Provides that assessments of self-insurers for the special disability fund shall be based on 110%, rather than 150%, of total disbursements

Title of bill

An act to amend the workers' compensation law, in relation to the assessment upon self-insurers, the state insurance fund, and all insurance carriers to fund the special disability fund

Purpose or general idea of bill

To change the calculation of the assessment for the Second Injury Fund from 150 percent of fund assets paid out in the prior year to 110 percent of fund assets paid in the prior year in order to utilize a more appropriate fund assessment.

Current law

The assessment for the Second Injury Fund is calculated by multiplying total disbursements of the fund for the previous year by 150 percent and subtracting the fund's net assets. As an example, if the Second Injury Fund paid out $300 million in claims in 2004, the assessment on employers in 2005 is designed to collect $450 million. This legislation changes the percentage to 110 percent. This proposal will save businesses approximately $150 million, more than 5 percent of their total spending on workers' compensation.

Justification

Worker's compensation costs have two components: premiums, which are rates employers pay to insure workers, and assessments, a surcharge on the total premium or total indemnity paid out by each employer. Money collected from the assessments supports the administrative costs of the Worker's Compensation Board (WCB) and provides monies for a number of special funds, including the Second Injury Fund.

The Second Injury Fund is the largest special fund supported by corporate assessments. It assumes, in certain cases, part of the permanent disability liability resulting from injuries to previously injured workers. First passed to encourage employers to hire returning veterans from World War II, the use of the fund has grown dramatically. In 2004, the assessment employers paid for this fund totaled over $482 million.

The current assessment calculation assumes that total disbursements from the Second Injury Fund will grow by 50 percent every year. This assumption has ensured the fund a cushion ranging from $167 to $200 million in the past three years.

This legislation provides the assessment for the fund would be calculated by multiplying the total disbursements of the fund for the previous year by 110 percent. The change to 110 percent would ensure the fund has enough money to meet all of its financial obligations without undue burden to employers. Reducing the assessment to 110 percent would produce a one time savings to the business community of $150 million and would not impinge on any benefits being collected by injured workers.

Legislative history

2005-2006: A.6703-A - A.3536/S.1863 of 2007-2008 (Referred to Labor)

Effective date

January 1, 2010.