3.4 City's Workers Compensation Coverage
Request for
City Council Action
DEPARTMENT INFORMATION
ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE:
Administration City Administrator/Finance Director Flaherty June 12, 2023
PRESENTER(s) REVIEWED BY: ITEM #:
Consent 3.4 – Workers’ Compensation
Coverage Renewal
STRATEGIC VISION
MEETS: THE CITY OF OTSEGO:
X Is a strong organization that is committed to leading the community through innovative
communication.
Has proactively expanded infrastructure to responsibly provide core services.
Is committed to delivery of quality emergency service responsive to community needs and
expectations in a cost-effective manner.
Is a social community with diverse housing, service options, and employment opportunities.
Is a distinctive, connected community known for its beauty and natural surroundings.
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff are recommending that the City Council approve the renewal of the City’s workers’ compensation
coverage.
ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED?
No No
BACKGROUND/JUSTIFICATION:
The City obtains workers compensation insurance coverage through the League of Minnesota Cities
Insurance Trust (LMCIT). The coverage period for the renewal runs from July 1, 2023 – June 30, 2024.
LMCIT provides a quotation for a “deposit premium” based on payroll information provided by City staff,
which for this renewal period was based off preliminary 2024 budgeted personnel costs. This deposit
premium serves as the City’s cost until the LMCIT conducts a final coverage period audit, typically 6 -12
months following the end of a coverage period, which determines whether there is a refund to the City or a
final premium payment due.
The premiums are partially based off actual claim experience in the 3 oldest coverage periods out of the 4
most recent coverage periods. This means the 2023-24 premiums are based on 2019-20, 2020-21 and
2021-22 actual claim experiences (aka Experience Modification).
The quoted premium for 2023-2024 is $92,637. This is an 8.39% increase from the 2023-2023 quoted
premium of $85,468. The increase is the net result of the City’s experience rating decreasing from 0.82 to
0.70 which reflects the number and cost of claims during the current coverage period compared to the
previous coverage period. The change in the City’s experience rating is offset by reporting increased wages
compared to the previous year.
LMCIT offers three premium options: 1) Regular Premium; 2) Deductible Premium; 3) Retrospective Rates
Premium. The City has historically chosen the Regular Premium, which can only change based on actual
payroll numbers during their final audit, and actual claims will have no effect.
Both other available options provide for cheaper premiums if the City has good claim experience in the
given period, but also has the possibility for paying higher premiums if the City has significant claims. These
options can be found on the attached LMCIT quote.
Staff would recommend that the City accept the regular premium option.
SUPPORTING DOCUMENTS ATTACHED:
• LMCIT Notice of Premium Options
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES:
Motion to authorize the City Administrator/Finance Director to accept the coverage offered from LMCIT
with the regular premium option for the 2023-2024 coverage periods.
BUDGET INFORMATION
FUNDING: BUDGETED:
Workers’ compensation coverage is allocated by the
employee to each fund/department of the City.
Yes
League of Minnesota Cities Insurance Trust
Group Self-Insured Workers' Compensation Plan
145 University Avenue West St. Paul, MN 55103-2044
NOTICE OF PREMIUM OPTIONS FOR STANDARD PREMIUMS_LM4514_01/23
Page 1 of 3 LM4514 (3/02)(Rev.01/23)
Notice of Premium Options for Standard Premiums of $100,000 - $150,000
OTSEGO, CITY OF
13400 90TH STREET NE
OTSEGO,MN 55330-7259
Agreement No.:WC 1003689_Q-7
Agreement Period:
From:07/01/2023
To:07/01/2024
Enclosed is a quotation for workers' compensation deposit premium.Note:Renewal Coverage will be bound as
per the expiring coverage arrangement, including coverage for elected and appointed officials, with the
premium indicated on the quote, unless the member or agent sends a written request not to bind renewal
coverage.
PAYROLL DESCRIPTION CODE RATE
ESTIMATED
PAYROLL
DEPOSIT
PREMIUM
SEE ATTACHED SCHEDULE FOR DETAILS
Manual Premium 145,551
Credit 0.70 -43,665
Standard Premium 101,886
Deductible Credit 0.00%0
Premium Discount -9,249
Net Deposit Premium $92,637
Adjustment for Commission*0
Total Net Deposit Premium $92,637
*Workers compensation rates assume a 2% standard commission.The commission adjustment accounts for the
commission difference, above or below 2%.
Agent:
01522 USI INsurance Services LLC
8000 Norman Center Dr #400
Bloomington,MN 55437-1180
Notice of Premium Options for Standard Premiums of $100,000 - $150,000
(Con't)
Page 2 of 3 LM4514 (3/02)(Rev.01/23)
OPTIONS
Please indicate below the premium option you wish to select.You may choose only one option and you
cannot change options during the agreement period.
1.*Regular Premium Option Net Deposit
Premium
Commission
Adjustment
Total Net Deposit
Premium
92,637 0 92,637
2.*Deductible Premium Option
Deductible options are available in return for a premium credit applied to your estimated standard
Premium of $101,886.The deductible will apply per occurrence to paid medical costs only.
There is no aggregate limit.
Deductible
per
Occurrence
Premium
Credit
Credit
Amount
Net Deposit
Premium
Commission
Adjustment
Total Net
Deposit
Premium
*$250 0.70%-713 91,924 0 91,924
*$500 1.20%-1,223 91,414 0 91,414
*$1,000 2.00%-2,038 90,599 0 90,599
*$2,500 3.50%-3,566 89,071 0 89,071
*$5,000 5.50%-5,604 87,033 0 87,033
*$10,000 8.00%-8,151 84,486 0 84,486
*$25,000 12.50%-12,736 79,901 0 79,901
*$50,000 17.50%-17,830 74,807 0 74,807
3.*Retrospective Rates Premium Option
Retro-Rated
Minimum Factor
Est. Minimum
Premium
Retro-Rated
MaximumFactor
Est. Maximum
Premium
*0.575 %58,584 1.300 %132,452
*0.532 %54,203 1.500 %152,829
*0.457 %46,562 2.000 %203,772
This quotation is for a deposit premium based on your estimate of payroll and selected options.Your final actual
premium will be computed after an audit of payroll subsequent to the close of your agreement year and will be
subject to revisions in rates,payrolls and experience modification.While you are a member of the LMCIT Workers'
Compensation Plan,you will be eligible to participate in divident distributions from the Trust based upon claims
experience and earnings of the Trust.
If you desire the coverage offered above, please return this signed document for the option you have selected.
This quotation should be signed by an authorized representative of the city requesting coverage.
Signature Title Date
Notice of Premium Options for Standard Premiums of $100,000 - $150,000
(Con't)
Page 3 of 3 LM4514 (3/02)(Rev.01/23)
CONTINUATION SCHEDULE FOR QUOTATION PAGE
REMUNERATION RATE CODE DESCRIPTION EST. PREM
601,171 9.66 5506 STREET CONSTRUCTION 58,073
262,086 4.06 7520 WATERWORKS 10,641
443,860 4.87 7580 SEWEAGE DISPOSAL PLANT 21,616
127,335 11.09 7706 FIREFIGHTERS (NOT VOLUNTEER)14,121
120,104 4.54 8227 CITY SHOP & YARD 5,453
933,605 0.76 8810 CLERICAL OFFICE EMPLOYEES NOC 7,095
30,000 7.54 9015 BUILDINGS-OPER BY OWNER 2,262
331,166 7.91 9102 PARKS 26,195
18,200 0.52 9411 ELECTED OR APPOINTED OFFICIALS 95
Manual Premium 145,551