Financial Information

Maintaining a financially stable risk sharing pool is the foundation of PARSAC. The Board of Directors has remained loyal to a conservative funding and investment philosophy to limit potential for pool-wide assessments. A conservative funding philosophy not only ensures sufficient assets are available to pay expected losses, but also builds Program surplus in the event of adverse loss development, and is consistent with the Board's Target Equity goals. This approach has proven to be successful as both programs are well funded with overall funding in excess of the 90% confidence level.

PARSAC's financial cycle begins with budget planning and actuarial analysis to determine the total funding requirement for each fiscal year. Member Contributions are collected and invested until necessary for claims and expense payments. As a public agency, we are not driven by profit and so surplus is returned to members in the form of dividends, when appropriate. Below please find a brief explanation of each step in the financial cycle:

Annual Budget

The Budget is intended to serve as a policy document, financial plan, and operations guide. This fiscally prudent budget reflects the Strategic Plan and policies adopted by the Board. Under the guidance of the Finance and Executive Committees, staff develops a balanced plan, working diligently to keep costs down while striving to provide quality services and loss control programs that members have come to expect.

The Budget includes a detail of revenues and expenses by program on a fiscal year basis, from July 1 - June 30. In addition, operational expenses that are not specific to any program are classified as General and Administrative Expenses (G&A). G&A expenses are allocated to the programs as follows: 50% to Liability; 45% to Workers' Compensation; and 5% to Property. PARSAC's Budget is adopted by the Board annually in May: Current Fiscal Year Budget.

Member Contributions

The Liability, Workers' Compensation, and PEPIP Property programs are experience-rated, meaning member contributions are adjusted based on loss experience, to ensure equitable distribution of costs. This approach is responsive to the members' most recent loss experience, incentivizing loss prevention. Changes to the experience modification factor are capped at 25% to minimize fluctuations in the member's contribution from year to year. 

Each member is allocated a pro-rata share of the total funding requirement based on: total payroll, self-insured retention, and ex-mod to determine their PARSAC premium ("primary"). The primary premium is then combined with their share of excess premium for the Total Deposit Premium that is collected annually.

Member Dividends

Sound financial planning has resulted in significant savings and stable rates for our members over the years. This savings is returned to the members through the Retrospective Premium Adjustment (RPA) process. The RPA is an annual reconciliation of member contributions to claims liabilities for each fiscal year to determine each member's remaining equity. Per the funding policies, total program equity must be sufficient to meet the 90% overall confidence level and satisfy target equity goals before funds are eligible for RPA distribution. The Board also reviews financial benchmarks and trends to determine the adequacy of equity in those years not yet included in the RPA calculation. 

If an RPA distribution is approved, current and former members may request their share of equity in the form of a check or premium off-set ("dividend"). If a member's total equity is insufficient due to individual loss experience, that member is billed the deficit ("assessment").

2017/2018 Statement of Investment Policy

Finance Subcommittee Agenda - 8/7/2018


December 29, 2017
April 20, 2017

Loss Control & Grant Program

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