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Legislative Memo

Lev Ginsburg
Director of Government Affairs
T 518.465.7511
www.bcnys.org

BILL:

S. 5979 (Rules) / A.8259-A (Morelle)

Support

SUBJECT:

Interim assessment on members of a defaulted group self-insurer.

 

DATE:

June 16, 2015

 

The Business Council strongly supports S.5979 / A.8259-A, as an important and necessary piece of legislation to ensure that New York’s employers who were not involved in defaulted group trusts will not be liable for further multi-million dollar assessments by the Workers’ Compensation Board (Board).  This bill would help guarantee indemnity and medical benefits for injured workers and would clarify that the assessments levied by the Chair of the Board on members of defaulted group trusts are in fact interim assessments and may be subject to additional assessments to cover losses sustained by the defaulted group. 

Over the last several years the Board has assumed responsibility for more than twenty defaulted self-insured group trusts. These trusts have combined deficits of over $900 million. In the FY 2014 budget, the state authorized $900 million in bonds to pay insurers to administer the failed trusts' remaining claims and deficits; some $400 million has been bonded to this point. The Board, in trying to close out these liabilities, assesses members of those defaulted trusts to cover the associated costs. 

In response to these efforts, one member of a defaulted trust, Riccelli Enterprises, sued the Board over, among other things, the timeliness of the Board’s secondary assessments on trust members.

The case, Matter of Riccelli Enters., Inc. et al v. State of New York Workers' Comp. Bd., decided in the state’s lower court, said that all deficiency assessments had to be submitted within 120 days of the dissolution of the trust.  Not only is this reading of the Workers’ Comp Law problematic, it completely ignores the reality that a deficit reconstruction is a difficult and time consuming task that would be difficult to accomplish in a 120 day period. There is little doubt that the Legislature never intended to set the Board up to fail in assessing defaulted groups, but instead anticipated a reasonable, tiered assessment approach.

S.5979/A.8259-A would clarify that while the Board has but 120 days to issue an initial interim assessment, the reality of forensic accounting must allow for additional time to guarantee an accurate assessment of the true indemnity and medical benefit-related liabilities of a defaulted trust. 

Without such a clarification, the outstanding liabilities of many defaulted trust members, totaling in the hundreds of millions of dollars, are in question.  If the lower court’s Riccelli decision were to be sustained, Workers' Compensation assessments on all other employers, never involved in group trusts, would increase every year until the trusts were settled out.  Next year’s assessment on New York’s self-insured employers would increase by approximately 265% or an additional $23.6 million, making already painfully high workers’ compensation costs significantly worse.

The Legislature, two years ago, wisely recognized the unfairness of continuing to force uninvolved self-insured employers to pay for the failure of these trusts, and acted to allow the Board to take steps to close down the trusts once and for all.  We are hopeful that the Legislature will act again to guarantee that the Board can continue down this path and protect New York’s employers from astronomical increases in their Workers’ Compensation Assessments.

For these reasons, The Business Council urges passage of S.5979 / A.8259-A.