2004 Workers Compensation Administrative Tax & Injury Fund
To: All Workers' Compensation Insurance Companies, Self-Insured Employers, Group Trusts and Third-Party Administrators
From: Catherine B. Leapheart, Director Missouri Department of Labor and Industrial Relations Scott Lakin, Director, Missouri Department of Insurance
Re: Workers' Compensation Administrative Tax, Second Injury Fund Surcharge and Administrative Surcharge for Calendar Year 2004
Date: October 7, 2003
As you know, the state of Missouri assesses a workers' compensation administrative tax and a surcharge to maintain the fiscal integrity of the Workers' Compensation Administrative Fund and the Second Injury Fund, respectively. In addition, recently enacted Senate Bill 385 requires the assessment of a workers' compensation administrative surcharge upon policyholders with workers' compensation deductible policies. This administrative surcharge is assessed as a percentage of the premiums that would have been paid for the deductible credit portion of these policies. During the coming calendar year 2004, the state of Missouri will assess a workers' compensation administrative tax of 1.0 percent, a Second Injury Fund surcharge of 4.0 percent and a workers' compensation administrative surcharge on deductible policies of 1.0 percent.
Our departments are pleased that we can reduce the administrative tax by half and keep the Second Injury Fund surcharge at no more than its 2003 level.
The revenue from the administrative tax and the administrative surcharge is used to fund the administrative expenses of the Division of Workers' Compensation. State law requires the director of the division of workers' compensation to estimate the amount of revenue required to administer the workers' compensation program each year and to determine the rate of tax to be paid in the following calendar year. If the estimated available balance of the fund on December 31 of the year the tax rate determination is made falls below 110 percent of the previous year's expenses, the director must impose a tax not to exceed 2.0 percent. Based on the division director's assessment of the fund balance and projected expenditures, the 1.0 percent tax levy and 1.0 percent surcharge assessment are needed for calendar year 2004.
It is important to note that the administrative surcharge required by the provisions of SB 385 will always be assessed at the same rate as the workers' compensation premium tax. The administrative surcharge will be assessed at the same time and in the same manner as the premium tax assessment, but it is not a premium tax. The portion of a workers' compensation deductible policy subject to the administrative surcharge will no longer be subject to the premium tax. As a result, there should be no net impact on the revenue generated by the new combination of the premium tax and the administrative surcharge when compared to the previous premium tax alone. Employers that self-insure their workers' compensation risk are not subject to the administrative surcharge.
The revenue from the Second Injury Fund surcharge assessment is used to pay benefits from the fund. The amount of surcharge assessed must be adequate to generate, as nearly as possible, 110 percent of the amount projected to be paid from the Second Injury Fund in the ensuing calendar year, minus the balance contained in the fund at the end of the previous calendar year.
State law requires the director of the division of workers' compensation to estimate the amount of benefits payable from the Second Injury Fund during the ensuing calendar year and to calculate the total amount of the annual surcharge to be imposed. Based on the division director's assessment of the fund balance and projected expenditures, this assessment will be set at 4.0 percent for 2004.
A copy of the Second Injury Fund surcharge form is available. To order a mailed copy please call 573-526-4963.
The Department of Labor and Industrial Relations and the Department of Insurance look forward to working with you in 2004. If you have questions or need more information, contact the Division of Workers' Compensation at 888-837-6069 or the Department of Insurance at 800-394-0964.