WORKERS' COMPENSATION INSURANCE AND RESERVES

12 Months Ended

Dec. 29, 2019

Workers' Compensation Insurance and Reserves [Abstract]

WORKERS' COMPENSATION INSURANCE AND RESERVES

WORKERS’ COMPENSATION INSURANCE AND RESERVES

We provide workers’ compensation insurance for our contingent and permanent employees. The majority of our current workers’ compensation insurance policies cover claims for a particular event above a $2.0 million deductible limit, on a “per occurrence” basis. This results in our being substantially self-insured.

For workers’ compensation claims originating in Washington, North Dakota, Ohio, Wyoming, Canada and Puerto Rico (our “monopolistic jurisdictions”), we pay workers’ compensation insurance premiums and obtain full coverage under government-administered programs (with the exception of PeopleReady in Ohio where we have a self-insured policy). Accordingly, because we are not the primary obligor, our consolidated financial statements do not reflect the liability for workers’ compensation claims in these monopolistic jurisdictions. Our workers’ compensation reserve is established using estimates of the future cost of claims and related expenses that have been reported but not settled, as well as those that have been incurred but not reported.

Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value using discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The weighted average discount rate was 2.0% at December 29, 2019 and December 30, 2018. Payments made against self-insured claims are made over a weighted average period of approximately 5 years as of December 29, 2019.

The following table presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented:



(in thousands)	December 29, 2019		December 30, 2018
Undiscounted workers’ compensation reserve	$	274,934	$	284,625
Less discount on workers’ compensation reserve	19,316		18,179
Workers’ compensation reserve, net of discount	255,618		266,446
Less current portion	73,020		76,421
Long-term portion	$	182,598	$	190,025

Payments made against self-insured claims were $63.1 million, $64.7 million and $66.8 million for the years ended December 29, 2019, December 30, 2018 and December 31, 2017, respectively.

Our workers’ compensation reserve includes estimated expenses related to excess claims, and we record a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance carriers. We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. At December 29, 2019 and December 30, 2018, the weighted average rate was 2.4% and 2.9%, respectively. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 16 years. The discounted workers’ compensation reserve for excess claims was $45.3 million and $48.2 million as of December 29, 2019 and December 30, 2018, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $44.6 million and $44.9 million as of December 29, 2019 and December 30, 2018, respectively.

Management evaluates the adequacy of the workers’ compensation reserves in conjunction with an independent quarterly actuarial assessment. Factors considered in establishing and adjusting these reserves include, among other things:


•	changes in medical and time loss (“indemnity”) costs;


•	changes in mix between medical only and indemnity claims;


•	regulatory and legislative developments impacting benefits and settlement requirements;


•	type and location of work performed;


•	impact of safety initiatives; and


•	positive or adverse development of claims.

The table below presents the estimated future payout of our discounted workers’ compensation claims reserve for the next five years and thereafter as of December 29, 2019:



(in thousands)
2020	$	73,020
2021	39,284
2022	22,190
2023	14,143
2024	9,862
Thereafter	51,866
Sub-total	210,365
Excess claims (1)	45,253
Total	$	255,618


(1)	Estimated expenses related to claims above our self-insured limits for which we have a corresponding receivable for the insurance coverage based on contractual policy agreements.

Workers’ compensation cost consists primarily of changes in self-insurance reserves net of changes in discount, monopolistic jurisdictions’ premiums, insurance premiums and other miscellaneous expenses. Workers’ compensation cost of $60.2 million, $69.2 million and $83.7 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income for the years ended December 29, 2019, December 30, 2018 and December 31, 2017, respectively.