By Bob Crandall
Proposed state regulations on group self-insurance trusts that offer workers compensation insurance to trust members are welcome news to employers that participate in The Business Councils trust for manufacturersbecause the new, more comprehensive regulations reflect our longstanding procedures.
The state Workers Compensation Board (WCB) has proposed new regulations to clarify and, in some cases, tighten rules on trusts finances, financial reporting, and accountability for financial performance.
These regulations are a good idea, and The Council welcomes them.
Workers comp trusts have grown dramatically since the mid-1990s. A decade ago, there were five such trusts; today, there are approximately 60.
These trusts have always been subject to regulation, but current regulations are vague, and in some cases, only implied. The proposed new regulations specify, in three areas, both the boards expectations and its authority to examine trusts.
Group financing: Workers comp trusts now send the WCB only an audited financial statement once a year. The new regs would require trusts to supplement that statement with an independent actuarial analysis affirming its validity.
The Business Councils trust has always done thatbecause this financial statement has little value without actuarial validation.
Trusts will also need to maintain total assets that equal or exceed total liabilities, or risk having the WCB mandate corrections, such as an injection of new capital, development of a three-year plan, or increased security. This, too, is just sound fiscal management. Our trust already enjoys a strong surplus.
Standardized reporting and full disclosure: All members of any workers compensation trust must sign many different documents affirming that they understand their rights and obligations in the trust. These documents vary from one trust to the other in content and quality. The new regulation would require each trust to use standard forms prescribed by the WCB.
Again, this regulation is nothing more than good business sense. The Business Councils Trusts members will only benefit from this standardization.
Accountability: The new regulations specify that the WCB can review and audit all of this documentation. Our trust has assumed all along that the board has this authority. Thats why weve embraced the conservative fiscal and management practices that ensure that our trust would fare well in any such review.
These regulations are sound and appropriately conservative. They will ensure the stability of all trusts while protecting the financial interests of the employers who join them.
In fact, the new regulations represent a competitive advantage for The Business Councils trust. They will reassure members of The Business Council and its workers comp trust for manufacturers that our trust deserves their confidence.