NU Online News Service, March 30, 3:20 p.m. EDT

The New York State legislature appears to be on the verge of passing legislation to address the state's group self insured trust workers' compensation system, which has amassed about $800 million in unfunded liabilities, sources tell NU Online News Service.

According to Art Wilcox, a consultant on workers' comp issues for the New York State AFL-CIO, the bill is a compromise that will incentivize the group trusts to alleviate their liabilities through loss portfolio transfers.

Currently, he notes, the backstop for the unfunded liabilities of a given group trust is joint and several liability for all employers belonging to all group trusts.

Wilcox says the governor put a program bill out in January that announced that unfunded liabilities for the group trusts had grown to $800 million. "In his program bill he attempted to do things to bring it under control." Stakeholders worked on that program bill "to make it a better bill," Wilcox says.

The legislation, Wilcox says, would put in recess for three years all assessments the group trusts would be mandated to pay over that time period. Group trusts that are able to become fully funded in those three years or eliminate their liabilities through loss portfolio transfers would be exempt from paying back those assessments.

Group trusts that cannot transfer those liabilities would have to pay back the assessments to the state. "So there is a real incentive for folks to do a loss portfolio transfer," Wilcox says.

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.

The group trusts rant into trouble in 2007 and 2008, when 15 of them became insolvent, creating a combined deficit at the time of $498 million.

In June 2008, former Gov. David Paterson formed the Task Force on Group Self-Insurance to analyze the group self insured trust system. That task force issued a report calling for legislation to terminate the group self-insurance program effective Dec. 31, 2010, and Paterson introduced a program bill that tracked the recommendation.

The current bill would not end the group self insurance program, but Wilcox notes that it would close the group trusts in January 2012 and then allow some to restart under more stringent criteria.

Wilcox says he believes the number of group trusts continuing on could be as low as five to seven, although he notes that is a guess at this stage. The group trusts would still be subject to joint and several liability for future unfunded liabilities.

Wilcox explains that in his view, the biggest problem the trusts faced was that the state's Workers Compensation Board (WCB), which oversaw the group trusts, lacked the expertise to properly supervise them. He says the "lack of attention led to disarray."

Under the legislation, the WCB would retain its oversight over the group trusts, but Wilcox notes that there will be more legislative and executive oversight than before, including a requirement that the WCB file a report every six months with the governor's office and legislature.

Wilcox acknowledges though that the WCB "hasn't done anything that's convinced me that they've become more capable" of supervising the group trusts.

Special Reports /

N.Y. Legislature To Pass Bill Addressing Group Self Insured Trusts

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