DIR: California’s Alternative Security Program Frees $7.7 Billion

Christine Baker, director of the Department of Industrial Relations, on Wednesday approved the implementation of the 2013/14 Alternative Security Program, which Baker said frees up $7.7 billion in capital that provides self-insured businesses in the state “greater financial flexibility.”

According to DIR, ASP is a “first-in-the-nation” program operated by the non-profit California Self Insurers’ Security Fund with DIR that provides guarantees to replace security deposits required to collateralize self-insured workers’ compensation liabilities.

“Self-insurance and the ASP are innovative ways that California supports businesses and helps them reinvest their capital,” Baker said in a statement. “With workers’ compensation representing a significant expense to businesses, this program benefits both the businesses and the larger California economy.”

Office of Self Insured Plans Chief Jon Wroten said he’s “surprised” there are not more employers taking advantage of the benefits that self-insurance offers.

“Numerous program improvements and streamlining efforts have been implemented at OSIP that make self-insurance more accessible and a highly competitive option for California employers to consider in meeting their workers’ compensation needs,” Wroten said in a statement.

Self-insured employers are required to maintain a deposit to collateralize their risk in an amount equal to estimated liabilities as determined by an actuary, and the deposit limits the employer’s ability to use the cash or credit line to expand their business, according to DIR.

In contrast, ASP members cash or line of credit is freed up allowing them to invest this capital back into their businesses while the ASP assumes responsibility of their security deposit posting requirement, DIR stated.

California currently has more than 7,500 employers protecting more than 4 million workers representing a total payroll of $177 billion through self-insurance workers’ comp plans, according to DIR.

Topics California Workers' Compensation