NU Online News Service, June 28, 3:20 p.m. EDT

New York Governor David Paterson has introduced a program bill that would, except under limited circumstances, close all private group self-insured trusts in the state, tracking recommendations made by a task force earlier this month.

According to the bill's memo, only private group self-insured trusts that are able to post security for their liabilities in a manner comparable to individual self-insurers would be allowed to continue operations. The memo said the number of such trusts is expected to be "very limited."

Public employer group self-insured trusts would also be allowed to continue operations.

The group self-insured trust program is a form of self-insurance for workers' compensation where employers join together and request approval to operate as a trust. The members of a trust share in any surplus generated but are jointly and severally liable for any deficit incurred to pay the trust's obligations.

Gov. Paterson formed the Task Force on Group Self-Insurance on June 30, 2008 after 15 group self-insured trusts became insolvent through 2007 and 2008, creating a combined deficit of $498 million.

The task force issued a report earlier this month calling for legislation to terminate the group self-insurance program effective Dec. 31, 2010–a recommendation that the governor's proposed bill tracks.

The task force said risks inherent in the group model outweigh the program's benefits.

The proposed bill would also cease certain assessments to former group self-insured trusts. According to the memo, "The employers in such trusts will procure insurance–and thereby be assessed–through other vehicles."

It adds that terminating the assessments will allow the closed, non-defaulted trusts "to stay financially viable, preventing those trusts from failing and thereby creating a further cycle of defaults, litigation and funding shortfalls."

Assessments designed to provide funding to run defaulted trusts would continue under the bill. The memo states, "Since those assessments are not made against all employers, ceasing such assessments against terminated [group self-insured trusts] would simply leave a funding gap that others would need to make up."

The memo concludes, "In sum, this bill would stem a significant and growing cycle of financial loss, allow closed [group self-insured trusts] to wind down their affairs in an orderly manner, and eliminate a workers' compensation option that subjects employers to excessive risk."

Special Reports /

N.Y. Governor Introduces Bill To End WC Group Self-Insured Trusts

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