Annual Assessments for Employers


10/15/14 N.Y. St. Reg. WCB-41-14-00004-P
October 15, 2014
I.D No. WCB-41-14-00004-P
Annual Assessments for Employers
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:
Proposed Action:
Addition of Part 318 to Title 12 NYCRR.
Statutory authority:
Workers' Compensation Law, section 151
Annual assessments for employers.
Create process for determining and collecting assessments.
Substance of proposed rule (Full text is posted at the following State
The proposed regulation adds new Part 318 to comply with Chapter 57 of the Laws of 2013 which requires the Board to streamline the manner in which it collects its administrative and special fund assessments to one that will be consistent among the various categories of payers and will be based upon active coverage.
Section 318.2 states that the assessment rate will be established by November 1st annually and apply to policies effective on or before January 1st of the next calendar year.
Section 318.3 establishes that the rate will apply to standard premium and defines the expenses to be covered by the assessment rate.
Section 318.4 states that the rate established by November 1st of each year for the succeeding calendar year shall be applied to a base of standard premium as defined below.
Standard premium is defined as follows:
(a) Carriers and State Insurance Fund – For employers securing workers’ compensation coverage via a policy issued either by an authorized carrier or the State Insurance Fund, standard premium shall mean the full annual value of premiums booked for each policy written or renewed during a specific reporting period as determined on forms prescribed by the Chair.
(b) Private and Public Self-Insured Employers – Standard written premium for self-insured employers shall be determined by applying payroll by classification codes to applicable loss cost rates. Loss cost rates for self-insured employers shall be furnished by the Chair based, in whole or in part at the discretion of the Chair, upon comparable rates applicable to carrier policies which may be adjusted for administrative expenses. To the extent there are no corresponding class codes for one or more classifications of payroll, the Chair shall establish an equivalent rate.
Estimated statewide premiums shall be determined by combining the standard premium for all employers.
Section 318.5 establishes that the assessment rate shall be a percentage of standard premiums and calculated as follows:
Total estimated annual expenses as defined in 318.3, Divided By, Total estimated statewide premiums as defined in 318.4.
The estimated statewide premiums may, where appropriate, reflect projected changes in overall premium levels that may result from loss cost rate changes approved by the Department of Financial Services.
Section 318.6 establishes that rate adjustments will be addressed as follows:
(a) If the rate established for any given year results in the collection of assessments which exceed the amounts described herein, the assessment rate for the next calendar year shall be reduced accordingly. However, the assessment rate for each calendar year shall ensure that the clearing account described in section 318.7 maintains a balance of at least ten percent of the annual projected assessments.
(b) If it appears that the rate established for any given year will not produce assessment revenue sufficient to meet all estimated annual expenses as described herein, the Board may make adjustments to the existing published rate prior to the beginning of the next calendar year. Any such mid-year rate adjustments must be published at least 45 days prior to becoming effective and will apply to policies with effective dates between the effective date of the adjusted rate through December 31 of that calendar year or until the Board issues a new rate, whichever is later.
Section 318.7 establishes that all assessment monies received shall first be deposited into a clearing account established for the purpose of receiving assessments. Assessment revenue will be applied pursuant to WCL § 151(8) in accordance with each then applicable financing agreement prior to application for any other purpose. Once any and all amounts required by applicable financing agreements have been met for the year, assessments will then be applied from the clearing account, at the discretion of the Chair, to the administrative and special fund expenses described herein.
Section 318.8 establishes that assessment should be remitted as follows:
(a) The assessment rate established by the Board shall apply to all employers required to secure compensation for their employees.
(b) Until such time as the Board can establish a direct employer payment process, the remittance to the Board of all required assessments shall be as follows:
1. For those employers obtaining coverage: (a) through a policy with the State Insurance Fund; (b) through a policy with an authorized carrier; (c) through a county self-insurance plan under Article V of the WCL; or (d) through a private or public group self-insurer; such assessment amounts shall be collected from the employer and remitted to the Board by the State Insurance Fund, carrier, county plan, or self-insured group. The State Insurance Fund, carrier, county plan, or self-insured group shall complete the reports identified in section 318.9 herein, apply the applicable assessment rate as established by the Board and timely remit both the report and the corresponding payment to the Board on the schedule set forth in paragraph (c) below.
2. For those private or public employers that self-insure individually, said employers shall pay assessment amounts directly to the Board. Such employers shall complete the report identified in section 318.9 herein, apply the applicable assessment rate as established by the Board and, timely remit both the report and the corresponding payment to the Board on the schedule set forth in paragraph (c) below.
(c) Both the report identified in section 318.9 below and the required assessment payment shall be remitted to the Board in accordance with the following schedule:
Assessments related to the quarter ending March 31 postmarked on or before April 30.
Assessments related to the quarter ending June 30 postmarked on or before July 31.
Assessments related to the quarter ending September 30 postmarked on or before October 31.
Assessment related to the quarter ending December 31 postmarked on or before January 31.
(d) If the above cited due dates fall on a weekend or holiday the remittances shall be due the next following business day.
(e) In addition at any time prior to March 31, June 30, September 30, or December 31, the Board may identify any employer that has refused or neglected to pay assessments pursuant to WCL § 50(3-a)(7)(b). In such instance the Board shall calculate a charge to be imposed on such employer in addition to the assessment required herein. Such charge shall be a percentage of the standard premium as defined herein and shall range from between 10 and 30 percent based upon: 1) the length of time the employer has been delinquent in its WCL § 50(3-a)(7)(b) assessment obligations; 2) the amount of the WCL § 50(3-a)(7)(b) assessment delinquency; and 3) the amount of the insolvent group self-insurance trust’s obligations that remain unmet at the time of the calculation of the surcharge, the Board shall inform the employer’s current provider of coverage of the neglect or delinquency. The employer’s current provider of coverage shall collect and remit such additional surcharge in the manner provided for above. All monies recovered from the payment of such charge shall be credited to: 1) the employer’s unmet obligations under the WCL; and 2) the group self-insurance Trusts’ unmet obligations under the WCL.
Section 318.9 describes the required reports:
(a) The assessment payment remitted quarterly shall be accompanied by reports prescribed by the Chair. Depending upon whether the remitter is a carrier, the State Insurance Fund, private or public self-insured employer, or private or public group self-insured employer, these reports may contain but not be limited to: written premium; total payroll; payroll by classification; adjustments from prior periods; etc. Annual reports prescribed by the Chair may also be required.
(b) All such prescribed reports will require an attestation by an authorized representative that all information is true, correct and complete. A payer that knowingly makes a material misrepresentation of information related to assessments shall be guilty of a Class E Felony.
(c) To the extent that a payer is also required to report the information requested by this section, or substantially similar values, to other governmental entities including but not limited to state and federal agencies, then the information reported by the payer to the Board shall be consistent with the payer’s reporting to other entities. To the extent that the payer’s reporting to the Board is materially inconsistent with the payer’s reports to other governmental entities, then the payer shall disclose such inconsistency in the reports submitted to the Board and supply an explanation for such inconsistency.
Section 318.10 establishes that, in the event of a carrier, the State Insurance Fund, a private or public self-insured employer, or a private or public group self-insured employer’s failure to remit assessment payments and reports in accordance with the requirements contained herein the Board may undertake any or all of the following collection activities with respect to the assessments:
(a) Refer the matter to the Office of the Attorney General for commencement of a collection action;
(b) Withhold any and all payments to the carrier, the State Insurance Fund, private or public self-insured employer or private or public group self-insured employer including but not limited to special fund reimbursements, until such time as all assessments have been paid in full;
(c) The failure of a private or public self-insured employer or private or public group self-insured employer to timely remit assessments and required reports shall constitute good cause for the Board to revoke said self-insurers self-insured status.
In the event that a carrier, the State Insurance Fund, a private or public self-insured employer, or a private or public group self-insured employer has underpaid an assessment as the result of inaccurate reporting, such payer shall pay all overdue assessments in full within 30 days of notification by the Board and may be subject to interest at a rate of 9% annually on the unpaid amount. Further, in the event that it is determined that the payer knew or should have known that the reported information was inaccurate an additional penalty of up to 20% of the unpaid amount may be imposed by the Board against such carrier, the State Insurance Fund, private or public self-insured employers.
Section 318.11 establishes that on an annual basis in conjunction with the November 1 publication of the assessment rate, the Board will prepare a report which supports the assessment rate established for policies effective in the succeeding calendar year. Such report shall also be prepared in the event an assessment rate modification is required pursuant to Section 318.6. Such report will include a summary of the projections or estimates made in the development of the assessment rate including the expenses covered by the rate and underlying assessment base.
Section 318.12 establishes that the Chair may conduct periodic audits on employers, self-insurers, carriers and the State Insurance Fund concerning any information or payment related to assessments.
Text of proposed rule and any required statements and analyses may be obtained from:
Heather MacMaster, Workers' Compensation Board, 328 State Street, Office of General Counsel, Schenectady, NY 12305-3218, (518) 486-9564, email: [email protected]
Data, views or arguments may be submitted to:
Same as above.
Public comment will be received until:
45 days after publication of this notice.
This rule was not under consideration at the time this agency submitted its Regulatory Agenda for publication in the Register.
Regulatory Impact Statement
1. Statutory Authority:
Workers’ Compensation Law (WCL) section 117(1) authorizes the Chair of the Workers’ Compensation Board (Board) to make reasonable regulations consistent with the provisions of the Workers' Compensation Law and the Labor Law. Chapter 57 of the Laws of 2013 amends several sections of the WCL including section 151 which is repealed and a new section added.
WCL section 151 directs the Board to promulgate an assessment rate by November 1 of each year and assess that rate by January 1 of the succeeding year. Specifically, Section 151(2) WCL states:
“on the first day of November two thousand thirteen, and annually thereafter, the chair shall establish an assessment rate for all affected employers in the state of New York in an amount expected to be sufficient to produce assessment receipts at least sufficient to fund all estimated annual expense pursuant to subdivision one of this section except those expenses for which an assessment is authorized for self- insurance pursuant to subdivision five of section fifty of this chapter. Such rate shall be assessed effective the first of January of the succeeding year and shall be based on a single methodology determined by the chair.” The assessment rate funds statutorily required programs such as the Board’s administrative expenses (151 WCL), the liabilities of the Special Disability Fund (15-8 WCL), the Fund for Reopened Cases (25-a WCL) and the Special Fund for Disability Benefits (214 WCL).
2. Legislative Objectives:
The legislation enacted sweeping reforms to the manner in which the Board collects its assessments.
The Board currently issues bills for the liabilities associated with each of the assessments noted above which, in total, are approximately $1.2 billion for 2013. The new process will eliminate the need for the Board to issue bills for these assessments and instead move towards a “pass through” assessment whereby employers ultimately remit their share of the assessment directly to the Board. As written, the legislation envisions an employer based assessment process. Ultimately, it is expected that the assessments will be collected directly from employers. However, it is not feasible to go directly from a carrier based to employer based assessment.
A transitional period is anticipated in the legislation as evidenced by the language which states that until such time as the Board establishes a direct employer payment process, assessments shall be remitted to the Board by carriers, the State Insurance Fund, county plans and groups. Individual private and public self-insurers shall continue to pay assessments directly. Finally, the legislation also allows the Board to enter into an agreement with the Dormitory Authority and issue up to $900 million in bonds to address unmet self-insured obligations. The debt service costs of any such bonds issued would be included in the annual rate. The debt service for these bonds as well as the WAMO bonds would take priority over the administrative expenses, special funds and interdepartmental funds.
3. Needs and Benefits:
The new legislation and supporting regulations will address many issues with the current process. Specifically:
• Currently, a disconnect exists between the amounts that carriers collect from their policy holders and the amounts that the Board bills those carriers. The new rule will result in the Board no longer issuing assessment bills and instead promulgating a rate that will fund the required programs. Carriers will collect the amount driven by the rate from their policyholders and remit that amount to the Board. Eventually, the employers will remit to the Board directly.
• The base factors currently used to calculate the various payers proportionate share of assessments are not currently audited and/or verified. The new process will include mechanisms to audit the data including verification of amounts included on other State mandated forms like the NYS-45 required by the Departments of Tax and Finance and Labor.
• The current process of assessments being based on paid indemnity for certain payers requires the accrual and funding of significant long term liabilities. This requires carriers, State Insurance Fund and self-insured’s to hold aside monies to pay assessment liabilities that they will not have to actually remit until several years later.
• The current process is administratively onerous and lacks transparency for both the Board and the various payers. The new process will result in more verification and audit of the data submitted.
• Each carrier, State Insurance Fund, private and public self-insurer is receiving as many as 23 invoices from the Board annually. Also, the data collection used to apportion the different assessments is manual and paper-based. The system used to calculate and bill the assessments is a custom module to the financial system used by the Board that is difficult to maintain, particularly when upgrades and/or legislative changes are necessary. The Board will no longer issue invoices and eventually a system will be implemented to allow payers to view and pay their assessments electronically.
4. Costs:
This proposal will not impose any new costs on the regulated parties, the Board, the State or local governments since all of these entities are currently required to pay assessments. The total projected need for 2014 of $893 million is significantly less than the average amounts billed for assessments for the past three years of more than $1 billion. The Fund for Reopened Cases was closed to new cases and for the short term will not be included in the assessment rate because the fund balance will support the claims. Additionally, roughly $7.4 million was billed on average related to the administration of the Disability Benefits program; these amounts will be rolled into the workers’ compensation assessment rate. Although many of the payers of the Disability Benefit assessment will still be paying Board assessments (as they also write workers’ compensation or have an active self-insurance program) they will no longer be paying a separate assessment related to Disability Benefits. This adjustment adds to the administrative efficiency of the new method as it is not cost beneficial to have a separate rate and/or assessment for less than 1% of the overall amounts collected in a given year. Collectively, it is estimated that the municipal self-insurers will pay $90 million less in assessments for 2014. However, the impact on the specific payers will be determined based on actual payroll.
For policies effective for calendar year 2014, the rate will be established as a percentage of standard premiums as follows: Total Estimated Annual Expenses Divided by Total Estimated Statewide Premiums. The estimated annual expenses to be covered by the rate total $893 million. Statewide standard premiums are projected to be $6.4 billion. Accordingly, the assessment rate for 2014 is set at 13.8%.
5. Local Government Mandates:
Since local governments have always been required to pay Board assessments, this law does not impose any new requirements on these entities.
6. Paperwork:
This proposed rule modifies the reporting requirements for municipalities, but does not impose additional reporting requirements. Eventually, it is the Board’s intent to streamline the reporting process and allow entities to report and pay their assessments electronically, but this is not an enhancement we could offer at the outset given the abbreviated timeframes for implementation.
7. Duplication:
The proposed rule does not duplicate or conflict with any state or federal requirements.
8. Alternatives:
The legislation directed the Board to promulgate an assessment rate and rules and regulations to establish the process by which carriers, self-insured’s, State Insurance Fund and the political subdivisions would pay the assessments to the Board. Because of the short timeframes to implement a new assessment process, and the ultimate goal of transitioning to an employer based payment stream, the only practical basis on which to calculate the assessment in the short term is premium. Premium information is readily available for the vast majority (more than 80%) of employers that obtain a policy from a carrier or the State Insurance Fund. A standard premium equivalent can be determined for the self-insured employers (both private and municipal) thus providing a similar basis for all employers, regardless of what type of coverage they maintain.
9. Federal Standards:
There are no federal standards applicable to this proposed rule.
10. Compliance Schedule:
It is expected that the affected parties will be able to comply with this change immediately.
Regulatory Flexibility Analysis
1. Effect of rule:
Pursuant to Section 50 Workers’ Compensation Law (WCL), most businesses and local governments are required to carry workers’ compensation coverage for their employees. They may obtain a policy from the State Insurance Fund, apply to, and become self-insured or obtain a policy from an insurance carrier licensed to write workers’ compensation in New York. All entities that carry workers compensation are required to pay assessments to the Workers Compensation Board (Board). There are approximately 1,900 payers in New York currently paying assessments including the carriers, State Insurance Fund, private and public self-insurers. Most small businesses and local governments are currently paying Board assessments. Depending on how they secure their workers compensation will determine the impact of the apportionment methodology and new rate on their assessment amounts. However, virtually all categories of payers will see a net decrease in their assessments whether they are carrier covered or self- insured.
2. Compliance requirements:
There is minimal impact on local governments and small businesses to comply with this rule.
3. Professional services:
It is believed that no professional services will be needed to comply with this rule.
4. Compliance costs:
This proposal will not impose any compliance costs on small business or local governments.
5. Economic and Technological Feasibility:
No implementation or technology costs are anticipated for small businesses and local governments for compliance with the proposed rule. Therefore, it will be economically and technologically feasible for small businesses and local governments affected by the proposed rule to comply with the rule.
6. Minimizing adverse impact:
Because the net result of the change in the assessment methodology, the proposed rule would be beneficial to local governments and small businesses. This rule provides only a benefit to small businesses and local governments.
7. Small business and local government participation:
The Board received input from various stakeholder groups which provide coverage for many small businesses and local governments. A decrease in assessments was recognized as a major benefit to these groups.
Rural Area Flexibility Analysis
1. Types and estimated numbers of rural areas:
This rule applies to all carriers, the State Insurance Fund, self-insured employers and political subdivisions in all areas of the state.
2. Reporting, recordkeeping and other compliance requirements:
This rule applies to all carriers, the State Insurance Fund, self-insured employers and political subdivisions in all areas of the state. Impact on reporting and compliance for all entities is minimal.
3. Costs:
This proposal will not impose any compliance costs on rural areas.
4. Minimizing adverse impact:
This proposed rule is designed to minimize adverse impact for small businesses and local government that already exist in the current regulations. This rule provides only a benefit to small businesses and local governments.
5. Rural area participation:
The Board consulted with carriers and some municipalities on the rule making process.
Job Impact Statement
The proposed regulation will not have an adverse impact on jobs. The regulation merely changes the apportionment and methodology for entities to calculate and pay their required assessments to the Workers’ Compensation Board. These regulations ultimately benefit the participants to the workers’ compensation system by streamlining the assessment process and reducing their liability.
End of Document