
NOTE 6:	WORKERS’ COMPENSATION INSURANCE AND RESERVES

We provide workers’ compensation insurance for our temporary 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. Our workers’ compensation insurance policies are renewed annually. We renewed our coverage with Chartis effective July 1, 2011 for the period July 2011 through June 2012. For all prior periods, we had coverage with Chartis and other insurance providers. Furthermore, we have full liability for all further payments on claims that originated between January 2001 and June 2003, without recourse to any third-party insurer as the result of a novation agreement we entered into with Kemper Insurance Company in December 2004.

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. Management evaluates the adequacy of the workers’ compensation reserves in conjunction with an independent quarterly actuarial assessment. Changes in the self-insurance reserve estimates are reflected in the income statement in the period when the changes in estimates are made.

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. At July 1, 2011, the weighted average rate was 3.1%. The claim payments are made over an estimated weighted average period of approximately 5.5 years.

Our workers’ compensation reserves include estimated expenses related to claims above our deductible limits (“excess claims”), and 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 July 1, 2011, the weighted average rate was 5.0%. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 19.3 years. The discounted workers’ compensation reserve for excess claims and the corresponding receivable for the insurance on excess claims were $25.9 million and $25.8 million as of July 1, 2011 and December 31, 2010, respectively.

Two of the workers’ compensation insurance companies (“Troubled Insurance Companies”) with which we formerly did business are in liquidation and have failed to pay a number of excess claims. These excess claims have been presented to the state guaranty funds of the states in which the claims originated. Certain of these excess claims have been rejected by the state guaranty funds due to statutory eligibility limitations. We have recorded a valuation allowance of $7.4 million against all of the Troubled Insurance Companies insurance receivables as of July 1, 2011 and substantially all of the Troubled Insurance Companies insurance receivables as of December 31, 2010. The receivable for the insurance on excess claims, net of the valuation allowance is included in Other assets, net in the accompanying Consolidated Balance Sheets.

Our total discounted workers’ compensation claims reserves were $186.0 million and $187.3 million as of July 1, 2011 and December 31, 2010, respectively. Workers’ compensation expense totaling $12.4 million and $10.4 million was recorded for the thirteen weeks ended July 1, 2011 and June 25, 2010, respectively. Workers’ compensation expense totaling $22.6 million and $18.3 million was recorded for the twenty-six weeks ended July 1, 2011 and June 25, 2010, respectively.