HAZARD—After receiving news earlier this year of, in some cases, staggering payments to a group insurance trust that had declared its planned dissolution due to massive deficits, school districts in the state can likely breathe more easily since news was released this month of a new, less devastating payment plan.
KSBIT, the Kentucky School Board Insurance Trust, announced in January that it had accumulated around $72 million in deficits — more than the projected $50-$60 million — for the worker’s compensation self-insurance pool and the liability self-insurance pool. These deficits led the trust to no longer accept new or renewal business this year, and, pursuant to the Kentucky Department of Insurance’s (DOI) assessment, to also set up a novation plan to have all previous and currently insured members make a payment to compensate for the deficit.
“The state insurance commission turned down KSBIT’s novation plan; they did not allow them to do that,” said Sandra Johnson, superintendent of the Hazard Independent School District, at the school board’s meeting on Monday.
In a letter addressed to members and superintendents on Nov. 7, KSBIT Chief Insurance Officer Doug Goforth, on behalf of the KSBIT board of directors, explained that KSBIT had been working on an agreement to “eliminate all existing fund liabilities for members including local school districts.” However, after announcing the plan, the DOI told KSBIT it was pursuing other options and had developed a new plan.
“Based upon this information KSBIT withdrew its novation plan … Yesterday, KSBIT filed a new plan for a runoff option with a smaller overall assessment amount,” Goforth wrote. “While not in complete agreement with the DOI’s proposed plans, KSBIT is working with the DOI to resolve differences on the new options in an effort to provide the softest landing for members.”
The tentative new plan to remedy the deficit problem lessens the strain put on some districts with charges of over $1 million by only going back to the 2007-08 school year to start calculating payments. This would result in a savings for the state’s school boards of at least $21 million.
“They were going to go back 20 years, which had us owing $138,000, because … during the late 1990s and through there we had property and everything with them (KSBIT) plus our work comp,” Johnson said.
Johnson explained that with the new plan, her district would only face a bill of around $28,000.
“What I was told, kind of unofficially, is that they’re going to, that we will have to pay 25 percent of that by June 30, which is like $5,000 or $6,000. Then, they’re going to give you an option to break it into annual payments at no interest over the following six years,” she said.
Johnson said she looked at some of the neighboring districts that originally owed over $1 million, like Knott County which was expected to pay $1,096,677, and will now only have to pay, in some cases, around $200,000.
“Can’t beat it,” she said. “It’s not going to have any kind of a drastic effect on our district. I wish we didn’t have to pay anything, but this is good news.”