The increase in the state Workers’ Compensation Premium Assessment (WCPA) for the year is the subject of a California Chamber of Commerce interview with California Department of Industrial Relations (DIR) Director John Duncan and DIR Chief Financial Officer Greg Edwards.
To listen to the interview and responses to questions (recorded December 17, 2009), click on the links below:
Introduction with Marti Fisher (CalChamber) and John Duncan and Greg Edwards with the Department of Industrial Relations
Listen to Audio (:30)
What is the assessment?
Listen to Audio (2:26)
What is the assessment notification process?
Listen to Audio (1:26)
What did the Legislature do, how did this happen and how long will the assessment be with us?
Listen to Audio (3:01)
How will the sunset provision work, beginning in 2012?
Listen to Audio (1:31)
What are the benefits of CalOSHA programs being employer funded?
Listen to Audio (3:24)
How much are employers being asked to pay through this annual assessment?
Listen to Audio (3:09)
Conclusion: Where you can find additional information from the Department of Industrial Relations.
Listen to Audio (1:37)
The WCPA will be an additional charge collected with employer-paid workers’ compensation premiums assessed by insurance companies, and from self-insured employers based on paid indemnity. The new fees will help pay for operation of the California Division of Occupational Safety and Health (Cal/OSHA) and the Division of Labor Standards Enforcement (DLSE), also known as the Office of the Labor Commissioner.
The WCPA is a temporary solution designed by the Legislature to address the current budgetary deficit. Through this mechanism, the Division of Workers’ Compensation (DWC) bills insurance companies for fees, which are then deposited into the appropriate trust fund. The insurance company then assesses employers a fee based upon their calculated premiums. Self-insured employers are billed directly by DWC.
Funding Distribution
The assessments are outlined in Labor Code sections 62.5 and 62.6. Specifically, Section 62.5 requires insurers to collect money from employers to fund:
- anti-fraud efforts by the California Department of Insurance and local district attorneys;
- benefits paid to injured workers whose employers were illegally uninsured; and
- compensation to injured workers who already had a disability or impairment at the time of injury.
In addition, legislation in 2009 created the Labor Enforcement and Compliance Fund (LECF) to provide a stable funding source for the DLSE, which enforces minimum labor standards and the statutory requirement to carry workers’ compensation insurance.
As a result, the WCPA covers the following funds:
- Workers’ Compensation Administration Revolving Fund;
- Uninsured Employers Benefit Trust Fund;
- Subsequent Injuries Benefit Trust Fund;
- Workers’ Compensation Fraud Account;
- Occupational Safety and Health Fund;
- Labor Enforcement and Compliance Fund.
A notification letter explaining the new funding shift has been distributed to insurance companies and self-insured employers and is posted on the DIR web site. DIR explains that the new funding shift is designed to bring stability to Cal/OSHA and DLSE operations and also will guarantee the services they provide.
Services Funded
Under the WCPA, Cal/OSHA and DIR will not experience general fund budget cuts that can erode the effectiveness of the services they provide, which include:
- Support for enforcement of programs to eliminate the underground economy;
- Enforcement of labor laws at a sustainable level to ensure a more competitive business environment by pursuing employers who break employment laws;
- Pursuit of uninsured employers who fail to carry workers’ compensation coverage for their workforce;
- Ensuring workplace safety across the state;
- Proving compliance assistance for employers who are striving to increase safety on their jobsites;
- Decreasing injuries, illnesses and fatalities at jobsites across the state.
Sunset/Cap
The increased Cal/OSHA and DLSE assessments will sunset in 2013 unless the Legislature acts to continue the WCPA at the current level. Until that time, the assessments are capped and may not exceed $52 million for Cal/OSHA and $37 million for DLSE; these amounts can be adjusted only for inflation (based on the state-government inflator) and to reconcile any over/under credits from previous years .
Background
Before the recent budget crisis, a significant portion of the funding for the operations of the DIR was provided by the state’s General Fund. Over the last two years, however, many state agencies, including DIR, have been subject to budget cuts. In order to stabilize funding for DIR operations, which include DWC, Cal/OSHA and DLSE, the Legislature authorized a temporary funding mechanism to collect fees to replace General Fund monies cut from the agency’s budget.
The fund shift, the WCPA, began in 2008 when approximately 16 percent of General Fund dollars ($14.8 million) were cut from the Cal/OSHA budget.
Under the WCPA funding mechanism Cal/OSHA funding will be as follows:
- 41 percent ($34.9 million) will be covered by the assessments;
- 28 percent will come from the federal government; and
- 31 percent will come from fees generated from the division’s operating functions, including elevator, pressure vessel, amusement ride and tramway inspections.
The WCPA will also be used to cover the 30 percent reduction (approximately $15 million) in General Fund money cut from the DLSE budget. The DLSE General Fund budget reduction (approximately $21.89 million) will occur in the 2010-11 fiscal year.
Under the WCPA funding mechanism. DLSE final funding will be as follows:
- 70 percent will be covered by the assessments;
- 30 percent will come from licensing fees and penalty assessments.
More information is available at the Department of Industrial Relations workers compensation premium assessments website at:
http://www.dir.ca.gov/WCAssessments/WCPremiumAssessments.htm
Additional information about the department is available at:
http://www.dir.ca.gov/
Questions can be directed to:
info@dir.ca.gov