Alternative Security Puts $6.17B Back Into Calif. Businesses

Department of Industrial Relations Director Christine Baker on Monday approved implementation of the 2012/2013 Alternative Security Program, freeing $6.17 billion in capital and giving self-insured California businesses greater financial flexibility, according to DIR.

The ASP is “a first-in-the-nation, innovative program operated by the non-profit California Self Insurers’ Security Fund with the California Department of Industrial Relations,” according to DIR’s description of the program.

The program provides guarantees to replace security deposits required to collateralize self-insured workers’ compensation liabilities.

“Self-insurance and the ASP are innovative ways that California can support businesses and help them reinvest capital back into growing their business,” Baker said in a statement. “With workers’ compensation representing a major expense to businesses, this program benefits both the businesses and the larger California economy in a meaningful and positive way.”

All employers in California are required to have workers’ comp, and meeting this requirement can be accomplished either by buying an insurance policy, or through obtaining authority from the DIR’s Office of Self Insurance Plans to self-insure.

Traditionally, self-insured employers are required to maintain a deposit to collateralize their risk in the amount equal to 135 percent of estimated future Liability. This cash deposit, irrevocable letters of credit, securities or surety bonds, limits employers’ ability to use the cash or credit line to expand their business, according to DIR.

In contrast, ASP members can apply that cash or line of credit back into their businesses while the ASP assumes responsibility of the security deposits.

California currently has 7,952 employers protecting more than 4 million workers representing a total payroll of $173 billion through self-insurance workers’ compensation plans – in other words one of every four California workers is protected by a self-insurance plan, according to DIR.

Topics California Workers' Compensation