasso,. Oklahoma hereby deems it in the beet interest or the City to stabilize workers cbrdpeneation premiums, by estab- lishing a trust and agency fund for the pur- pose orres ing funds for future payments of workers compeasation claims pursuant to an agreement dated March 1, 1988, between the City and the OML Municipul Assurance Group. Said agreement is made pert of this Ordinance (See Exhibit A.) Section 2. Definitious. As used in this ordinance the following words and phrases ,hall have the following meaning: Group: The OML Municipal Assurance Group. Plan: The OML Municipal Assurance Group Wmkers Compensation Plan. Trust and Agency Fund: The City of Owasso, Oklahoma - OML Municipal Aasur- ance Croup Workers Compensation Plan Trust and Ageacy.Fudd. Section 3: Trust end Agency Fund. A. There is hereby created a'trust and agency fund, for the purpose of reserving funds for future.payment of workers mmpeneation claims,parsuant to an agreement dated March. 1, 1988, with the. OML Municipal Assurance Group. Said trust and agency fund shall be designated "the City of Owm- ao, Oklahoma _'O ML Municipal Assurance Group Worker Compensation Plan Trust and Agency Fund." B. The (appropriate city officer) shall transfer into the trust and agency fund monies equal to the amount so designated and invoiced by the Group and approved by the City Council. Said monies are to be held in trust for future payments of workers compensation claims as required by the Group or until released under the terms of Section 6 herein. C. In the event the City is unable to transfer the said amount invoiced into the trust and agency fund upon approval by the council, then the (appropriate city officer) ,hall take eppmpriate step, to make period- ic payments into the trust and agency fund in orde that the amount invoiced is avail- able for payment to the Group by the next June 30. Section 4. Earned Interest Transfer. The (appropriate city officer) may transfer any interest earned from the trust and agency fund into the general fund (or other appro- priate fund as designated by the City Coun- sill. Section 5. workers Compensation Claims. A. Only claims made by the Group pursuant to the agreement dated March 1, 1958, between the Group and the City shall be paid from the trust and agency fund with the exception ofearned interest transfere as described in Section 5. herein. B. Upon presentation of a claim by the Group for any or all amounts in the trust and agency fund. the (aomuoriate City offi- cer) shall make payment forthwith to the Group. Section 6. Release of Funds. In the event that the City receives written notice of release from the Group that monies reserved in the trust and agency fund are no longer needed, the (appropriate city offi- cer) shall trensfer said monies to (the gener- al fund (or other appropriate fund as desig- nated by the City Council). Section 7. Annual Audited Financial Statement. The City shall send to the Group the Annual Audited Financial State. ment ofthe Trust and Agency Fund no later than January 1 following the end of each fiscal year. Section S. The effective date of this ordi- nance shall be September 6, 1958. /s/ Stacy P. Lamb Mayor Attest /s/Jane Buchanan City Clerk NN62 Municipal Assurance Group 16 N.W. 63rd Street • Suite 201 • Oklahoma City, OK 73116 • 405/842 -9461 May 17, 1988 Mr. Rodney Ray City Manager City of Owasso P. 0. Box 29 Owasso, OK 74055 Dear Mr. Ray: Enclosed is an invoice for renewal of your participation in the Workers' Compen- sation Plan from July 1, 1988 to July 1, 1989. Because of the substantial increase in funding required for your participation, you have the option of appropriating a portion of your premium to a Special Budget Reserve Account (SBRA) pursuant to guidelines adopted by our Board of Trustees. . Your normal premium for the year beginning July 1, 1988 is $169,604.00. Our guidelines allow the actual premium to be paid in this year to be limited to $142,242.00, which is 130% of the premium you paid in the prior year. Applying your 1987 -88 interest credit of $352.09, will leave a balance of $27,009.91 to fully fund your premium. This amount must be appropriated to a Special Budget Reserve Account (SBRA) where it will be available at any future time if needed to pay for losses incurred in this fiscal year. Your Loss Fund is $113,069.00. Remember that if your losses do not exceed this amount, you are entitled to a refund of the balance based on rules adopted by the OMLMAG Board. To assist you in deciding whether to pay the premium in full or to establish an SBRA we have enclosed the following: 1. OMLMAG Workers' Compensation Plan premium modifications guide- lines, effective July 1, 1986; 2. A sample ordinance establishing a trust and agency fund for the purpose of reserving workers' compensation premiums; 3. A flow chart identifying the actual steps involved in setting up such an account; and 4. A list of journal entries required to accomplish such transactions. Should you desire to utilize the SBRA method, you must adopt the necessary ordin- ance and file with this office before July 1, 1988 a copy of such ordinances and purchase orders for the premium to be paid and the premium to be reserved, along with the 1988 -89 Renewal Participation Agreement also enclosed. Inc UFfL Mu±ucipai Assurance Group is an interlocal Cooperation Act Agency of Cities and Towne : roviding: Group Life & Health Benefits Plana • Comprehensive Municipal Liability Protection Plana • Workers' Compensation Coverage Mr. Rodney Ray May 17, 1988 Page 2 In the alternative, you may of course, choose to pay the entire normal premium or take a standard policy with the State Insurance Fund. Please remember that the city is credited with all interest earned on funds held in your name by our Workers' Compensation Plan, and that you will receive a refund of all Loss Fund amounts not needed for incurred losses. Please advise us of what action you intend to take. Yours truly, Harold Pumford Chief Executive Officer H P: ds Enclosure cc: H. Faerber P. Spinks OMLMAG Insurance Contract Example Journal Entries Assumptions Used in Example: 1.. Contract premium for current fiscal year is 4130,000, 5110,000 to be paid directly to OMLYrAG and 420,000 to be placed in trust 6 agency fund. 2. Entire premium is paid from Municipality's General Fund. 3. Municipality only budgeted $100,000 for the insurance contract in the General Fund. Additional $30,000 to be appropriated from available fund balance in the General Fund. 4. Interest earned on trust t agency fund is deposited into the General Fund. 5. In the folloving fiscal year, OMLMAG submits a claim for 415,000 of the 5420,000 retained in the trust k agency fund and releases the remaining 45,000 which is returned to the General Fund. Example Journal Entries: Transaction A. Contract received and supplemental appropriation is approved for 430,000. B. OMLMAG Contract is signed and purchase orders for $110,000 and 420,000 are prepared and processed. C. Purchase orders are approved and invoices are processed for payment. Entry B Fund A1. General Accounts Budgetary Fund Balance Appropriations Control Debit Credit 430,000 430,000 61. General Encumbrances 4130'000 Reserve for Encumbrances 4130,000 Cl. General Reserve for Encumbrances 4130,000 Encumbrances 4130,000 C2. General Expenditures 4130,000 Accounts Payable 4130,000 Trans action Entry B Fund Accounts Debit Credit D. Invoices are approved for D1. General Accounts Payable $910,000 payment & checks are pre- Cash $110,000 pared from General Fund for $110,000 to OMLMAG & $20,000 D2. General Accounts Payable $20,000 to Trust & Agency Fund. Cash $20,000 E. $20,000 is deposited by El. Trust & Agency Cash $20,000 Trust & Agency Fund. Liability -Held for OMLMAG $20,000 F. Interest of €1,500 is earned F1. General Cash $1,500 on Trust & Agency Fund & Interest Income $1,500 deposited in General Fund. S. Folloving fiscal year, G1. Trust & Agency Liability -geld for ONLMAG $15,000 OMLMAG submits claim for Cash $15,000 $15,000 of Trust & Agency Fund & releases rerafning 62. Trust & Agency Liability -Held for OMLMAG 45,000 $5,000. Cash 45,000 63. General Cash $5,000 Expenditures $5,000 1 Page 1 1_ Municipality adopts an ordinance to establish a trust & agency fund for the purpose of retaining a portion of OMLMRG's actuarially determined premium. Ordinance outlines appropriation re- quirements, fund establishment, claim processing, interest earnings use and annual reporting requirements. 2. When OMLMRG contract is submitted, the municipality must determine whether the full amount of the contract premium has been appropriated. If so, then the contract may be signed. 3. IF the full contract amount has not been appropriated, the municipality must determine if a transfer of existing appropriation can be made to fund the amount not appropriated. If so, then a budget amendment must be processed and approved by the governing body (if fund to be charged is required to maintain a legal budget). Upon approval of the appropriation transfer, the contract may be signed. 4. If r.1he full contract amount has not been appropriated and a transfer of existing appropriations cannot be made, the municipality must identify excess revenue or available reserves to provide a supplemental appropriation to ;'und the amount not appropriated. Upon identification of the funding source of the supplemental appropriation, a budget amendment must be processed and approved by the governing body (if fund to be charged is required to maintain a legal budget). Upon approval, the contract may be signed. If full amount of contract premium cannot be appropriated by one of these methods, the OMLMRG contract cannot be signed. Municipal Ordinance Adopted OMLMRG Contract Submitted Is Full Amount o Contract Appropria -by Municipality? YES OMLMRG Contract Signed Can Transfer of Existing Appropriation be Made to Fund Full Contract ? Can Appropr- iaticn Be Lla.de Contract from Ew:cess Cannot Revenue, or Be Signed YES Prepare Budget Amendment Governing Body Approval of Budget Amendment Full Amount of Contract is Appropriated in Budget Records Page 5. Once the OMLMAG contract has been signed, a L'rust & agency fund must be established in accordance with the new ordinance to retain the unpaid portion of the contract premium. G. Upon creation of the trust & agency fund, the municipality must prepare purchase orders and /or other proper claim documents to encumber the full contract premium against the appropriate budget accounts. Separate purchase orders are prepared for the amount to be paid directly to OMLMAG and the amount to be paid into the trust & agency fund. 7. Once the purchase orders and /or claim documents have been prepared, they must be .approved by the governing body and processed for payment. B. The check to OMLMAG for the portion of. the premium to be paid directly to them is prepared, signed and submitted to OMLMRG. 9. The amount of premium to be retained in the trust & agency fund is deposited into the fund and recorded as both an ass -zt and a liability in the agency fund. R Has Municipality Establish a Trust & Created a Trust & Agency Agency Fund in Accounting Fund for Unpaid Portion Records Solely for Contract? Holding the Unpaid Portion of Contract YES Prepare Purchase Orders for Approval by Governing Body Purchase Order Purchase Order for for Current Rmt Amount to be paid to be paid to into Agency Fund OMLMRG Approved by Approved by Governing Bady Governing Body and Processed and Processed for Payment for Payment Check Submitted "mount Oeposite to OMLMRG by Municipality (in Agency Fund Page 3 O. The amount retained in the Agency Fund, may be invested by the Municipality in accordance with stateA and local regulations. The interest earninqs from investment should be transferred to and recorded as interest revenue in the Fund(s) designated in the ordinance establishing the Trust & Agency Fund. NOTE: An agency fund does not report any fund equity, revenues or expenditures. They only maintain and report assets and liabilities. The principal portion of the contract premium is retained in the agency fund until the full amount or a portion of the amount is either required by OMLMRG or released by them. If OMLMAG requires all or some of the retained amount to be paid, a claim is processed against the agency fund and approved by the governing body. Once approved, the claim is processed for payment and the check submitted to OMLMRG. 3. If OMLMRG releases all or some of the retained amount in a subsequent contract, the amount released should be returned to the Fund(s) originally charged and the expenditure accounts credited in proportion to their original charges. 'I. On an annual basis, a copy of the Municipality's audited financial statements must be submitted to OMLMRG with4n six months after the close of the fiscal year. The financial statements should include the financial information of the above noted Agency Fund for the fiscal year ended. aim on R nd Submi by OMLMR Principal Portion of Agency Fun Retained in Agency Fund and Held for OMLMRG GIs Full Amount orb Portion of Agency Fund Required by OMLMRG min Future Years Claim for Payment on Agency Fund Approved by Governing Body Check Submitted to OMLMAG Amount Retained in Agency Fund is Invested by Municipality Interest Earnings Transferred to Fund(s) Designated in Ordinance Full Amount or Portion of Agency Fund May Be Released by OMLMRG in New Contract Amount Released is Transferred to Fund(s) Originally Charged Accounts Originally Charged are Credited Proportionally OMLMAG Workers' Compensation Plan Premium Modification Guidelines Effective July 1, 1986 On June 20, 1986, the Board of Trustees approved guidelines for modification of renewal premiums in the Workers' Compensation Plan with the State Insurance Fund (SIF). These guidelines are effective for renewal premiums due on or after July 1, 1986. Guidelines apply only to renewals. These guidelines do not apply to new members or where there has been any gap in participation. Premiums as used herein is the term to describe the total charge for a member to participate including the Toss Fund and fees for administration, reinsurance and management of the Plan. Guidelines deal first with premium decreases from one plan year to the next; and second, with premium increases from one plan year to the next. PREMIUM DECREASES 1. Renewal premium decreases shall be limited to a maximum reduction of 10% in any one year. The reduction is in regard to the amount of premium to be paid by the member to OMLMAG. Any portion of the premium not required to fully fund the member's Loss Fund set by SIF, plus fees will be held by OMLMAG in a "Rate Stabilization Reserve" (RSR) for that member. 2. RSR balances will be applied to off set any future rate increases. 3. RSR balances are to be included for the purpose of allocating inter- est earnings to members. 4. Should a member's RSR exceed more than five times the annual normal premium due, then the premium to be paid may be reduced by any excess in the RSR. 5. All premium payments, including ASR, must be paid in accordance with payment schedules otherwise established for the Plan. 6. A member shall be entitled to a refund of any RSR balance upon termination of their participation in the Plan. PREMIUM INCREASES Renewal premiums for any member shall be computed in the normal fashion; however, members with increases shall have the option of paying a portion of the full premium and budgeting additional funds in reserve to guarantee full payment of the premium when: 1. Their renewal premium would be an increase of more than 30% over the prior year; and 2. When the total current premium due exceeds $40,000.00. Premium payments and funds held in reserve shall be in accordance with documenta- tion and procedures acceptable to OMLMAG which shall include, at a minimum. 1. Premiums to be paid in any one year may be limited to a maximum of 30% over the premium paid in the prior year; and 2. The balance of premium due in excess of 130% over the prior year shall be appropriated by the member to a workers' compensation special budget reserve account (SBRA) in accordance with procedures acceptable to the Chief Executive Officer; and 3. If at any time the Chief Executive Officer determines that loss payments for the member shall exceed that portion of the loss fund paid by the member, the Chief Executive Officer shall requisition the remaining balance due which had been set aside in the SBRA; and 4. Annually the member's SBRA will be evaluated. Accrued interest earnings, prior year refunds or future rate stabilization reserves, if any, will be credited to any SBRA before any other method of distribution of funds; and 5. The Chief Executive Officer shall on annual renewal apprise each member utilizing an SBRA of the status of their account; and 6. Each member shall take whatever reasonable action is required by the Chief Executive Officer to present evidence that the SBRA is in tact and available for payment to OMLMAG if required. Harold 1Pumford, Chief Executive Officer 7 -23 -86 July 1, 1988 through June 30, 1989, and the Loss stated in our Invoice, are accepted as an amendment t 0117LMAG for continued participation in the Workers' Cc (Select and initial the appropriate boxes below) A. ( ) 1. We wish to apply $ of our current Interest Credit to a Rate Stabilization Reserve Account for our municipality, or ( ) 2. We will use $ of our current Interest Credit to reduce our 1988 -89 Fee for Participation. lip 1. We wish to apply $ of our Other Premium Credit to a Rate Stabilization Reserve Account for our municipality, or ( ) 2. We will use $ of our Other Premium Credit to reduce our 1988 -89 Fee for Participation. C. ( ) We are going to pay $ in addition to our 1988 -89 Fee for Participation for deposit to a Rate Stabilization Reserve Account for us. We will renew and establish a S.B.R.A. for 1988 -1989. September 6, 1988 Date Signature of Authorized Representative Stacy P. Lamb, Mayor Printed Name and Title NOTE: To renew your coverage for July 1, 1988, this statement must be returned to OMLMAG by June 22, 1988 and payment of your Fee for Participation must be received by July 1, 1988, or no later than July 10th. Annual Premiums in excess of $5,000 may be paid quarterly. First quarter payment is due July 1st. Premiums less than $5,000 must be paid in full by July 1st. The OML Municipal Assurance Group is an Interiocal Cooperation Act Agency of Cities and Towns Providing: Group Life & health 6encfi Ls Plans • Comprehensive Afunicipnl Linhility Prott¢-tion Plans • workers' Compensation Coverage