To:           All Workers’ Compensation Insurance Companies

From:      Scott B. Lakin, Director, Missouri Department of Insurance

Re:          Administrative Surcharge on Workers’ Compensation Deductible Plans

Date:       December 1, 2003

The Missouri General Assembly has amended the process for the collection of revenue with respect to workers’ compensation insurance policies with a deductible option. (See Senate Bill No. 385, 92nd General Assembly, 2003). Effective for the calendar year 2004, these changes include replacing the portion of the premium tax on the insurance company attributable to the deductible portion of the policy with a new administrative surcharge on the workers’ compensation deductible plan policyholder. This administrative surcharge will be collected by the insurance company from the policyholder.

The insurance company will collect the administrative surcharge from the policyholder by surcharging the policy premiums that would otherwise have been charged for the deductible portion of the policy. The percentage of the administrative surcharge will be determined annually by the Division of Workers’ Compensation at a rate equal to the premium tax rate also determined by the Division. The percentage for the year 2004 will be 1.0 %. Accordingly, each workers’ compensation insurance company will surcharge each workers’ compensation deductible plan policyholder at the rate of 1.0 % of the premiums that would otherwise have been charged for the deductible portion of the policy.

The insurance company will pay the surcharges to the Department of Revenue in four approximately equal estimated quarterly installments and a fifth reconciling installment. Each estimated quarterly installment shall consist of one fourth of the insurance company’s estimate of the total administrative surcharges payable in the calendar year for which the surcharge is imposed. The insurance company shall make the quarterly installment payments on March 1, June 1, September 1 and December 1. The insurance company shall complete the attached quarterly deductible option surcharge report form and return it with each quarterly installment payment. (Each insurance company may freely copy the attached form).

The insurance company shall pay the fifth reconciling installment by June 1 of the following year. The fifth reconciling installment will be assessed to the insurance company based upon the insurance company’s annual return (due on or before March 1 with respect to the immediately preceding calendar year) to the Department of Insurance. Since the first such annual return is not required until March 1, 2005, with respect to the calendar year 2004, this annual return is not included with this bulletin. If the total of the quarterly payments exceeds the sum actually due as determined by the annual return, the excess shall be credited against future quarterly payments.