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Bill creates new path for workers' comp

by Spencer Willems | May 17, 2016 at 3:51 a.m. | Updated May 17, 2016 at 3:51 a.m.

Gov. Asa Hutchinson wants lawmakers to make changes to the workers' compensation system, including ending the state's decades-old fund that relies on insurance premium taxes on businesses to pay for death and disability claims.

Arkansas employers or their insurers currently pay roughly the first $200,000 of a claim filed either by workers left disabled or by their surviving family members. Payment of the rest of that claim then falls to the state's Workers' Compensation Commission's Death and Permanent Total Disability fund.

Arkansas is the last state in the union to maintain such a fund, according to the commission's CEO, Barbara Webb, who said other states have shifted the responsibility of funding such workers' claims onto businesses and their insurers.

Currently, most nonfarming Arkansas businesses are required to buy workers' compensation insurance and then pay 3 percent of premiums into the commission's Death and Permanent Total Disability fund. No general revenue goes into this fund.

Legislation sponsored by Sen. Greg Standridge, R-Russellville, proposes to end paying new claims from the fund, a move that would shift to businesses the burden of prolonged payments to injured employees or their survivors.

Standridge did not return a call Monday to discuss the measure.

But the reason for the shift, according to Webb, is that the fund is insolvent and roughly six to 12 years away from going bankrupt.

"Because of decreasing returns on investments, low interest rates ... we've had decreasing premium tax revenue ... and we've had the increasing number of claims in the fund with increasing wage benefits," Webb said. "All of that together put this fund into a downward spiral and created this underfunded liability."

In 1995, the fund faced a $6.7 million underfunded liability. By 2004, that figure grew to about $15 million, Webb said. With assets of $111.6 million, but current and future benefits to claimants set at about $242.5 million, the state's current liability is about $131 million.

Without a change, "these 1,500 or more people would no longer be getting the check they rely on to live," Webb said, referring to the number receiving the payments.

But the lobbying group for Arkansas businesses opposes shifting the cost burden for workers' compensation claims wholly to businesses.

Randy Zook, the head of the Arkansas State Chamber of Commerce, said the fund needs to be addressed and his group has been pushing for some kind of fix since 2000.

But he doesn't think Hutchinson's proposal is the best way to do it and he thinks that such a complicated issue should have been left for the 2017 legislative session instead of a proposed three-day special session.

"This is not about the chamber; it's about employers, the people who pay the tax, who pay the claims, who pay to fund the workers' compensation system," Zook said. "This will create additional costs and depending on the type of business you're in, those costs will be anywhere from moderate to substantial."

Zook declined to go into specific alternatives to Hutchinson's proposal, but said there will be plenty of discussion at the Capitol over the coming days.

A Section on 05/17/2016

Print Headline: Bill creates new path for workers' comp

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