210000000132.pdf

NOTICE OF CONTRACT

NOTICE OF CONTRACT NO. 210000000132 .

between

THE STATE OF MICHIGAN

and

C O

N T

R A

C T

O R

Merlinos & Associates

S T

A T

E

P ro g ra m

M a n a g e r

Richard Smith LEO

3274 Medlock Bridge Rd 517-284-8872

Peachtree Corners, GA 30092 Smithr3@michigan.gov

Tom Vasey C o n tr a c t

A d m in is tr a to r Jim Wilson LEO

678-684-4851 517-241-0002 tvasey@merlinosinc.com Wilsonj4@michigan.gov

CV0135730

CONTRACT SUMMARY

DESCRIPTION: WCA- Actuarial Analysis

INITIAL EFFECTIVE DATE INITIAL EXPIRATION DATE

INITIAL AVAILABLE

OPTIONS

EXPIRATION DATE BEFORE

CHANGE(S) NOTED BELOW

12/01/2020 11/30/2025 Two- 2 Year 11/30/2025

PAYMENT TERMS DELIVERY TIMEFRAME

Net 45

ALTERNATE PAYMENT OPTIONS EXTENDED PURCHASING

☐ P-card ☐ Payment Request (PRC) ☐ Other ☐ Yes ☒ No

MINIMUM DELIVERY REQUIREMENTS

MISCELLANEOUS INFORMATION

ESTIMATED CONTRACT VALUE AT TIME OF EXECUTION $123,975.00

STATE OF MICHIGAN PROCUREMENT

Department of Labor & Economic Opportunity 105 W. Allegan St., Lansing, MI 48933

Brian Carpenter, Chief Operating Officer

Labor and Economic Opportunity

12-1-2020

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STATE OF MICHIGAN

Actuarial Analysis – Self-Insurers; Security Fund

SCHEDULE A

STATEMENT OF WORK

CONTRACT ACTIVITIES

This schedule identifies the requirements of the Contract.

BACKGROUND

The Self-Insurers’ Security Fund (SISF) is a vital part of the State of Michigan, Funds Administration and is responsible for the payment of workers’ compensation benefits due to a disabled employee or a dependent of a disabled employee that are due from a private self-insured employer who becomes insolvent after November 16, 1971 and is unable to continue honoring their workers’ compensation obligations. An insolvent private self-insured employer means either an employer who files for relief under the federal bankruptcy act, or a private self-insured employer against whom bankruptcy proceedings are filed or an employer for whom a bankruptcy receiver has been appointed. The SISF also has to receive notice from the claimant, or their counsel, for the direct liability of the Self-Insurers’ Security Fund to accrue.

Amendments to Section 551 of the Michigan Workers’ Disability Compensation Act require an annual actuarial analysis of active SISF claims to estimate the potential SISF future workers’ compensation benefit payment and loss adjustment expense liabilities based on the probable future cost of compensation and medical benefits plus necessary loss adjustment expenses due, or could reasonably be expected to be due, over the projected life of each open and possible future claims to be filed.

As of June 30, 2020, the SISF had 172 open workers’ compensation claims and these claims are related to 42 former self-insured employers, the majority of whom are insolvent.

Private self-insured employers are required by the Workers’ Compensation Agency to secure a Letter of Credit or other type of security as a requirement for the employer to become a self-insured employer. In the event of a self-insured employer becoming unable to continue with the payment of their self-insured workers’ compensation obligations, this security is called by the Workers’ Compensation Agency and these proceeds are used to establish the employer’s Trust Fund that is managed by the Funds Administration’s trustees.

SCOPE

Historical and Active Claim and Employer data, from our Funds Administration Information System (FAIS), will be shared with the Vendor prior to the end of the calendar year. Vendor will be asked to conduct an actuarial analysis on this claim and employer data to identify projected future workers’ compensation indemnity and medical losses on known claims plus provide a projection of loss expenses on known claims and provide an analysis of future benefit and loss expenditures for projected future claims to be filed against the Self-Insurers’ Security Fund on known and potential future insolvent private self-insured employers.

REQUIREMENTS

1. General Requirements Claim data is contained within the Funds Administration Information System which is supported by an Oracle database. The data on each claim includes personal identifying information and personal identifying information that is included within each claim file that is housed within the offices of the Funds Administration. Vendor must agree to maintain the confidentiality of this personal identifying information and take all steps necessary to prevent the disclosure of this information and to destroy any record of personal identifying information upon completion of each annual review.

1.1. Annual analysis must include an estimated future cost of compensation, medical benefits and loss adjustment expenses for claims managed by the SISF for individual private self-insured employers where the SISF has assumed the payment of benefit obligations. The estimated future compensation

Version 11 (5/2020) 4 benefit, medical and loss adjustment expenses due is to be reported separately for each self-insured employer with a reporting on the existing number of open claims and potential future claim exposure for each self-insured.

Please provide a plan of action on how this requirement will be completed and the resources needed to perform the analysis.

Merlinos & Associates has been providing these same actuarial consulting services to the SISF since 2015. We have made improvements in our analysis, given the data available, since our initial work for the SISF. Our plan of action would be to apply the process and methodology that we have employed in recent years, where we project the total unpaid claims (for indemnity, medical, and expenses separately) on both a gross and net of excess insurance basis directly. We are able to more easily accomplish this using the claim payment and case reserve database that we have been able to compile since 2015. The results are allocated to each self-insured/estate using the case reserves and payment history of each estate.

Andy Kiel, Tom Vasey, Andrew Seeley, and Paul Merlino were all involved in this process in early 2020, and we would expect that they will continue to be involved in this work in the future.

1.2 Actuarial analysis and review are to be conducted between December, 2020 and February, 2021 and for each successive year covered by this contract. Report is to be compiled in conjunction with the SISF annual financial report and provide actuarial review and opinion on the future contingent liabilities for the SISF. The State of Michigan provides for lifetime benefits on workers compensation claims.

Therefore, determination of future contingent liability evaluation should consider whether a claim is in payment or litigation status in its evaluation of future SISF exposure. Claims in payment status require an analysis of future benefit obligations and loss adjustment expenses; subject to employer specific or aggregate policy retention levels on the claim’s date of injury and feasibility for settlement of the claim.

Evaluation is to include potential excess reinsurance and trust fund recoveries on all claims. SISF staff will maintain reserve valuations on all active SISF claims which shall be updated on a regular basis.

The actuary will be expected to provide an analysis of future potential exposure for the SISF on all private self-insured employers which have been assumed by the SISF for claims management.

to the SISF since 2015. We have made improvements in our analysis, given the data available, since our initial work for the SISF. As part of this analysis, we review the case reserves and payment data provided from the SISF and inquire on any unusual data points. Our plan of action would be to apply the same process and methodology that we have employed in recent years, where we project the total unpaid claims (for indemnity, medical, and expenses separately) on both a gross and net of excess insurance basis directly, using several different actuarial methodologies. We are able to more easily accomplish this using the claim payment and case reserve database that we have been able to compile since 2015.

Where applicable, we will continue to consider the litigation status of the remaining claims, along with a variety of other claim features that the SISF includes in the case files. The total estimated liabilities are allocated to each self-

Version 11 (5/2020) 5 insured/estate using the case reserves and payment history of each estate. Any trust fund assets are then applied against the reserves by estate to estimate the SISF liability net of the trust fund assets.

Andy Kiel, Tom Vasey, Andrew Seeley, and Paul Merlino were all involved in this process in early 2020, and we would anticipate that they will all be involved in the future.

1.3 Actuarial analysis is to include a review of all open SISF claims with projections for aggregate future benefit losses and future loss adjustment expenses. Estimates of future liability of the SISF are to include computations that reflect the probable total future cost of compensation and medical benefits due, or can reasonably be expected to be due, over the life of the claim. Include projections of future benefit losses and loss adjustment expenses associated to future claims that will accrue to the SISF from existing insolvent self-insured employers. Also, provide projections of potential SISF benefit losses and loss adjustment expenses that may accrue from new bankrupt self-insured employers over the coming year and into succeeding years.

Please provide a plan of action on how this requirement will be completed and the resources needed to perform the analysis.

to the SISF since 2015. Our plan of action to estimate the liabilities from known estates is the same as that described in 1.2 and 1.3 above.

Every year we will discuss any new insolvencies, or potential insolvencies, with the SISF to determine what liabilities or report commentary should be included in our report. For any new insolvencies, we will include an estimate of the future payments in the reserve estimate as directed by the SISF. The methodology used to estimate the unpaid claim liabilities for a new insolvency could vary depending on the size of the insolvency and data available, and we would produce these estimates using the most reasonable methodology available in the circumstance.

Andy Kiel, Tom Vasey, Andrew Seeley, and Paul Merlino were all involved in this

1.4 Actuarial analysis is to include an estimation of all active SISF claims that includes projections for aggregate future benefit and expense payment obligations, on a yearly basis, over the next 5 calendar years. These estimates are also to include SISF losses due to potential insolvencies over this period.

a. Estimate future liability of the SISF for payments of claims against a private self-insured employer is to be based on computations that reflect probable total future cost of compensation and medical benefits due over the life of the claim

Alternatively, where this cannot be performed, provide estimates on the cost of compensation and medical benefits, that can reasonably be expected to be due, over the life of a claim,

b. A report of the total liability assumed for payment of claims made against each private self-insured insolvent employer that is being managed by the SISF.

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Analysis is also to evaluate projected losses based on available credits that the SISF may receive from excess reimbursement on claims that have, or are about to, pierce specific or aggregate retention levels.

c. The SISF also manages 54 self-insured employer Trust Funds. These Trust Funds have been funded from security that was held by the self-insured employer which has been called by the workers’ Compensation Agency. These trusts are available to also extend payment on claims that are associated to employment with that specific employer. These funds reduce the potential liability of the Self-Insurers’ Security Fund. Analysis is to identify future benefit allocation of SISF payment obligations that are related to liabilities related to active employer trust funds and the trust fund has a fund balance that is available to pay these benefit obligations

Please provide a plan of action on how this requirement will be completed and the resources needed to perform the analysis.

to the SISF since 2015. Our plan of action to estimate the ultimate unpaid claim liabilities from known estates is the same as that described in 1.2 and 1.3 above.

As discussed in those sections, the estimated liabilities will continue to reflect all excess insurance and trust fund assets.

There are implicit and explicit assumptions about the payout patterns in our actuarial work. These can be applied to the ultimate claim liabilities to project the estimated future payments for each of the next 5 calendar/fund years.

Andy Kiel, Tom Vasey, Andrew Seeley, and Paul Merlino were all involved in this

1.5. Final actuarial analysis is to be completed no later than by February 15th of the following year.

a. Vendor’s primary contact designee and the primary SISF contact designee are to communicate at least weekly on the status of the current year’s actuarial analysis.

b. Initial draft of the actuarial analysis report is to be provided to the designated SISF primary contact by February 5th of the succeeding calendar year. This draft shall be reviewed by SISF staff and cosmetic changes may be requested for inclusion into the final report.

Please provide a plan of action on how this requirement will be completed and the resources needed to prepare the report.

Merlinos & Associates agrees to comply with this requirement. As part of our work, we will coordinate with the SISF on a date when they would like to have a draft report, not to be later than February 5. We will to be available to answer any questions the SISF has about the draft report and provide an updated and final actuarial report at the time needed by the SISF.

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2. Acceptance

2.1. Acceptance, Inspection and Testing

2.1 Acceptance, Inspection and Testing

Contract activities are subject to inspection and verification by the State within 7 calendar days of the State’s receipt of them.

The State will use the following criteria to determine acceptance of the Contract Activities:

a. Evaluation of claims to determine future obligations of the SISF has been adequately performed

b. Contingent future benefit obligations for SISF on known insolvent self-insured employers has been performed utilizing standard actuarial procedures

c. Evaluation of potential future insolvencies has been determined and future liabilities for these insolvencies have been estimated.

d. Vendor will have a dedicated resource available to address any questions presented by the State of Michigan during the Acceptance period.

Merlinos & Associates agrees to comply with this requirement. We expect that our work product will continue to meet and exceed the needs of the SISF.

3. Staffing

3.1 Contractor Representative

The Contractor must appoint 1 Project Manager specifically assigned to the State of Michigan account, that will respond to State inquiries regarding the Contract Activities, answering questions related to ordering and delivery, etc. (the “Contractor Representative”).

The Contractor must notify the Contract Administrator at least 10 calendar days before removing or assigning a new Contractor Representative.

Tom Vasey (FCAS, MAAA) will be the Project Manager assigned to this account.

Mr. Vasey, a principal in our firm with more than 16 years of experience, is currently the point-of-contact for our relationship with the SISF and has been for the past three (3) years.

3.2 Work Hours

The Contractor must provide Contract Activities during the State’s normal working hours Monday – Friday 8:30 a.m. to 5:00 p.m. EST, and possible night and weekend hours depending on the requirements of the project.

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Mr. Vasey, our assigned Project Manager named above, is available every working day (excepting vacation and sick time) to discuss the needs of the SISF. His typical office hours are 8:30 am to 5:00 pm, Monday through Friday. He is available a minimum of 40 hours per week. In his absence, Paul Merlino or another senior consultant designated by Mr. Vasey will be available.

3.3 Key Personnel

The Contractor must appoint enough individuals who will be directly responsible for the day-to-day operations of the Contract and meet the project deadlines (“Key Personnel”).

Key Personnel must be specifically assigned to the State account, be knowledgeable on the contractual requirements, and respond to State inquires within 4 hours.

The State has the right to recommend and approve in writing the initial assignment, as well as any proposed reassignment or replacement, of any Key Personnel. Before assigning an individual to any Key Personnel position, Contractor will notify the State of the proposed assignment, introduce the individual to the State’s Project Manager, and provide the State with a resume and any other information about the individual reasonably requested by the State. The State reserves the right to interview the individual before granting written approval. In the event the State finds a proposed individual unacceptable, the State will provide a written explanation including reasonable detail outlining the reasons for the rejection.

Contractor will not remove any Key Personnel from their assigned roles on this Contract without the prior written consent of the State. The Contractor’s removal of Key Personnel without the prior written consent of the State is an unauthorized removal (“Unauthorized Removal”). An Unauthorized Removal does not include replacing Key Personnel for reasons beyond the reasonable control of Contractor, including illness, disability, leave of absence, personal emergency circumstances, resignation, or for cause termination of the Key Personnel’s employment. Any Unauthorized Removal may be considered by the State to be a material breach of this Contract, in respect of which the State may elect to terminate this Contract for cause under Termination for Cause in the Standard Terms.

It is further acknowledged that an Unauthorized Removal will interfere with the timely and proper completion of this Contract, to the loss and damage of the State, and that it would be impracticable and extremely difficult to fix the actual damage sustained by the State as a result of any Unauthorized Removal. Therefore, Contractor and the State agree that in the case of any Unauthorized Removal in respect of which the State does not elect to exercise its rights under Termination for Cause, Contractor will issue to the State the corresponding credits set forth below (each, an “Unauthorized Removal Credit”):

(if) For the Unauthorized Removal of any Key Personnel designated in the applicable Statement of Work, the credit amount will be $25,000.00 per individual if Contractor identifies a replacement approved by the State and assigns the replacement to shadow the Key Personnel who is leaving for a period of at least 30 calendar days before the Key Personnel’s removal.

(ii) If Contractor fails to assign a replacement to shadow the removed Key Personnel for at least 30 calendar days, in addition to the $25,000.00 credit specified above, Contractor will credit the State $833.33 per calendar day for each day of the 30 calendar-day shadow period that the replacement Key Personnel does not shadow the removed Key

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Personnel, up to $25,000.00 maximum per individual. The total Unauthorized Removal Credits that may be assessed per Unauthorized Removal and failure to provide 30 calendar days of shadowing will not exceed $50,000.00 per individual.

Contractor acknowledges and agrees that each of the Unauthorized Removal Credits assessed above: (i) is a reasonable estimate of and compensation for the anticipated or actual harm to the State that may arise from the Unauthorized Removal, which would be impossible or very difficult to accurately estimate; and (ii) may, at the State’s option, be credited or set off against any fees or other charges payable to Contractor under this Contract.

The Contractor must identify the Key Personnel, indicate where they will be physically located, describe the functions they will perform, and provide current chronological résumés.

NAME / LOCATION / FUNCTIONS:

Tom Vasey / Peachtree Corners, Georgia / Project Manager, Lead Actuary

RÉSUMÉ:

2004-Present / Merlinos & Associates 1997-2003 / Lucent Technologies

NAME / LOCATION / FUNCTIONS:

Paul Merlino / Peachtree Corners, Georgia / Project Guidance, Peer Review

RÉSUMÉ:

1989-Present / Merlinos & Associates 1988-89 / KPMG Peat Marwick 1986-88 / Worldwide Insurance Group

NAME / LOCATION / FUNCTIONS:

Andrew Kiel / Peachtree Corners, Georgia / Actuarial Analysis

RÉSUMÉ:

2007-Present / Merlinos & Associates 2005-07 / Merastar Insurance Company

NAME / LOCATION / FUNCTIONS:

Andrew Seeley / Peachtree Corners, Georgia / Actuarial Analysis

RÉSUMÉ:

2019-Present / Merlinos & Associates 2018 / Liberty Mutual Insurance (intern)

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3.4 Organizational Chart

The Contractor must provide an overall organizational chart that details staff members, by name and title, and subcontractors. Contractor is also to provide relevant experience of all staff members assigned to this project.

Organizational Chart Merlinos & Associates is organized in a manner that allows any employee to work on any client’s business so that actuaries’ expertise is not wasted because another actuary is the lead consultant. We allocate our resources to our clients based on what expertise is needed. That said, once our actuaries and support staff become familiar with a client, we typically do not move them from this client. Given our structure and philosophy, traditional organization charts do not reflect our flexibility. So, we present two charts:

#1 Description of Anticipated Personnel for this Engagement #2 – Overview of Firm by Ownership and General Lines of Responsibility

Organizational Chart #1 - Project Team

Tom Vasey, FCAS, MAAA

LEAD ACTUARY

PROJECT MANAGER

Paul Merlino, ACAS, MAAA, CFA

PROJECT GUIDANCE, PEER REVIEW

Andy Kiel, ACAS, MAAA

ACTUARIAL ANALYSIS, PEER REVIEW

Andrew Seeley

ACTUARIAL ANALYSIS

Organizational Chart #2 - Ownership and Professional Staff

PRINCIPALS

Mark Brannon Greg Fanoe Paul Merlino David Shepherd

Michael Berman Rebecca Freitag Ryan Purdy Tom Vasey

Derek Chapman Matt Merlino Peter Scourtis Rosemary Wickham

SENIOR CONSULTING ACTUARIES

Marc Altschull Frank Huang Brett Miller Robert Daniel

Meg Glenn Brad LeBlond Kirk Braunius Tracy Maples

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CONSULTING ACTUARIES

Paul Ferrara Jeff Dozier Andy Kiel Bao Vu

Anthony Kuhns Kyle Gutowski Brian Simon Jacob Zirbel

Ben Conrad Leigh Heymann Greg Stone

Mark Davenport Jeremy Hoch Kristen Taylor

SENIOR CONSULTANTS

Ruth Coleman Allen Fricks Kathy Kettering Shawn Martin

CONSULTANTS

Jarett Bache Valerie Harper Arya Mehta Crystal Sierra

Ashley Bennett Cindy Jones Gwen Portis Ryan Stubbs

Meghan Brown Ning Li Scott Schuck Campbell Wilks

Amy Cochran Jordan McCray Andrew Seeley

Relevant Experience Tom Vasey -- As noted earlier, our designated Project Manager, Tom Vasey, has provided actuarial consulting services to the SISF since 2017. Mr. Vasey has also provided actuarial consulting to numerous other self-insured entities that provide workers compensation insurance during his 16-year career. The majority of his time is spent on workers compensation and loss reserving.

Paul Merlino – Mr. Merlino has provided actuarial consulting to the SISF for five

(5) years. During his 35+ year career, he has worked on numerous projects for self-insured entities. He has been involved in the planning and review of our work for SISF since the beginning of our relationship.

Andrew Kiel – Mr. Kiel has provided actuarial services to the SIFS since 2016. His 15-year career include numerous other self-insured projects. He has also provided significant assistance to the SISF over the past several years related to data organization and compilation, along with exhibit preparation. A significant portion of Mr. Kiel’s time is spent on actuarial loss reserving.

Andrew Seeley – Mr. Seeley started providing actuarial assistance to the SISF in 2020.

3.5 Disclosure of Subcontractors

If the Contractor intends to utilize subcontractors, the Contractor must disclose the following:

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• The legal business name; address; telephone number; a description of subcontractor’s organization and the services it will provide; and information concerning subcontractor’s ability to provide the Contract Activities.

• The relationship of the subcontractor to the Contractor.

• Whether the Contractor has a previous working experience with the subcontractor. When yes, provide the details of that previous relationship.

• A complete description of the Contract Activities that will be performed or provided by the subcontractor.

• Of the total bid, the price of the subcontractor’s work.

Merlinos & Associates will not engage any subcontractors for this project with the

SISF.

3.6 Security

The Contractor will be subject to the following security procedures:

Signing security forms, signature of forms protecting the confidentiality of personal identifying information, maintaining confidentiality of personal and employer claims and records.

Merlinos & Associates agrees to comply with this requirement.

3.7 Access to Tax Information

The Contractor must comply with the requirements of IRS Publication 1075 (including Exhibit 7 Safeguarding Contract Language) and Michigan Department of Treasury Safeguard Requirements of Confidential Tax Data.

4. Project Management

Vendor will be required to provide weekly overviews on the progress of their work to Richard W. Smith, Program Manager (smithr3@michigan.gov), and Emily McDonough, Funds Administrator (mcdonoughe@michigan.gov).

4.1 Project Plan

Project is projected to start on Monday, December 1, 2020. Project Completion Date is set for February 15, 2021. This timeline will be essentially the same for each year of this contract.

Contact person for the State of Michigan (SOM) is Richard Smith, phone number is 517- 284-8872. Mr. Smith’s email address is referenced immediately above.

Contractor is to identify their sole contact resource.

Progress updates and scheduled meetings to review the progress are to be completed on a weekly basis. Requests for specific information are to be provided to Richard Smith.

mailto:smithr3@michigan.gov

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Richard Smith and the contractor sole contact will be the individuals responsible for providing requested information between the State and the Contractor.

The Contractor will carry out this project under the direction and control of the Program Manager. Within 7 calendar days of the Effective Date, the Contractor must submit a project plan to the Program Manager for final approval. The plan must include: (a) the Contractor's organizational chart with names and title of personnel assigned to the project, which must align with the staffing stated in accepted proposals; and (b) the project breakdown showing sub-projects, tasks, and resources required.

Meetings

The Contractor shall be available for the following meetings:

a. There shall be weekly meetings to monitor the progress of this project from the beginning of the project to its completion,

b. There shall also be a final meeting to allow for a direct review of the product provided by the Contractor and enable the State to ask questions regarding the Contractor’s findings.

c. These meetings shall be done via Microsoft Teams.

d. The State may request other meetings, as it deems appropriate.

4.2 Reporting

The Contractor must submit, to the SOM Contact Person its Actuarial Analysis Report which includes:

a. Overview of the Actuarial Analysis

b. Discussion of Case Reserves

c. Summary of Results

d. Estimate of future exposure on a claim by claim basis; split by indemnity, medical and loss adjustment expenses.

e. Total estimate of future exposure for each private self-insured employer.

f. Potential Liability Related to Future Insolvent Self-Insured Employers

g. Description of Projection Methods and Key Assumptions used in Estimating Total

Reserves

h. Projection of Excess Reinsurance and Trust Fund Recoveries

i. Exhibits

j. Appendices

The Contractor must explain its reporting capabilities and any reporting that is included in its proposal.

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Merlinos & Associates has provided this information in the discussion portion of our actuarial reports each year for the SISF. We will continue to provide the discussion of all of these items listed above in future reports, along with any other areas of discussion that become significant.

5. Pricing

5.1. Price Term

Pricing is firm for the entire length of the Contract.

6. Ordering

6.1. Authorizing Document

The appropriate authorizing document for the Contract will be a delivery order.

7. Invoice and Payment

7.1 Invoice Requirements

All undisputed invoice amounts are payable within 45 days of the State’s receipt.

All invoices submitted to the State must include: (a) date; (b) purchase order number; (c) description of the Contract Activities; (d) unit price; and (e) total price. Overtime, holiday pay, and travel expenses will not be paid.

7.2 Payment Methods

The State will make payment for Contract Activities via EFT to the Contractor

8. Liquidated Damages

Late or improper completion of the Contract Activities will cause loss and damage to the State and it would be impracticable and extremely difficult to fix the actual damage sustained by the State. Therefore, if there is late or improper completion of the Contract Activities the State is entitled to collect liquidated damages in the amount of $5,000 and an additional $100 per day for each day Contractor fails to remedy the late or improper completion of the Work.

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0Actuarial Analysis – Self-Insurers; Security Fund

SCHEDULE B

PRICING

1. The Contractor must provide a pricing schedule for the proposed Contract Activities using the hourly rate to be charged for the services. The pricing schedule should be submitted in a modifiable format (e.g. Microsoft Word or Excel); however, you may also submit an additional pricing schedule in a non-modifiable format (e.g., PDF). Failure to complete the pricing schedule as requested may result in disqualification of your proposal.

2. Price proposals must include all costs, including but not limited to, any one-time or set-up charges, fees, and potential costs that Contractor may charge the State (e.g., shipping and handling, per piece pricing, and palletizing).

3. The Contractor is encouraged to offer quick payment terms. The number of days must not include processing time for payment to be received by the Contractor's financial institution.

Quick payment terms: ____1____ % discount off invoice if paid within ____5____ days after receipt of invoice.

4. By submitting its proposal, the Contractor certifies that the prices were arrived at independently, and without consultation, communication, or agreement with any other Contractor.

Please submit hourly rate by position as well as estimated hours per position per year.

Merlinos & Associates - Pricing and Projected Costs

**This information is also included as an Excel file uploaded to SIGMAVSS**

Position Hourly Rate

Estimated Hours

Estimated Fees

Employee

Actuary – Level I $305 45 $13,725 Tom Vasey, Paul Merlino

Actuary – Level II $280 0 $0

Actuary – Level III $250 35 $8,750 Andy Kiel

Actuarial Analyst – Level I $225 0 $0

Actuarial Analyst – Level II $205 10 $2,050 Andrew Seeley

Actuarial Analyst – Level III $190 0 $0

Administrative $90 3 $270 Pam Carter

Total 93 $24,795

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This STANDARD CONTRACT (“Contract”) is agreed to between the State of Michigan (the “State”) and [Insert Company Name] (“Contractor”), a [Insert State & Entity Status, e.g., a Michigan corporation or a Texas limited liability company]. This Contract is effective on 12/1/2020 (“Effective Date”), and unless terminated, expires on 11/30/25.

[Add if appropriate: This Contract may be renewed for up to two (2) additional two (2) year period(s). Renewal is at the sole discretion of the State and will automatically extend the Term of this Contract. The State will document its exercise of renewal options via Contract Change Notice.]

The parties agree as follows:

1. Duties of Contractor. Contractor must perform the services and provide the deliverables described in Schedule A – Statement of Work (the “Contract Activities”). An obligation to provide delivery of any commodity is considered a service and is a Contract Activity.

Contractor must furnish all labor, equipment, materials, and supplies necessary for the performance of the Contract Activities, and meet operational standards, unless otherwise specified in Schedule A.

Contractor must: (a) perform the Contract Activities in a timely, professional, safe, and workmanlike manner consistent with standards in the trade, profession, or industry; (b) meet or exceed the performance and operational standards, and specifications of the Contract; (c) provide all Contract Activities in good quality, with no material defects; (d) not interfere with the State’s operations; (e) obtain and maintain all necessary licenses, permits or other authorizations necessary for the performance of the Contract; (f) cooperate with the State, including the State’s quality assurance personnel, and any third party to achieve the objectives of the Contract; (g) return to the State any State-furnished equipment or other resources in the same condition as when provided when no longer required for the Contract; (h) not make any media releases without prior written authorization from the State; (i) assign to the State any claims resulting from state or federal antitrust violations to the extent that those violations concern materials or services supplied by third parties toward fulfillment of the Contract; (j) comply with all State physical and IT security policies and standards which will be made available upon request; and (k) provide the State priority in performance of the Contract except as mandated by federal disaster response requirements. Any breach under this paragraph is considered a material breach.

Contractor must also be clearly identifiable while on State property by wearing identification issued by the State, and clearly identify themselves whenever making contact with the State.

2. Notices. All notices and other communications required or permitted under this Contract must be in writing and will be considered given and received: (a) when verified by written receipt if sent by courier; (b) when actually received if sent by mail without verification of receipt; or (c) when verified by automated receipt or electronic logs if sent by facsimile or email.

If to State: If to Contractor:

Jim Wilson Landmark Bldg. 2nd Floor Lansing MI 48933 Wilsonj4@michigan.gov 517-241-0002

Tom Vasey 3274 Medlock Bridge Rd.

Peachtree Corners, GA 30092 tvasey@merlinosinc.com 678-684-4851

3. Contract Administrator. The Contract Administrator for each party is the only person authorized to modify any terms of this Contract, and approve and execute any change under this Contract (each a “Contract Administrator”):

STANDARD CONTRACT TERMS

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State: Contractor:

Jim Wilson Landmark Bldg. 2nd Floor Lansing MI 48933 Wilsonj4@michigan.gov 517-241-0002

Tom Vasey 3274 Medlock Bridge Rd.

Peachtree Corners, GA 30092 tvasey@merlinosinc.com 678-684-4851

4. Program Manager. The Program Manager for each party will monitor and coordinate the day-to-day activities of the Contract (each a “Program Manager”):

State: Contractor:

Richard W. Smith Department of Labor and Economic Opportunity 2501 Woodlake Circle Okemos, MI 48864 Smithr3@michigan.gov 517-284-8872

Tom Vasey 3274 Medlock Bridge Rd.

Peachtree Corners, GA 30092 tvasey@merlinosinc.com 678-684-4851

5. Performance Guarantee. Contractor must at all times have financial resources sufficient, in the opinion of the State, to ensure performance of the Contract and must provide proof upon request. The State may require a performance bond (as specified in Schedule A) if, in the opinion of the State, it will ensure performance of the Contract.

6. Insurance Requirements. Contractor must maintain the insurances identified below and is responsible for all deductibles. All required insurance must: (a) protect the State from claims that may arise out of, are alleged to arise out of, or result from Contractor's or a subcontractor's performance; (b) be primary and non-contributing to any comparable liability insurance (including self-insurance) carried by the State; and (c) be provided by a company with an A.M. Best rating of "A-" or better, and a financial size of VII or better.

Required Limits Additional Requirements

Commercial General Liability Insurance

Minimum Limits:

$1,000,000 Each Occurrence Limit $1,000,000 Personal & Advertising Injury Limit $2,000,000 General Aggregate Limit $2,000,000 Products/Completed Operations

Deductible Maximum:

$50,000 Each Occurrence

Contractor must have their policy endorsed to add “the State of Michigan, its departments, divisions, agencies, offices, commissions, officers, employees, and agents” as additional insureds using endorsement CG 20 10 11 85, or both CG 2010 07 04 and CG 2037 07 04.

mailto:Smithr3@michigan.gov

Version 10 (4/2020) 18

Umbrella or Excess Liability Insurance

Minimum Limits:

$5,000,000 General Aggregate

Contractor must have their policy follow form.

Automobile Liability Insurance

Minimum Limits:

$1,000,000 Per Accident

Contractor must have their policy: (1) endorsed to add “the State of Michigan, its departments, divisions, agencies, offices, commissions, officers, employees, and agents” as additional insureds; and (2) include Hired and Non-Owned Automobile coverage.

Workers' Compensation Insurance

Minimum Limits:

Coverage according to applicable laws governing work activities.

Waiver of subrogation, except where waiver is prohibited by law.

Employers Liability Insurance

Minimum Limits:

$500,000 Each Accident $500,000 Each Employee by Disease $500,000 Aggregate Disease.

Professional Liability (Errors and Omissions) Insurance

Minimum Limits:

$3,000,000 Each Occurrence $3,000,000 Annual Aggregate

Deductible Maximum:

$50,000 Per Loss

Version 10 (4/2020) 19

If any of the required policies provide claims-made coverage, the Contractor must: (a) provide coverage with a retroactive date before the effective date of the contract or the beginning of Contract Activities; (b) maintain coverage and provide evidence of coverage for at least three (3) years after completion of the Contract Activities; and (c) if coverage is cancelled or not renewed, and not replaced with another claims-made policy form with a retroactive date prior to the contract effective date, Contractor must purchase extended reporting coverage for a minimum of three (3) years after completion of work.

Contractor must: (a) provide insurance certificates to the Contract Administrator, containing the agreement or delivery order number, at Contract formation and within 20 calendar days of the expiration date of the applicable policies; (b) require that subcontractors maintain the required insurances contained in this Section;

(c) notify the Contract Administrator within 5 business days if any insurance is cancelled; and (d) waive all rights against the State for damages covered by insurance. Failure to maintain the required insurance does not limit this waiver.

This Section is not intended to and is not to be construed in any manner as waiving, restricting or limiting the liability of either party for any obligations under this Contract (including any provisions hereof requiring Contractor to indemnify, defend and hold harmless the State).

7. Reserved

8. Reserved

9. Independent Contractor. Contractor is an independent contractor and assumes all rights, obligations and liabilities set forth in this Contract. Contractor, its employees, and agents will not be considered employees of the State. No partnership or joint venture relationship is created by virtue of this Contract. Contractor, and not the State, is responsible for the payment of wages, benefits and taxes of Contractor’s employees and any subcontractors. Prior performance does not modify Contractor’s status as an independent contractor.

10. Subcontracting. Contractor may not delegate any of its obligations under the Contract without the prior written approval of the State. Contractor must notify the State at least 90 calendar days before the proposed delegation and provide the State any information it requests to determine whether the delegation is in its best interest. If approved, Contractor must: (a) be the sole point of contact regarding all contractual matters, including payment and charges for all Contract Activities; (b) make all payments to the subcontractor; and (c) incorporate the terms and conditions contained in this Contract in any subcontract with a subcontractor.

Contractor remains responsible for the completion of the Contract Activities, compliance with the terms of this Contract, and the acts and omissions of the subcontractor. The State, in its sole discretion, may require the replacement of any subcontractor.

11. Staffing. The State’s Contract Administrator may require Contractor to remove or reassign personnel by providing a notice to Contractor.

12. Background Checks. Pursuant to Michigan law, all agencies subject to IRS Pub. 1075 are required to ask the Michigan State Police to perform fingerprint background checks on all employees, including Contractor and Subcontractor employees, who may have access to any database of information maintained by the federal government that contains confidential or personal information, including, but not limited to, federal tax information. Further, pursuant to Michigan law, any agency described above is prohibited from providing Contractors or Subcontractors with the result of such background check. For more information, please see Michigan Public Act 427 of 2018. Upon request, or as may be specified in Schedule A, Contractor must perform background checks on all employees and subcontractors and its employees prior to their assignment. The scope is at the discretion of the State and documentation must be provided as requested. Contractor is responsible for all costs associated with the requested background checks. The State, in its sole discretion, may also perform background checks.

13. Assignment. Contractor may not assign this Contract to any other party without the prior approval of the State. Upon notice to Contractor, the State, in its sole discretion, may assign in whole or in part, its rights or responsibilities under this Contract to any other party. If the State determines that a novation of the Contract to a third party is necessary, Contractor will agree to the novation and provide all necessary documentation and signatures.

14. Change of Control. Contractor will notify within 30 days of any public announcement or otherwise once legally permitted to do so, the State of a change in Contractor’s organizational structure or ownership. For purposes

Version 10 (4/2020) 20 of this Contract, a change in control means any of the following: (a) a sale of more than 50% of Contractor’s stock; (b) a sale of substantially all of Contractor’s assets; (c) a change in a majority of Contractor’s board members; (d) consummation of a merger or consolidation of Contractor with any other entity; (e) a change in ownership through a transaction or series of transactions; (f) or the board (or the stockholders) approves a plan of complete liquidation. A change of control does not include any consolidation or merger effected exclusively to change the domicile of Contractor, or any transaction or series of transactions principally for bona fide equity financing purposes.

In the event of a change of control, Contractor must require the successor to assume this Contract and all of its obligations under this Contract.

15. Ordering. Contractor is not authorized to begin performance until receipt of authorization as identified in

Schedule A.

16. Acceptance. Contract Activities are subject to inspection and testing by the State within 30 calendar days of the State’s receipt of them (“State Review Period”), unless otherwise provided in Schedule A. If the Contract Activities are not fully accepted by the State, the State will notify Contractor by the end of the State Review Period that either: (a) the Contract Activities are accepted but noted deficiencies must be corrected; or (b) the Contract Activities are rejected. If the State finds material deficiencies, it may: (i) reject the Contract Activities without performing any further inspections; (ii) demand performance at no additional cost; or (iii) terminate this Contract in accordance with Section 23, Termination for Cause.

Within 10 business days from the date of Contractor’s receipt of notification of acceptance with deficiencies or rejection of any Contract Activities, Contractor must cure, at no additional cost, the deficiency and deliver unequivocally acceptable Contract Activities to the State. If acceptance with deficiencies or rejection of the Contract Activities impacts the content or delivery of other non-completed Contract Activities, the parties’ respective Program Managers must determine an agreed to number of days for re-submission that minimizes the overall impact to the Contract. However, nothing herein affects, alters, or relieves Contractor of its obligations to correct deficiencies in accordance with the time response standards set forth in this Contract.

If Contractor is unable or refuses to correct the deficiency within the time response standards set forth in this Contract, the State may cancel the order in whole or in part. The State, or a third party identified by the State, may perform the Contract Activities and recover the difference between the cost to cure and the Contract price plus an additional 10% administrative fee.

17. Reserved

18. Reserved

19. Reserved.

20. Terms of Payment. Invoices must conform to the requirements communicated from time-to-time by the State.

All undisputed amounts are payable within 45 days of the State’s receipt. Contractor may only charge for Contract Activities performed as specified in Schedule A. Invoices must include an itemized statement of all charges. The State is exempt from State sales tax for direct purchases and may be exempt from federal excise tax, if Services purchased under this Agreement are for the State’s exclusive use. All prices are exclusive of taxes, and Contractor is responsible for all sales, use and excise taxes, and any other similar taxes, duties and charges of any kind imposed by any federal, state, or local governmental entity on any amounts payable by the State under this Contract.

The State has the right to withhold payment of any disputed amounts until the parties agree as to the validity of the disputed amount. The State will notify Contractor of any dispute within a reasonable time. Payment by the State will not constitute a waiver of any rights as to Contractor’s continuing obligations, including claims for deficiencies or substandard Contract Activities. Contractor’s acceptance of final payment by the State constitutes a waiver of all claims by Contractor against the State for payment under this Contract, other than those claims previously filed in writing on a timely basis and still disputed.

The State will only disburse payments under this Contract through Electronic Funds Transfer (EFT). Contractor must register with the State at http://www.michigan.gov/SIGMAVSS to receive electronic fund transfer payments. If Contractor does not register, the State is not liable for failure to provide payment. Without prejudice to any other right or remedy it may have, the State reserves the right to set off at any time any http://www.michigan.gov/SIGMAVSS

Version 10 (4/2020) 21 amount then due and owing to it by Contractor against any amount payable by the State to Contractor under this Contract.

21. Liquidated Damages. Liquidated damages, if applicable, will be assessed as described in Schedule A.

22. Stop Work Order. The State may suspend any or all activities under the Contract at any time. The State will provide Contractor a written stop work order detailing the suspension. Contractor must comply with the stop work order upon receipt. Within 90 calendar days, or any longer period agreed to by Contractor, the State will either: (a) issue a notice authorizing Contractor to resume work, or (b) terminate the Contract or delivery order.

The State will not pay for Contract Activities, Contractor’s lost profits, or any additional compensation during a stop work period.

23. Termination for Cause. The State may terminate this Contract for cause, in whole or in part, if Contractor, as determined by the State: (a) endangers the value, integrity, or security of any location, data, or personnel; (b) becomes insolvent, petitions for bankruptcy court proceedings, or has an involuntary bankruptcy proceeding filed against it by any creditor; (c) engages in any conduct that may expose the State to liability; (d) breaches any of its material duties or obligations; or (e) fails to cure a breach within the time stated in a notice of breach.

Any reference to specific breaches being material breaches within this Contract will not be construed to mean that other breaches are not material.

If the State terminates this Contract under this Section, the State will issue a termination notice specifying whether Contractor must: (a) cease performance immediately, or (b) continue to perform for a specified period.

If it is later determined that Contractor was not in breach of the Contract, the termination will be deemed to have been a Termination for Convenience, effective as of the same date, and the rights and obligations of the parties will be limited to those provided in Section 24, Termination for Convenience.

The State will only pay for amounts due to Contractor for Contract Activities accepted by the State on or…