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Minnesota Department of Labor and Industry

Workers' compensation -- Results of 2016 Special Compensation Fund assessment

The Special Compensation Fund (SCF) assessment funds Minnesota's workers' compensation programs. Most of the assessment dollars go to funding the supplementary and second-injury benefit programs. The assessment also pays the operating expenses of the workers' compensation divisions of the Department of Labor and Industry, the Office of Administrative Hearings and the Workers' Compensation Court of Appeals.

As a result of legislation by the 2002 Minnesota Legislature, the assessment process has changed. Companies are no longer required to report semi-annually. The report is now being done on an annual basis. The report form is mailed to companies at least 45 days before the due date of April 1.

The Special Compensation Fund assessment is now directly invoiced by the Minnesota Department of Labor and Industry. The first half of the assessment is invoiced by June 30 of each year, and is due Aug. 1 of that year. The second billing is due Feb. 1 of the following year, and is mailed approximately 30 days before the due date.

The 2016 SCF assessment continues a downward trend in the amount of funding required with a corresponding reduction in the assessment rate. The 2016 assessment of $80 million is $1 million less that the 2015 assessment of $81 million. During the past eight years, the annual funding requirement has dropped $11 million. The 2009 assessment was $91 million versus $80 million for the 2016 assessment. The assessment rate has dropped
18 percent -- from 23.3 percent for the 2009 assessment to 19.3 percent for the 2016 assessment.

The estimated state-fiscal-year 2017 funding requirement for the Special Compensation Fund was determined to be $80 million. The liability was divided between the insurers and self-insurers by the ratio of their 2015 indemnity payments to the total indemnity reported by both groups.

2015 indemnity
Ratio
Estimated liabilities
DSR pure premium
Insurers $310,210,932 74.80% $59,839,599 $846,334,640
Self-insurers $104,513,724 25.20% $20,160,401  
Total $414,724,656 100.00% $80,000,000 $846,334,640


Insurer premium surcharge rate

The insurer premium surcharge rate applied for the purpose of determining the Special Compensation Fund assessment was 7.0704 percent. The rate was determined by dividing the insurer portion of the Special Compensation Fund state-fiscal-year 2017 liability ($59,839,599), by the 2015 designated statistical reporting pure premium reported by all insurers to the Minnesota Workers' Compensation Insurers Association ($846,334,640).

Self-insured assessment rate

The imputed self-insured assessment rate was 19.2897 percent. It was determined by dividing the self-insured portion of the Special Compensation Fund state-fiscal-year 2017 liability ($20,160,401) by the total 2015 indemnity reported by the self-insured employers ($104,513,724).

The insurer portion of the 2016 assessment will be adjusted for actual 2016 data reported by the Minnesota Workers' Compensation Insurers Association. As a result of 2014 amendments to Minnesota Statutes § 176.129, subd. 2a, the current assessment is considered to be an estimate based on the prior year's data. The reconciliation and final determination (true-up) for insurers will be completed by Dec. 1, 2017. See 2014 Minnesota Laws Chapter 182.

If you need further information, contact John Kufus at (651) 284-5179 or dli.assessment@state.mn.us.

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