Individual self-insured employers in New York may encounter major changes to how their workers' compensation plans are secured if recommendations proposed by New York's Workers’ Compensation Board (the “Board”) become law. The Board issued a report recommending that self-insuring employers be required to join a guarantee pool instead of the present system where individual self-insuring employers post a security deposit, such as a letter of credit or surety bond, equivalent to their outstanding workers’ compensation claims. Payments into the guarantee pool would be based on an employer’s credit rating and actual risk. In the report, the Board expressed its belief that this approach would ensure that claims would be paid in the event that any individual employer is unable to meet its obligations and defaults. Additionally, the Board estimated that changing to a pooling system would result in the release of approximately $1.8 billion in current letters of credit and surety bonds.
Before they become law, the recommendations need to be drafted into legislation, passed by the New York State Legislature, and approved by Governor Spitzer. We will continue to monitor the status of this proposal and provide updates at InsureReinsure.com.