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Legislative Memo

BILL:

S.6325 (Rules)

Support

SUBJECT:

Aggregate Trust Fund

 

DATE:

June 19, 2007

 

The Business Council strongly opposes this legislation, which would exacerbate an unfortunate – and we believe inadvertent – provision of this year's comprehensive workers' compensation reform act (Chapter 6, Laws of 2007), thereby eroding the intended savings that were so widely supported by the state legislature and Governor.

Section 46 of the act mandates that commercial carriers that sell workers compensation insurance deposit the “present value” of permanent partial disability benefits into the state's Aggregate Trust Fund (ATF). (Previously, the Workers Compensation Board had the discretion to require this payment for PPD claims; it was only a mandatory payment for death and permanent total disabilities.)

This provision imposed a significant, unnecessary cost on workers compensation policies written by commercial carriers, and will reduce the act's cost savings by forcing carriers to increase premiums to cover their ATF payment mandate. This provision will reduce the options available to the state's business community, by making commercial comp coverage less affordable, and eventually less available in New York.

Rather than repealing Section 46, or proposing an outright repeal of the ATF, this bill makes the problem worse by imposing this mandate on self-insured entities, self insured groups and the State Insurance Fund. This will increase comp costs on hundreds of private sector employees and more than two thousand public sector entities that self insure for comp coverage, on the members of numerous self insured groups (such as The Business Council's comp trust, which provides reduced cost comp coverage to seven hundred small and mid-sized manufacturers), and entities that are covered by the State Insurance Fund.

Dating back to 1935, the ATF is an outdated mechanism that at one time was seen as necessary to protect against potentially insolvent carriers.

Rather than perpetuate or expand the ATF, as this proposal would do, The Business Council recommends its outright repeal. As an alternative, The Business Council supports repeal of the new ATF mandate imposed under Section 36 of Chapter 6. However, we strongly oppose this legislation, which impose this costly burden on additional employers.