Washington State
House of Representatives
Office of Program Research
BILL
ANALYSIS
Labor & Workplace Standards Committee
HB 1558
Brief Description: Creating a separate fund for the purposes of self-insured pensions and assessments.
Sponsors: Representatives Cheney, Fosse, Berry and Schmidt; by request of Department of Labor & Industries.
Brief Summary of Bill
  • Creates the Self-Insurance Reserve Fund for payments from self-insured employers related to workers' compensation pensions and from the Overpayments Reimbursement Fund.
  • Allows the State Investment Board to invest any excess amounts in the Self-Insurance Reserve Fund.
  • Provides that the Second Injury Fund will retain its proportionate share of earnings in the fund held by the State Treasurer's Office.
Hearing Date: 2/7/23
Staff: Trudes Tango (786-7384).
Background:

Under the state's industrial insurance laws, workers who, in the course of employment, are injured or disabled from an occupational disease are entitled to benefits.  Workers may receive medical, temporary time-loss, and vocational rehabilitation benefits.  In addition, a worker who suffers specified catastrophic injuries or other conditions permanently incapacitating the worker from any gainful employment is entitled to permanent total disability, which is often referred to as total permanent disability or pension benefits. 
 
Self-Insured Employers.
Employers must insure through the State Fund administered by the Department of Labor and Industries (Department) or may self-insure if qualified.  To be certified by the Department as a self-insurer, an employer must have sufficient financial ability to ensure prompt payment of compensation to its injured workers and must meet other requirements. 
 
Self-insured employers are responsible for paying to the Department certain assessments into the following funds: 

  • Insolvency Trust Fund, for claim expenditures of self-insured employers who have defaulted and exhausted their surety resources;
  • Supplemental Pension Fund, for cost-of-living adjustments;
  • Overpayment Reimbursement Fund, for reimbursements to self-insured employers for claims paid during appeals, where the employer prevails and has not recovered; and
  • Second Injury Fund, for relief of pension claims that are granted second-injury relief.

 
Second Injury Relief.
When an industrial injury results in death or a pension is awarded, a self-insured employer must pay into the Pension Reserve Fund for the costs of the injury.  However, when death or total permanent disability is partially caused by a prior injury, pension costs resulting from the prior injury are paid by the Second Injury Fund.  
 
Fund Transfers and Audits.
The Director of the Department may make periodic temporary interfund transfers between the reserve and supplemental pension funds as needed.  The Department must prepare financial statements on the various funds, and the State Auditor must conduct annual audits of the State Fund. 

 
Summary of Bill:

Self-Insurance Reserve Fund.
The Self-Insurance Reserve Fund is created in the Office of the State Treasurer.  Payments related to pensions and from the Overpayment Reimbursement Fund are paid into the Self-Insurance Reserve Fund, rather than into the Reserve Fund.  Interest earned on the Self-Insurance Reserve Fund becomes part of the fund.  The authority to make transfers between funds is extended to the Self-Insurance Reserve Fund.  The Department must provide for audits of the Self-Insurance Reserve Fund and prepare financial statements. 
 
If the State Investment Board determines there are funds in excess of the amounts needed to meet the Self-Insurance Reserve Fund's current expenditures, the Board may invest the excess funds. 
 
Second Injury Fund.
The Second Injury Fund is added to the list of funds that retain their own earned interest.
Appropriation: None.
Fiscal Note: Requested on February 1, 2023.
Effective Date: The bill contains multiple effective dates.