Funds for disabled to run out by 2008

Thursday, April 26, 2007 | 12:00 a.m. CDT; updated 3:15 p.m. CDT, Monday, July 21, 2008

JEFFERSON CITY— A state audit released Wednesday predicts a state fund to compensate disabled workers who suffer additional work injuries will likely run out of money by 2008.

The audit blames the state Second Injury Fund’s potential insolvency partly on a 2005 law that caps employer contributions into the fund and a 2007 court case that required disability benefits to continue to be paid even after the injured worker died.

The fund, created in 1943, is designed to encourage employers to hire workers who already have been injured. The fund is designed to take businesses off the hook for work injuries that worsen existing disabilities. Missouri and 34 other states have similar funds.

According to the audit, the Second Injury Fund handled 10,600 claims and paid out $68 million last year. Auditors estimate claim payments will top revenues by $19 million per year from 2007 to 2009.

The Department of Labor and Industrial Relations, which administers the fund, estimates the fund will run out of money during the second half of 2008. Current law does not have provisions for what to do if the fund does not have enough cash to continue paying out benefits, which could endanger injured worker claims.

The fund balance comes from a fee employers must pay on top of their workers’ compensation insurance premiums. That surcharge had fluctuated based on a formula created by the Department of Labor and Industrial Relations. But in 2005, lawmakers overhauled the workers’ compensation system and capped the fee for the Second Injury Fund at 3 percent.

According to the auditors’ calculations, the surcharge should be at 3.5 percent to keep the fund solvent. The fee was 4 percent in 2003 and 2004.

The audit urges the legislature and the Department of Labor and Industrial Relations to develop a plan for what to do if the fund runs out of money and determine whether the court case expanding who is entitled to disability benefits will have a long-term effect on the fund.

In its formal response to the audit’s findings, the Labor Department writes that controlling expenses is needed instead. The department said keeping pace with the increasing claims would require raising employers’ fees to 4.5 percent in 2009 and by at least 1 percentage point every year after.

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