Meredith Joins Thirteen Municipalities In Filing Formal Complaint with NH Bureau of Securities Regulation Re: LGC Discriminatory Business Practices
On Thursday, December 13, 2012, on behalf of the towns of Peterborough, Durham, Salem, and eleven other municipalities, Attorney John Ratigan of DTC Lawyers in Exeter filed a Right to Know law request under RSA 91-A with the LGC to obtain financial and other information as follows:
(1) The annual audit of financial transactions, as provided for under RSA 5-B:5 I(d) for the years 2003 through 2012.
(2) The annual actuarial evaluation of the pooled risk managements program(s) as provided for under RSA 5-B:5 I(f) for the years 2003 through 2012.
(3) The written bylaws as provided for under RSA 5-B:5 I(e) in effect for each of the years of 2003 through 2012.
(4) Documents indicating the name of each LGC member community, municipality and other entities, by year, for all years between 2003 and 2012.
(5) Documents indicating the name of each LGC member community, municipality and other entity that left the LGC, by year, for all years between 2003 and 2012 to include the dates of departure.
The towns of Peterborough, Durham, and Salem, acting through their Town Managers Pam Brenner, Todd Selig, and Keith Hickey, have raised concerns with about a dozen other municipalities who, like Peterborough, Durham, and Salem were members of the LGC during the time that surplus funds were accumulated in the LGC health insurance and property liability trusts and which are now subject to Donald E. Mitchell’s August 16, 2012 Order directing that more than $52 million in certain surplus funds from these trusts be returned to the then Trust members. Peterborough, Durham, and Salem were members of the LGC trusts for many years, leaving the LCG trusts in 2012.
The concerns raised by Peterborough, Durham, and Salem, are also shared by the towns of Auburn, Bennington, Canaan, Greenfield, Henniker, Lyndeborough, Meredith, Northfield, Plainfield, Raymond and Temple.
On Wednesday, December 12, 2012, the town of Meredith asked to join the request.
Ms. Brenner, Mr. Selig, and Mr. Hickey state: “If a refund of surplus is going to be distributed, as employers who were part of the LGC trusts when much of the surplus was accumulated, Peterborough, Durham, and Salem, in our opinion, are deserving of a portion of the return of surplus for the years Peterborough, Durham, and Salem were in the pool, nothing more, nothing less. It is a matter of fairness for our taxpayers and employees who contributed to the surplus. Our communities left for economic reasons. If the return of surplus had been applied on an annual basis as the Hearing Officer has suggested, our taxpayers and public employees would have benefitted annually over the course of our membership in the form of lower, more competitive insurance rates.”
LGC has taken the position that in order for a municipality to be eligible for the return of its share of the Surplus, the municipality must have been enrolled in the specific coverage during the billing cycle when the surplus is proposed to be returned—August 2013. Under this analysis, neither Peterborough, Durham, nor Salem would be entitled to participate in the proposed return of Surplus.
While this proposal may address a non-cash credit of funds or a cash payment to municipalities that are current property liability and health insurance trust members, provided the entities are also members in August 2013 when a “payment holiday” is applied, this proposal does nothing for those members who have left the LGC program, but whose contributions helped build the surplus over the time span that it was allowed to unlawfully accumulate.
NH RSA 5-B:5 requires that pooled risk management programs, such as the LGC, meet particular standards. Included within these requirements is the obligation on the part of the program to return all earnings and surplus in excess of any amounts required for administrative claims, reserves, and purchase of excess insurance to the participating municipalities. The standards further require that the program conduct an annual audit of financial transactions and an annual actuarial evaluation of the program.
The surplus in any particular year is due in part to the payments made by the participating municipalities in that particular year. As detailed in the Mitchell report (see page 27 of the report) the determination of earnings and surplus of each trust was to be determined annually. The present position of the LGC that it is only obligated to return Surplus to those municipalities who are presently within the applicable trust program unlawfully discriminates against former municipal members whose contributions help create the surplus.
The proposed distribution of surplus may also create a windfall to the LGC.
The communities have taken the position that LGC’s refusal to return to Peterborough, Durham, Salem, and the other towns that have joined in this action their prorata share of the Surplus is improper and contrary to law.
When the 12 (now 14) towns lodged their complaint with the BSR, the Bureau of Securities Regulation’s outside counsel, Andru Volinsky told Annmarie Timmins of the Concord Monitor, “The bureau will need to look at this…There is nothing in the law that says you have to be a member to get your surplus back.”