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HomeMy WebLinkAboutItem 5.7 Resolution Declaring the City of Dublin’s Assumption of Workers’ Comp Liability as a Self-Insured Employer STAFF REPORT CITY COUNCIL Page 1 of 2 Agenda Item 5.7 DATE: December 2, 2025 TO: Honorable Mayor and City Councilmembers FROM: Colleen Tribby, City Manager SUBJECT: Resolution Declaring the City of Dublin’s Assumption of Workers’ Compensation Liability as a Self -Insured Employer Prepared by: Sarah Monnastes, Human Resources Director EXECUTIVE SUMMARY: The City Council will consider approval of a Resolution formally declaring the City of Dublin’s assumption of legal responsibility for workers’ compensation liabilities as a self -insured employer. The proposed Resolution is required by the California Office of Self -Insurance Plans as part of the City’s application to obtain a Certificate of Consent to Self -Insure. Approval of this Resolution supports the transition to the self -funded workers’ compensation program previously authorized by the City Council on November 18, 2025. STAFF RECOMMENDATION: Adopt the Resolution Declaring the City of Dublin’s Assumption of Workers’ Compensation Liability as a Self-Insured Employer, Authorizing Self-Funded Workers’ Compensation Operations, and Directing Related Actions. FINANCIAL IMPACT: There is no direct financial impact associated with adoption of the Resolution. The financial implications associated with the transition to a self -funded program were detailed in the November 18, 2025 staff report and include approximately $115,000 in annual administrative and excess insurance costs and establishment of a Workers’ Compensation Trust Fund with an initial $50,000 allocation. Staff will bring forward the necessary budget adjustments as part of the Fiscal Year 2025-26 mid-year financial review. DESCRIPTION: With the dissolution of the Cities Group Joint Powers Authority effective January 1, 2026, the City must transition to an independent workers’ compensation structure. On November 18, 2025, the City Council approved a self-funded workers’ compensation model supported by a 191 Page 2 of 2 third-party administrator and excess insurance. The November 18 staff report is included as Attachment 3 to this report. The California Office of Self-Insurance Plans (OSIP) regulations require a City Council Resolution affirming the City’s acceptance of liability as a self -insured employer. Approval of this Resolution is necessary to finalize the City’s OSIP application. STRATEGIC PLAN INITIATIVE: None. NOTICING REQUIREMENTS/PUBLIC OUTREACH: The City Council Agenda was posted. ATTACHMENTS: 1) Resolution Declaring the City of Dublin’s Assumption of Workers’ Compensation Liability as a Self-Insured Employer, Authorizing Self-Funded Workers’ Compensation Operations, and Directing Related Actions 2) Exhibit A to the Resolution – Certification Statement 3) November 18, 2025 Staff Report (without attachments) 192 Attachment 1 Reso. No. XX-25, Item X.X, Adopted 12/02/2025 Page 1 of 2 RESOLUTION NO. XX – 25 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN DECLARING THE CITY OF DUBLIN’S ASSUMPTION OF WORKERS’ COMPENSATION LIABILITIES AS A SELF-INSURED EMPLOYER, AUTHORIZING SELF-FUNDED WORKERS’ COMPENSATION OPERATIONS, AND DIRECTING RELATED ACTIONS WHEREAS, since 2005 the City of Dublin (“City”) has participated in the San Mateo County Cities Insurance Group Joint Powers Authority (“Cities Group”) for the administration and pooling of workers’ compensation liabilities; and WHEREAS, due to significant structural and financial changes in the Cities Group risk pool, the Cities Group Board voted to dissolve and cease all workers’ compensation operations effective January 1, 2026; and WHEREAS, as a result of this dissolution, the City is required to secure an alternative workers’ compensation program structure to comply with the California Workers’ Compensation Act and ensure continuation of benefits for City employees; and WHEREAS, on November 18, 2025, the City Council received a Staff Report analyzing workers’ compensation program alternatives and subsequently approved the City’s transition to a self -funded workers’ compensation model beginning January 1, 2026, supported by a third-party administrator and excess workers’ compensation insurance, and authorized the City Manager to take all necessary implementation actions; and WHEREAS, California Labor Code section 3700 et seq. and Title 8, California Code of Regulations section 15200 et seq. authorize public entities to self -insure for workers’ compensation liabilities, subject to the approval of the Director of Industrial Relations ; and WHEREAS, it is necessary and appropriate for the City Council to formally declare the City’s assumption of liability as a self-insured employer. NOW, THEREFORE, BE IT RESOLVED that, effective January 1, 2026, the City Council declares that the City of Dublin shall operate as a self-insured employer for workers’ compensation purposes and shall assume any and all liabilities arising under the California Workers’ Compensation Act, subject to applicable excess insurance coverage. BE IT FURTHER RESOLVED that the City Council affirms its intention to maintain appropriate excess insurance to cover statutory benefits above the City’s self -insured retention. BE IT FURTHER RESOLVED that the City Council authorizes the establishment and continued maintenance of a Workers’ Compensation Trust Fund for the purpose of paying claims and related expenses and authorizes initial and ongoing deposits consistent with expected obligations. BE IT FURTHER RESOLVED that the City Manager is authorized and directed to execute all agreements, filings, certifications (including the Certification Statement attached hereto as EXHIBIT A), records transfers, and administrative actions necessary to implement and maintain the City’s status as a self-insured employer, including required filings with the State of California Office of Self-Insured Plans. 193 Reso. No. XX-25, Item X.X, Adopted XX/XX/2025 Page 2 of 2 PASSED, APPROVED AND ADOPTED BY the City Council of the City of Dublin, on this 2nd day of December, 2025 by the following vote: AYES: NOES: ABSENT: ABSTAIN: ______________________________ Mayor ATTEST: _________________________________ City Clerk 194 Attachment 2 Exhibit A to the Resolution CITY MANAGER CERTIFICATION STATEMENT Pursuant to Title 8, California Code of Regulations, Section 15211 et seq. City of Dublin Application for Public Entity Workers’ Compensation Self-Insurance Authority I, Colleen Tribby, City Manager for the City of Dublin, hereby certify the following: 1. Authority to Bind the City I am duly authorized to execute and submit the City of Dublin’s application to the California Office of Self-Insurance Plans (OSIP) to obtain a Certificate of Consent to Self-Insure workers’ compensation liabilities pursuant to Labor Code §3700 and Title 8 California Code of Regulations §15200, et seq. 2. Assumption of Liability The City of Dublin expressly assumes and accepts full legal responsibility for the payment of any and all workers’ compensation claims and benefits arising under the California Workers’ Compensation Act for its employees, as required by Labor Code §3700, subject to applicable excess insurance coverage. 3. Financial Capacity / Funding Commitment The City has the financial capacity to administer a self-insured workers’ compensation program and commits to funding all workers’ compensation liabilities including, but not limited to, temporary disability, permanent disability, medical benefits, vocational rehabilitation, death benefits, administrative costs, investigation, legal defense, and claims adjusting costs. 4. Establishment of a Dedicated Fund The City has established or will establish a dedicated workers’ compensation trust fund for the payment of claims, costs, and benefits, and will maintain funding levels consistent with actuarially estimated obligations. 5. Program Administration The City will administer claims through a third-party administrator duly licensed to administer workers’ compensation claims in the State of California, and will ensure compliance with all statutory and regulatory reporting requirements. 6. Compliance Commitment The City agrees to comply with all rules, regulations, forms, data reporting requirements, audits, and investigations of OSIP. 7. Accuracy of Information All information included in the application and supporting documents is true, accurate, and complete to the best of my knowledge. Executed this _____ day of _____________________, 2025 in Dublin, California. _______________________________ Colleen Tribby City Manager, City of Dublin 195 STAFF REPORT CITY COUNCIL Page 1 of 5 Attachment 3 DATE: November 18, 2025 TO: Honorable Mayor and City Councilmembers FROM: Colleen Tribby, City Manager SUBJECT: Approval of Workers’ Compensation Program Structure and Recommendation to Transition to a Self-Funded Workers’ Compensation Plan Prepared by: Sarah Monnastes, Human Resources Director EXECUTIVE SUMMARY: The City Council will receive a report on Staff’s analysis of workers’ compensation programs and discuss Staff’s recommendation to transition to a self-funded workers’ compensation program, supported by a third-party administrator for day-to-day claims administration and excess insurance for catastrophic claims. STAFF RECOMMENDATION: Approve the City’s transition to a self-funded workers’ compensation model beginning January 1, 2026, authorize the establishment of a workers’ compensation trust account, and authorize the City Manager to execute all necessary agreements related to administration and excess insurance. FINANCIAL IMPACT: The recommended self-funded program option requires contracting with a third-party administrator and purchasing excess insurance, which costs approximately $165,000 annually, combined (this would be pro-rated for the current fiscal year). The City is also required to establish a workers’ compensation trust account, which Staff recommends funding with an initial $50,000. Claims will be paid directly out of the trust, and the City can replenish the funds as needed. Staff will return with a mid-year budget adjustment to request the appropriation of these funds for the remainder of Fiscal Year 2025-26. In addition, the City currently has approximately $187,000 held by the Cities Group. Although a portion of that will be used to fund dissolution costs, some amount is expected to be returned to Dublin in Fiscal Year 2026-27, which may partially offset expenses in the second year. 196 Page 2 of 5 DESCRIPTION: Background Since 2005, the City of Dublin has been a member of the San Mateo County Cities Insurance Group Joint Powers Authority (Cities Group), which has administered workers’ compensation claims and related benefits on behalf of its member agencies. The City pays $3,000 annually for the Cities Group program and operates with a self-insured retention (SIR) of $1 million per claim and a $10 million per claim limit. Under this structure, the City is financially responsible for the first $1 million of every claim, with pooled excess coverage providing protection for catastrophic or severe losses up to $10 million dollars. The City is then responsible for anything over $10 million. As documented in the Staff Report presented to the City Council on October 21, 2025 (Attachment 1), the long-term viability of the Cities Group became uncertain following the withdrawal of Foster City, whose claim volume and size represented a disproportionately large share of the group’s overall risk pool. The withdrawal significantly weakened the group’s financial stability and its attractiveness to reinsurers. After further review, the Cities Group Board concluded that dissolution was the most prudent path forward for all remaining members. The Board subsequently adopted a resolution directing the cessation of all workers’ compensation operations by January 1, 2026, and requiring each member agency to transition its workers’ compensation program independently. As a result, Dublin must secure and implement a new workers’ compensation structure prior to that date. Following the October City Council meeting, Staff conducted a comprehensive review of the City’s historical claim experience and existing risk structure, and analyzed viable options available to California municipalities: 1) enrollment in the State Compensation Insurance Fund; 2) contracting directly with a joint powers authority (JPA) for claims administration; or 3) establishing a self-funded workers’ compensation program supported by a third-party administrator (TPA) and excess insurance coverage. Based on Staff's analysis, the self-funded program is the most prudent option for Dublin. A discussion of the analysis is provided below. Analysis Claims History In selecting the workers’ compensation structure that is most appropriate for the City as it transitions away from Cities Group, Staff looked at the City’s historical loss experience using the complete loss-run data from January 1, 2005 through September 30, 2025. The loss-run captures more than 20 years of claims activity and provides a comprehensive picture of Dublin’s long-term risk exposure. Over the 20-year period, annual claim payments ranged from as low as $374 in 2020 to $86,466 in 2005, with most years falling below $14,000. Recent experience is even more modest, with total paid losses of $8,754 in 2024 and $2,546 recorded through September 30, 2025. These results 197 Page 3 of 5 reflect Dublin’s low-frequency, low-severity claim environment, supported by a predominantly administrative and professional workforce and strong internal safety practices. The City’s exposure is further reduced by contracting out police, fire, and maintenance services, which shifts the highest-risk functions outside the City’s direct operations. This historical claim performance must also be considered in the context of the City’s current risk structure through Cities Group, under which Dublin operates with an SIR of $1 million per claim and a $10 million per claim limit. It is important to note that Dublin’s claim activity has remained far below the SIR level. Workers’ Compensation Program Options Considered 1. State Compensation Insurance Fund. The State Compensation Insurance Fund is a fully insured workers’ compensation program in which the State assumes full liability for all claims. Agencies pay an annual premium based on payroll, class codes, and statewide actuarial factors, and in exchange the State Fund becomes responsible for claims payments, litigation costs, medical management, and all associated liabilities. While the State Fund provides guaranteed acceptance for public agencies and delivers a predictable, standardized administrative process, participation comes with several notable limitations. Specifically, because the program is fully insured, agencies relinquish nearly all control over claims handling. This includes decisions regarding compensability, medical treatment direction, settlement strategy, litigation oversight, and return-to-work coordination. For Dublin, which has historically benefited from close oversight of claims and early-return-to- work practices, this loss of control could negatively impact claim outcomes and increase indirect costs such as lost productivity and modified duty availability. This reduction in control could lengthen claim duration, increase disability time, and diminish the effectiveness of the City’s return-to-work approach. Additionally, while the State Fund premium calculation is based on the City’s claim experience, premiums include statewide risk assumptions, administrative overhead, and insurer operating costs. As a result, the premium does not reflect Dublin’s actual workers' compensation exposure, which typically totals only a few thousand dollars per year. The annual premium quoted for Dublin to participate in the State Fund is $206,000, significantly higher than the City’s historical claims. 2. Workers’ Compensation Joint Powers Authority (JPA). A workers’ compensation JPA is a collective risk-sharing arrangement in which multiple public agencies pool their workers’ compensation exposures and jointly fund the costs of claims, administration, and long-term reserves. Member agencies contribute annual premiums that support both current claim payments and the reserves needed to cover future liabilities for the entire pool. JPAs provide shared governance, access to pooled resources, and standardized risk-management practices; however, participation also requires agencies to operate under uniform policies and claims-handling procedures established by the pool. 198 Page 4 of 5 Although the overall structure of a JPA is similar to that of Cities Group, where agencies pooled their claims and purchased excess insurance collectively, the JPAs reviewed by Staff differ in one important respect: they maintain much lower levels of SIR than Cities Group’s $1 million SIR. The JPAs that provided quotes operate with SIRs in the range of $5,000 to $150,000. This lower retention level increases the amount of pooled claim costs and administrative overhead that must be funded by all members. For a low-loss agency like Dublin, this means paying significantly more into the pool to support claims generated by higher-risk members. Because JPA contributions are calculated based on the pooled actuarial needs of all members rather than on each agency’s individual loss experience, low-loss agencies often subsidize agencies with higher claim frequency or severity. For Dublin, whose workers’ compensation losses have been consistently modest and well below its long-standing $1 million SIR, this structure is financially unfavorable. The JPAs reviewed quoted annual participation costs between $250,000 and $535,000, far exceeding the City’s typical annual losses. Joining a JPA would therefore require the City to contribute substantially more than is warranted by its actual risk profile. In addition, even in years where the City’s losses totaled less than $10,000, Dublin would still be required to pay several hundred thousand dollars into a pooled program, effectively subsidizing agencies with much higher claim activity while receiving no materially different protection than the structure under which it already operates. 3. Self-Funded Program with TPA and Excess Insurance. A self-funded program allows agencies to pay only the actual cost of their workers’ compensation claims while maintaining a dedicated trust account for those expenses. Under this model, a third-party administrator handles day-to-day claims administration in close coordination with agency staff, including medical coordination, investigations, regulatory reporting, litigation oversight, and return-to- work support. The TPA charges a flat annual fee of approximately $4,000, with additional à la carte fees for individual claims and specialty services. Based on projected activity in Dublin, the TPA’s total annual cost for the City is expected to be no more than $15,000. To protect the City against catastrophic or unusually high-cost claims, the program includes the purchase of excess workers’ compensation insurance, estimated at $100,000 annually. Under the proposed structure, the City would assume an SIR of $750,000, meaning the City is responsible for all claim costs up to that amount. The excess insurance provides statutory limits coverage, which means the insurer will pay all legally required workers’ compensation costs (i.e., medical care, wage replacement, permanent disability benefits, lifetime medical awards, and death benefits) without a dollar cap, as required under California law. Once the City’s $750,000 SIR is reached, all additional benefits owed under the Workers’ Compensation Act are fully covered by the excess carrier. This enhances the catastrophic protection the City currently receives through Cities Group. Given that the City’s annual claims have remained far below $750,000, and that Dublin has decades of successful experience operating within a high-retention framework, a self-funded workers’ compensation program remains the approach most consistent with the City’s 199 Page 5 of 5 historical losses and overall risk profile. This option aligns costs with actual experience, ensures unspent funds stay in a City-controlled trust rather than subsidizing a pool, and preserves essential catastrophic protection through statutory-limit excess coverage. For these reasons, the self-funded model not only represents the lowest-cost option but is also the most actuarially appropriate and operationally consistent approach for the City moving forward. Under this option, the City would need to establish an initial trust account to cover anticipated claim expenses and maintain liquidity, at a level consistent with claims history. Staff recommends depositing an initial $50,000 into the trust, with funding levels evaluated annually thereafter. Next Steps Upon City Council approval to use the self-funded model, Staff will execute an agreement with the selected TPA, bind excess workers’ compensation insurance coverage effective January 1, 2026, and create the required trust and fund structure. Staff also will complete State self- insurance filings, coordinate record transfers with Cities Group, and update the City’s internal reporting and return-to-work procedures. Finally, Staff will bring a mid-year budget amendment to the City Council to fund the transition. STRATEGIC PLAN INITIATIVE: None. NOTICING REQUIREMENTS/PUBLIC OUTREACH: The City Council Agenda was posted. ATTACHMENTS: 1) October 21, 2025 Staff Report (without attachments) 200