Anyone who has tried to compare Workers’ Comp rate quotes among competitive carriers has encountered these “assessment” charges added to the total cost. As the various charges together adds up to a little over 4.25%, it’s become significant, and begs the question of why they exist.
The short answer is that they exist because the California treasury can no longer support such activities from general revenues. Beginning in 2008, the Legislature authorized a “temporary” funding mechanism to collect fees to replace general fund monies lost during the budget crisis.
This fund shift is called the Workers’ Compensation Premium Assessment (WCPA) and is administered by the Division of Workers’ Compensation.
In 2009 this fund was made permanent by the Legislature. The new Labor Enforcement and Compliance Fund (LECF) provides a stable funding source for the Division of Labor Standards Enforecement (DLSE), which enforces minimum labor standards and the statutory requirement to carry workers’ compensation insurance. More detail can be found on the California DIR website.
The assessments cover the following funds:
- Workers’ Compensation Administrative Revolving Fund, .9669%
- Uninsured Employers Benefit Trust Fund, .1362%
- Subsequent Injuries Benefit Trust Fund, .1255%
- Workers’ Compensation Fraud Account, .2648%
- Occupational Safety and Health Fund, .2350%
- Labor Enforcement and Compliance Fund, .2380%
The total of these assessments is 1.9664%. With the added assessment for the California Insurance Guarantee Association (CIGA), the fund that pays claims on behalf of insolvent insurance companies (2.285% of premium), the total exceeds 4.25%.
One thing to note: the premium that is assessed is the premium after all carrier rating adjustments, including the experience modification rate.
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