By Greg Bird
Five years after having to pay nearly $600,000 to the failed Kentucky School Boards Insurance Trust (KSBIT), the McCreary County School District was notified last week that it will receive some of that money back as part of a $5 million disbursement from the Kentucky Department of Insurance due to new management of insurance claims.
In a press release last week the DOI stated that the Franklin Circuit Court authorized a $5 million disbursement to 194 members of the KSBIT fund “because of diligent administration of worker’s compensation claims by the DOI and Kentucky Employer’ Mutual Insurance (KEMI) over the past several years.”
The McCreary County School District will receive $59,622.44 as part of the settlement.
KSBIT provided low-cost liability and workman’s compensation insurance to school districts across Kentucky for several years. In 2013 the carrier ran in to debt issues totaling nearly $60 million – prompting a court-ordered assessment from each of the districts who had carried policies over the years. In all nearly 200 school districts across the state were hit with the assessment.
In 2014, KEMI accepted $37 million in claims liabilities for KSBIT, which was lauded by the Kentucky Department of Insurance as the “softest possible landing for Kentucky school districts and injured workers.” KEMI offered schools interest-free loans and planned to handle the claims at cost.
A recent actuarial study confirmed that KEMI’s claims administration substantially reduced liabilities, resulting in approximately $5 million in savings to the assessed KSBIT members.
Acting Superintendent Sonny Fentress stated the funds will be added to the General Fund.
The McCreary County School District had carried a policy with KSBIT for 16 of the previous 23 years and was hit with an assessment totaling $587,277.
The Board was presented with three court ordered options, none of which were met with much enthusiasm at the time.
The Board could have opted to pay the entire assessment, in full, by the next month; pay 25 percent of the total amount due and pay the remainder within six years; or opt to participate in a bond issue, which would pay off the debt within 15 years.
While none of the options were favorable for the Board at that time the choices to pay the full amount, or even a percentage would not be possible under the School District’s current financial situation, prompting the Board to take the third option of issuing a 15-year bond.
The bond carries a 3.8 percent interest rate and will require annual payments of about $57,000 until 2029. Once the bond is paid off a total of $855,546 would have been paid with interest charges.