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Legislative Memo

Lev Ginsburg
Director of Government Afairs
T 518.465.7511 x207
www.bcnys.org

BILL:

A.3117-B (Schroeder) / S.1970-C (Stachowski)

Support

SUBJECT:

Provides for a COLA to Workers' Compensation Death and Permanent Total Benefits, Past and Future

 

DATE:

June 29, 2010

 

The Business Council opposes this bill which would provide annual cost of living adjustments (COLA) for workers' compensation permanent total and death benefits, as WCL §25-a(9) already provides a mechanism by which supplemental benefits may be payable to these two categories of claimants. 

The bill proposes to establish a COLA equal to 67% of the increase in the consumer price index for the preceding calendar year.  If the consumer price index is less than two percent in a given year, the next succeeding annual calculation must consider the change in the CPI over the preceding two calendar years.

The COLA adjustment would be provided to past and future beneficiaries. As proposed, the COLA would not apply to anyone accepting a Section 32 settlement.

The bill contains no fiscal note and indicates the impact is “to be determined”.  While it may appear that a COLA as proposed is a modest weekly adjustment to a benefit level, these two categories of claims which provide lifetime benefits are often thirty years in duration.  An actuarial estimate on an earlier version of this bill conservatively estimated the impact of the bill on employer premiums as ranging from 1.9%-5.0%.

Perhaps most unprecedented, providing a COLA to past and future beneficiaries, undermines the methodologies by which insurers establish reserves and upon which they base premiums charged to employers.   The costs for such retroactive increases were not contemplated by insurance carriers, as they only anticipate losses incurred during the prospective policy periods.  Premiums are established and collected based on the benefit levels in place at the time the policy is written.  A retroactive COLA would create unfunded liabilities to be recovered from New York's employers and changes enacted as part of the 2007 workers' compensation reforms call into question the means by which this COLA would be funded.

This legislation would cause a significant increase in workers' compensation premiums paid by New York's employers, in addition to increases already being borne by employers to pay for increased benefit levels agreed to as part of the 2007 reforms. 

For these reasons, the Business Council opposes this legislation.