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Associated Industries of Missouri Achieves Second Injury Fund Compromise

Associated Industries of Missouri (AIM), working with all other business groups around the state, has announced consensus on legislation to address Missouri’s failing Second Injury Fund and the liability it presents for Missouri employers.

Last year, AIM worked with its partner business organizations to defeat legislation that would have increased Missouri employers’ workers’ compensation costs by as much as 14%, according to estimates by a national workers’ compensation rate authority.  The defeated legislation would have immediately increased the surcharge that funds the Second Injury Fund by 4% and, more importantly, would have allowed all non-work related claims and conditions to increase the amount that must be paid for compensable injuries under the Missouri workers’ compensation system.  That would have meant workers with conditions like diabetes and obesity, and those with sports injuries and other non-work related injuries, would have been eligible for enhanced workers’ compensation benefits when injured at work because of these injuries and conditions that have nothing to do with work.  Although the plan had the support of trial attorneys and one business association, it was defeated by a strong coalition of the major employer groups in Missouri, including Associated Industries of Missouri.

Here is the compromise Second Injury Fund Reform package as it currently stands (additional reforms will be added to the list):

Eliminate Permanent Partial Disability claims.  This is a ridiculous provision that currently allows workers to be more than 100% disabled and still working – we would eliminate these claims;

Eliminate Permanent Total Disability claims where the previous injury was not a compensable work injury or due to military service;

Offset Social Security disability benefits and other employer paid disability insurance payments against the amount that may be awarded from the Second Injury Fund.  One or both of these reforms are current practice in most states with a Second Injury Fund.  Many states also offset against unemployment compensation received.  We will explore the extent to which we may establish these reforms in Missouri for future claims against the Fund;

Reduce the interest rate payable on claims to a reasonable amount – perhaps the rate charged on tax delinquencies (currently 3%), rather than the 9% or 10% currently allowed for these claims; and,

Prohibit payments to claimants that are incarcerated, and other common sense measures.

The compromise would also address funding for the Second Injury Fund in a responsible way.  There is a large backlog of cases currently pending.  Workers that filed these claims will be entitled to interest at the current rate of either 9% or 10% on these claims until they are paid.  Employers will benefit from “paying down” these pending claims – but the reforms must be implemented first.  After reforms have been implemented, employers will be able to assess the impact the changes have on cash flow of the Fund.  Here is the timeline expressed in the compromise:

  1. August 28, 2012 – Reforms effective.

  2. January 1, 2013 – The Second Injury Fund surcharge cap would increase from 3% to 4.5%.

  3. January 1, 2014 – The maximum Second Injury Fund surcharge rate would increase from 4.5% to 6%, but the amount of the surcharge increase, and whether or not the rate is increased, is to be determined by a vote of a new committee that would include the Governor, Attorney General, Senate President Pro Tem, and Speaker of the House.  These elected officials, by a 3/4 vote, could vote to increase the surcharge rate up to a maximum of 6%;

  4. January 1, 2020 – The surcharge maximum rate would return to the current level of 3%.

We believe this package will result in real reform of the Second Injury Fund as we carefully begin to address the backlog of claims.  Every major employer group in Missouri has agreed to support this legislation and we are hopeful workers, and the groups that represent them, will support the legislation as well.

The 2012 legislative session begins January 4, 2012.

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