North Dakota AG Says Workers’ Comp Surplus Not Correctly Figured

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North Dakota’s workers’ compensation agency has not correctly figured its fund’s surplus, Attorney General Wayne Stenehjem says. He says the agency should include all its assets in the calculations and suggests the Legislature give direction.

Stenehjem issued a legal opinion on Tuesday, Nov. 18 to state Auditor Robert Peterson, who asked for an interpretation of how the surplus should be figured.

The Workforce Safety and Insurance fund surplus has been higher than state law allows, due to returns on the agency’s investment portfolio.

State law limits the surplus to between 120 percent and 140 percent of the agency’s “actuarially established discounted reserve.”

WSI’s financial auditor, Brady Martz, said the surplus on June 30, 2007, was $174.4 million greater than state law allowed.

In June this year, the Workforce Safety and Insurance board approved $77 million in dividends to most of its business customers to shrink the surplus. Stenehjem said WSI did not include all its assets in figuring the amount.

Rather than force the agency to divest some of its assets, Stenehjem said, the Legislature should consider changing the law, especially given the downturn in financial markets that has hit investments of WSI and others.

WSI reported that a June 30 surplus of $89 million had dropped to $22 million by the end of September, Stenehjem said.

“Legislative direction may be more appropriate than a forced divestiture of assets once the status of the market has been more fully determined and analyzed,” his opinion said.

WSI has argued that the surplus should exclude paper investment gains in its portfolio as well as safety grants, and almost $15 million available in a school loan fund for injured workers. But Stenehjem said state laws define surplus as “all of an entity’s assets,” unless specifically excluded.

Bruce Furness, Workforce Safety’s interim director, said Stenehjem’s opinion offered a reasonable solution that WSI itself has suggested.

“The Legislature just needs to define it,” he said.