Connecticut has eliminated the projected 20-year debt of its Second Injury Fund for workers’ compensation claimants in just six years by paying off the final $48 million late last week, the state treasurer announced.
Treasurer Denise Nappier said that payment marked the latest milestone in a comprehensive series of long-term initiatives designed to return the state operated workers’ compensation insurance fund to fiscal stability.
In addition to paying off the long-term debt, the fund has also managed reductions in rates charged to Connecticut businesses for the new fiscal year to the lowest levels in more than a decade. Rates for insurance companies that represent employers are dropping by 38.5 percent and self-insured employers 27.2 percent reduction, saving businesses $29 million annually. Effective July 1, rates for insurance companies will decrease from 6.5 percent to 4.0 percent for regular policies and from 5.2 percent to 3.2 percent for assigned risk policies. Concurrently, the rate for self-insured employers will decrease from 11.6 percent to 8.4 percent.
Nappier and business leaders also worked with lawmakers to change state laws to ensure that businesses making a good-faith effort to comply with state law are not penalized unnecessarily.
In the past six years, the program’s unfunded liabilities have been reduced by 44 percent, from $838 million in 1999 to $465 million currently, as a result of changes in settlement strategy involving active cases. Nappier noted that the Treasury’s assessment audit program has played an important role. From the program’s outset in 2000, $50 million in underpaid assessments has been recovered.
Nappier credited sound fiscal planning, management reforms and input from the business community for the turnaround at the fund. “These unprecedented achievements are the product of six years of unwavering diligence aimed at turning the Second Injury Fund around and returning to firm financial footing,” Nappier said. “The input provided by Connecticut businesses in this effort has been tremendously helpful, and underscores our commitment to work constructively with the business community without compromising any benefits due injured workers.”
Legislation approved by the 2005 General Assembly sets an annual interest rate of 6 percent on underpaid assessments, when an audit determines that a company has improperly reported or paid a lower amount than is owed. The legislation distinguishes between interest and penalties, by assessing the full 15 percent penalty only when there has been a failure to pay the assessment. It is the first time that such a distinction has been made in state law, affording the Treasury an opportunity to recognize good faith efforts to comply with the law.
The law, which took effect on July 1, 2006, also clarifies definitions while changing the method of assessing insured employers, exempts the Fund from apportionment claims or claims brought on behalf of insolvent insurers, and caps retroactive liability of the Fund at two years for reimbursement claims.
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