The New York State Workers’ Compensation Board (WCB) is pressing on with its effort to resolve the liability problems stemming from collapsed group self-insured trusts.
WCB has been taking a multi-pronged approach to tackle the problems in the past few years. And it has also begun to sue businesses that participated in collapsed group trusts that have not yet reached settlements with WCB. WCB is currently suing about 2,500 businesses that have been members of various insolvent group self-insured trusts.
The problems can be traced back to the last decade. WCB said that in the early part of last decade, approximately 10,000 employers in New York State chose to insure through a mechanism known as the group self-insurance trust, in which a group of employers agreed to be jointly and separately liable for each other’s claims. But a large number of these trusts ended up defaulting in 2007 and 2008.
Since then, WCB has taken over 23 of these collapsed trusts that didn’t have assets to cover their liabilities. These trusts today have liabilities of a little less than $800 million. WCB said it was left to deal with the problems, both of collecting dollars to pay for injured workers and of dealing with employers who owed money to pay their workers but were saying they couldn’t pay it.
WCB has taken several steps over the last few years to reduce the costs to these employers and help them settle these claims, and also to protect the rights of the injured workers caught in the middle. First, WCB worked with the state legislature to close the trust program to all but the healthiest trusts so that the problem doesn’t repeat itself.
Additionally, through legislation, WCB forgave the requirement that these trusts pay the New York State assessment fees, reducing their liability by about 20 percent. WCB said it has also closed about 50 percent of the claims in these trusts through active claims handling.
WCB is now preparing to begin selling some trust liabilities to investors, with the first bonds representing two largest defaulted group trusts scheduled to be issued in early December. WCB is also continuing to negotiate with members of defaulted trusts to work out payment plans.
WCB said it is selling insolvent group trust members’ liabilities and is giving these trust members up to 10 years to repay the amount they owe.
WCB said it has made settlement offers to a large number of employers in New York State, and many of them have chosen to settle. It said settlement offers are reasonable, low-interest, 10-year repayment plans.
But some businesses chose to hire lawyers to engage with WCB, as opposed to settling for payment plans, according to WCB.
And as the end of statute of limitations approaches, WCB said it is filing lawsuits to protect its collection rights.
WCB also said it is actively engaged in third-party actions, suing actuaries, financial advisors, third-party administrators, trust administrators, trustees and attorneys that it believes contributed to the problem and the understatement of reserves. And when it is successful in those lawsuits, it takes that money to offset what it’s charging the trust members, WCB said.
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