FWCJUA Meeting Recaps

Following is a recap of recent Florida Workers Compensation Joint Underwriters Association (“FWCJUA”) Committee meetings.

• Producer Committee
• Rates and Forms Committee
• Investment Committee
• Operations Committee

 

Producer Committee

A May 24, 2007 meeting of the Florida Workers Compensation Joint Underwriters Association (“FWCJUA”) Producer Committee (“Committee”) began with the approval of the previous meeting minutes.

FWCJUA Executive Director Laura Torrence discussed the new agency producer agreement approved in December, 2006, but said it led to agent mistakes. To rectify this, a change form was developed. Now, agencies can do various functions without incurring additional charges and add designated producers for a $100 fee for the term of agreement still outstanding.

The Committee passed a resolution to adopt the new form, as well as authorize revisions to the operations manual and the applicable exhibit regarding the changes approved.

Regarding the method of producer payment to the FWCJUA, there have been several complaints from consumers who were unaware of their options to do so. It was determined that agents may not be disclosing various payment options that FWCJUA has available. Some agents feel it is not their responsibility to disclose payment options because they feel they are being asked to “push” a premium-withholding program. Other agents are compensated for steering customers toward “financing options.”

The Committee stated its opinion that FWCJUA’s position is that agents have a responsibility to disclose information on payment options. A resolution was made to adopt and revise the operations manual to add that agents must talk to applicants about premium payment options.

Currently, the required FWCJUA $4,500 payroll service provider threshold is waived if an employer joins an FWCJUA-approved payroll service, with use of an approved provider (currently only Paychex), premium withholding automatically takes place every time an employer issues a paycheck.

One applicant who had used FWCJUA-approved Paychex as a payroll service also became unwittingly enrolled in a finance agreement with a high interest rate. That applicant is pursuing a complaint.

Ms. Torrence suggested adding a sixth form that would require an agent to disclose payment options and made a recommendation to address disclosure requirements through the Rules and Procedures Committee.

Bob Milligan, Florida’s Consumer Advocate with the Florida Department of Financial Services then remarked on the importance of having consumers sign a consent document, otherwise agents may not disclose what they should.

Premium withholding was identified as a method to assist the FWCJUA in protecting itself from outstanding accounts and improving collections rates. Payroll deduction requires signing up with a service provider or finance company.

Mr. Milligan remarked that Paychex is the only payroll service provider with FWCJUA approval so far, and that he did not think there existed enough current policies to have participation with Paychex be mandatory.

Discussion ensued, after which Mr. Milligan stated that the Committee should make sure that no action occurs that would not be most beneficial to the FWCJUA.

Mr. Milligan suggested that since payroll service companies are required to be licensed, the words “any properly licensed provider” should be used to describe authorized payment processors for FWCJUA.

Given the discussion, it was suggested that the Committee should not move forward with the disclosure issue at this point until it receives an update on how the entire payroll provider approval process is accomplished.

Ms. Torrence replied that this new information will not be available by June 12 and therefore, this issue will come before a new Committee and be subject to new statutes effective on July 1, 2007. She also suggested that the FWCJUA Rates and Forms Committee should be advised that this Committee is not prepared to move forward.

After further discussion, the meeting was then adjourned.

 

Rates and Forms Committee

A meeting of the Florida Workers Compensation Joint Underwriters Association (“FWCJUA”) Rates and Forms Committee (“Committee”) took place on May 29, 2007 via teleconference.  It was noted that the entire Committee was participating in the call.

After approval of the minutes with no discussion, the Committee moved that the Board should authorize staff to file the FWCJUA’s current Policy Information Page and Extension of Information Page – Schedules with the Florida Office of Insurance Regulation (OIR) as soon as practicable. The motion was approved with later discussion about authorizing FWCJUA Executive Director Laura Torrence to amend small typographical errors on certain forms.

The Committee passed a resolution to authorize the FWCJUA Board to adopt changes to 10 supplemental application forms in order to reflect the now-current practice of the FWCJUA to permit notaries, other than Florida notaries, to notarize an employer’s authorized signer’s signature, with such form amendments becoming effective as soon as practicable.

Next, the Board approved revisions to ACORD 133 FL (2007/07) and the Assessable Policy Notice Endorsement (FWCJUA 04 01) their subsequent insertion into the Operations Manual, as well as their filing with OIR.

The Committee then discussed forms associated with the agency authorization process. The FWCJUA Producers Committee had met previously and made recommendations regarding change procedures for the Agency Producer Agreement to enable agents to add or delete a Designated Producer or Customer Service Representative during the term of an agreement at their discretion with no charge for a deletion and a $100 charge for an addition.

The Committee recommended that the Board implement the recommended change procedures for the Agency Producer Agreement in order to permit an Agency’s principal to add or delete a Designated Producer or Customer Service Representative from the original Agreement by adopting the proposed Agency Producer Agreement.

Various administrative issues pending the passage of Senate Bill 1894 were discussed. Many of those issues were not recommended for action by the Committee because of the Producer Committee’s decision not to act on certain matters regarding the FWCJUA approval process for an affiliate payroll provider.

It was discussed that if SB 1894 is signed by the Governor, it will require the FWCJUA to apply to the IRS for a determination of tax-exempt status. Ms. Torrence said that a Milliman loss reserve analysis will be needed for this process, the cost of which is a $20,000 out-of-budget expense. Because of the effective date of SB 1894, there is a strong possibility that the FWCJUA may have two sets of records to be amended within a short time of one another, followed by a possible denial of tax-exempt status by the IRS. Ms. Torrence recommended that the authorization for the Milliman analysis be in place for the new Board, but the Committee did not adopt this recommendation, citing that to make this type of binding commitment would be doing the new FWCJUA Board a disservice.

The Committee decided not to approve the Milliman study, leaving that decision to the incoming Board.

The Committee then discussed the FWCJUA’s recognized $48,794,092 surplus from 2006.

Although the FWCJUA is not statutorily required to submit a deficit elimination plan to the OIR, with Subplan D now posting a deficit, and the Board having previously agreed to update its plan to eliminate this individual rating plan deficit and submit said updated plan to the OIR, the Committee recommended that the Board authorize staff to finalize the draft letter to OIR outlining the program to eliminate the FWCJUA’s 2006 Subplan D deficit.

The cash flow model suggests that there will be approximately $600,000 in funds returned to the State with no adverse results.

Lastly, the Committee was notified of a surplus during the 2001, 2002 and 2003 policy years and asked to make a recommendation of whether the Board should consider a return of premium dividend to policyholders at this time.

After some discussion, it was determined that no action at this time was necessary, in part because the Committee felt it was advisable to delay a decision pending review of the effect of SB 1894, as well as the binding nature of such a decision for the incoming Board.

The meeting was then adjourned.

 

Investment Committee

A meeting of the Florida Workers Compensation Joint Underwriters Association Investment Committee (“Committee”) was held on May 24, 2007.

After the minutes from the previous meeting on May 11, 2006 were read, a suggestion was made that approval of the minutes might be handled more expediently. It was offered that approval of outstanding minutes could be jointly approved at other Committee meetings. However, FWCJUA Executive Director Laura Torrence indicated that new legislation taking effect on July 1, 2007 may alter the way minutes are handled, notwithstanding. Reporting of all meetings and keeping a written record was another proposed method.

Representatives from Evergreen Investment presented the current economic climate and future outlook, along with a performance report on the FWCJUA portfolio.

The Evergreen report indicates that FWCJUA funds are concentrated in money market funds that will mature throughout the next several years, with some funds awaiting immediate maturity.

Optimal job growth statistics were cited to be in the range of 100,000-200,000 new jobs added to the United States economy on a month-to-month basis. Anything less than that does not afford replenishment value to the economy in terms of job growth.

If interest rates do not fluctuate over next 12 months, the FWCJUA portfolio will produce a 5 % return. The FWCJUA portfolio is currently overweighted with investments with shorter maturities and expected dividends. There has been additional income due to positive performance in the corporate and agency sector.

No additional funds have been added into the portfolio. This year’s performance has been slightly ahead of the previous year’s performance.

A review of the FWCJUA investment policy and the independent analysis provided in Evergreen’s report determined that the portfolio was in compliance with State of Florida diversification requirements and no deviations were made.

Whether a minimum performance threshold should be established was discussed. Because the portfolio is conservatively formulated, strictly allocated and short in duration, it was concluded that establishing a minimum performance standard may not be necessary.

No recommendations were made by staff on portfolio performance policy, however it was noted that the FWCJUA currently enjoys a substantial surplus position. Therefore, it could be beneficial to consider whether a better return on longer term investments could be achieved.

The use of a loss payout report in order to report cash management status was discussed and the Committee recommended the revision of the cash management policy and an approval out-of-budget expenditure of $1,200 for Milliman Inc. to create a loss payout report.

Finally, the Committee reviewed the investment manager’s performance and determined that the manager has consistently outperformed comparable benchmarks and achieved the highest possible return, despite a restrictive policy.

The Committee was reminded that SunTrust Capital Market is the FWCJUA’s secondary securities manager.

The Investment Committee unanimously recommended that the Board continue its current investment relationship.

No other general announcements were made prior to adjourning.

 

Operations Committee

A meeting of the Florida Workers’ Compensation Joint Underwriting Association (“FWCJUA”) Operations Committee (“Committee”) took place on May 30, 2007.

Subsequent to the approval of prior meeting minutes, the Committee meeting opened with a discussion of Senate Bill 1894 and House Bill 7169. Tom Maida stated that SB 1894 allows for a letter ruling from the IRS that grants the FWCJUA tax-exempt status, and HB 7169 allows for certain records of the FWCJUA to be made available to the public, but also provides an exemption for certain confidential information. It was determined that the implementation date of these bills would be later than July 1, 2007 if there is a delay in the bills being presented to Governor Crist.

Incorporating FWCJUA reorganization issues into the FWCJUA bylaws was then discussed regarding the Board Appointment Process, Public Records Act, Sunshine Law, Ethics Requirements, and Procurement of Goods and Services

In order to start the Board election process, the FWCJUA bylaws must first be approved by the Office of Insurance Regulation. FWCJUA Executive Director Laura Torrence stated that increased expenses needed for employee travel and training will be out of budget to implement the Public Records Act (SB 1894).

Ms. Torrence indicated that an actuarial audit was recommended by the end of June, and that in her opinion, keeping the current audit and tax advisor would be preferable.

Ms. Torrence also said that physical storage space was needed to comply with HB 7169. She recommended purchasing physical storage space and additional Dell computer equipment. Ray Neff proposed putting together a document management subcommittee through the FWCJUA general membership. Mr. Maida pointed out that many documents that are subject to the Public Records Act will be physically stored with vendors, not at the FWCJUA.

A motion was then passed to ask the Board of Governors for a specific action regarding physical storage.

The issues of document management and disaster recovery were discussed. A recommendation from Mr. Maida regarding increased responsibility for document management should be completed by June 4. The Committee reviews changes in a disaster recovery plan each quarter on an as-needed basis. A motion was passed that allows the Committee to confirm any revisions.

The use of audio recordings was discussed on an informational-only basis. Ms. Torrence suggested that staff determine if a meeting needed to be recorded until a new Board is appointed and can decide.

The Committee then discussed the Operations Manual. A motion to update the current Adobe format and allow for already-budgeted staff training was passed.

Preliminary Audit Results were next discussed. The physical audit of Travelers was postponed until July. According to the carrier data quality report, the FWCJUA received “all ‘A’s.”

There were no general announcements, and an adjournment motion was passed.

 

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