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Sept. 24, 1998

State announces $150 million bonanza for employers Workers' comp system also set for $19 million savings in 1999

OLYMPIA - Washington employers soon will receive their share of a $150 million windfall in the state's workers' compensation system.

Gov. Gary Locke announced the dividend - the first in the history of the state's workers' compensation system - at a news conference today.

Employers will be able to use the dividend to expand their businesses and create new jobs, said Gary Moore, director of the Department of Labor & Industries.

Moore also noted that Labor & Industries is proposing a 2.3 percent reduction in overall rates for workers' compensation premiums for 1999. This cut would save employers $19 million next year.

Labor & Industries manages the workers' compensation system.

The $150 million dividend will be paid by check to 131,000 employers beginning early in 1999. This dividend represents about 24 percent of Accident Fund premium payments businesses made during fiscal year 1998 - July 1, 1997 through June 30, 1998. The premiums provide benefits for injured workers, such as wages for lost time from work and disability awards.

The dividend that each employer receives will depend on the amount of premium paid in fiscal year 1998.

Together, the dividend and proposed rate reduction represent a $169 million savings on workers' compensation premiums.

The dividend and lower rates for 1999 are the result of:

  • Continued excellent returns on stock market investments during fiscal year 1998.
  • Lower-than-expected costs in claims associated with injured workers.

"This is wonderful for employers," said Don Brunell, president of the Association of Washington Business. "We see this dividend as part of the continuing improvements at Labor & Industries. Employers will be extremely pleased with this news."

The Accident Fund is the largest of five funds from which benefits are provided to injured workers. The Accident Fund is financed solely by premiums that employers pay.

The Medical Aid Fund, the second-largest, pays for medical care. Employers and workers split the cost of financing this fund. There will be no increase in the percentage of contributions that employers and employees make to the fund in 1999.

"It's good news that the financial burden on employers and workers is being reduced," said Rick Bender, president of the Washington State Labor Council. "Labor & Industries is doing a good job of keeping the system financially sound."

Labor & Industries will hold two public hearings on the rate proposal:

  • Nov. 2 - Spokane, 10 a.m. to noon, Labor & Industries office, main conference room, 901 N. Monroe St.
  • Nov. 6 - Tumwater, 10 a.m. to noon, Labor & Industries Building, auditorium, 7273 Linderson Way S.W.

The proposed 2.3 percent rate reduction for 1999 is an average for all industry groups. Some employers may see larger decreases and others increases depending on their industry classification and accident history.

For example, the following industries are slated for a higher percentage reduction. The number in parentheses shows what each employer would save annually in premium payments for each full-time employee:

  • Supermarkets, a 10 percent reduction -- ($74).
  • Electrical wiring, a 9 percent reduction - ($155).
  • Nursing homes, an 8 percent reduction - ($94).

The proposed rate cut continues a trend. L&I reduced premiums by $50 million in 1998, had no general increase in 1997 and sliced premiums by $300 million in 1996. There also was no rate increase in 1995.

The workers' compensation system in Washington, referred to as the State Fund, covers almost 1.4 million employees. The system pays for lost wages, medical bills, disability benefits and pensions when workers are hurt on the job.

Even with the $150 million dividend and a $19 million cut in general rates for 1999, the state's workers' compensation system will remain financially strong with sufficient reserves to meet anticipated benefit costs.

Reserves are sufficient despite recent fluctuations in the stock market. Currently, only about 15 percent of assets are invested in the market. More than 80 percent of the assets are in high-quality bonds.

Washington ranks among the 10 lowest states for workers' compensation costs, according to a 1996 study by the Oregon Department of Consumer and Business Services. Benefits for injured workers also rank among the top.

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