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DISABLED-WORKER FUND FACING SHORTFALL

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In 1994, the Legislature took steps to ward off an impending nearly $300 million unfunded liability in the Employer's Reinsurance Fund.

This year, it appears more steps need to be taken to make certain the fund that pays for benefits to permanently and totally disabled workers has enough money to cover the expenses for several future years.The latest problem with the ERF is caused by the drop in the percentage of workers' compensation premiums that the State Industrial Commission allocated to the ERF and the Uninsured Employer's Fund for 1995 and 1996 following several years of premium increases.

The problem will get a thorough discussion on Wednesday when the commission receives a report from its actuary, Milliman & Robertson Inc., outlining the projected revenue and disbursements from the fund through the year 2032. It could take legislative action, following a recommendation from the commission, to solve the problem.

Lane Summerhays, president of the Workers Compensation Fund of Utah, a quasi-public agency and Utah's largest provider of workers compensation insurance, said that in 1994 when the fund was projected to have the enormous unfunded liability, the Legislature passed a bill that transferred responsibility to companies and their insurance carriers to pay for benefits of workers injured after July 1, 1994, and later declared totally and permanently disabled.

Under the former law, insurance carriers were responsible for paying the benefits for six years and then the disabled person received benefits from the ERF, thus sharing the load among all companies paying into the fund.

However, the number of people going onto the ERF rolls continues because they have until 2000 to wait for the declaration.

Each year, after receiving the figures from the actuary, the commission sets the amount of money from the premiums that go into the ERF and also the Unisured Employer's Fund. The amount going into the ERF is fixed by law at 7.25 percent.

Traditionally, Summerhays said, the commission has opted for a rate at less than 6 percent to the ERF, but this year the commissioners might have reach the cap and maybe ask the Legislature to raise the cap so the fund can remain financially sound.

When the actuary projected how much money the fund would need in future years, the assumption was that workers' compensation insurance premiums would continue to increase, but they decreased 10.1 percent in 1996 and 8.1 percent in 1995.

Summerhays said Utah employers paid $380 million in workers' compensation premiums in 1994, but that decreased to $321 million and that is expected to drop to $295 million in 1997.

According to figures provided by the actuary, the fund is expected to receive $17.9 million in revenue in 1996 and disburse $20.4 million, leaving a balance of $27.8 million. The crunch will come in 2000 when revenue is projected at $26.4 million and disbursements will be $28.4 million, leaving a fund balance of $21.3 million.

Summerhays said the fund cannot continue to take money from its balance to pay the difference between the revenue and disbursements. He expects the number of people joining the ERF rolls to continue increasing and then level off after 2000.

He said the state was prudent when the liability for the fund was passed onto employers and their insurance carriers and the state will take prudent action to solve this latest dilemma.