Seems to NYIWA the AFL-CIO has hit the nail on the head in plain language.  Unless the new Governor and legislative leadership fully appreciate the financial finagling that has plagued the trusts, taxpayers and innocent participants will pay the price.

   PONZI,  MADOFF and  WORKERS’ COMPENSATION

    Somebody  (over a decade ago) made a decision to permit a proliferation of self-insured trusts to be created in lieu of the requirement to have an insurance policy providing workers’ compensation before a business could operate.  For some years there had been a couple of such trusts successfully operating in New York and various schemers recognized opportunity when it presented itself.  The opportunity, of course, occurred simultaneously with the collapse of the self-insured trusts for workers’ compensation insurance in almost every other state in the union. The structure and the supervision of the group trusts in New York led to abuse. In one particularly outrageous case, a trust administrator who had been thrown out of Pennsylvania set up shop in New York without further adieu. He also published an opinion piece in a professional journal touting all the money to be made in this emerging industry.   

  
    Because the group trusts are not legally insurance entities, the supervision of them fell to the Workers’ Compensation Board which was ill equipped to keep an eye on them. Some trusts were created in a proprietary fashion by brokers who set them up in order to maximize their own personal gain from the trusts.  One of the typical tricks was to undervalue potential losses from claims so as to bait the trusts with low premiums for participants. Another trick was to declare large dividends for group members without regard for building up reserves. These practices were common knowledge in New York State among interested parties.  Many trusts soon were insolvent. Many failed to contribute necessary assessment payments to maintain the solvency of the entire industry. The Workers’ Comp Board deferred required assessment payments to the insolvent trusts, some of which were collapsing on the spot. In one instance, a particularly notorious and politically connected to a broker and trust administrator had his license to administer trusts, (but not his broker’s license) revoked by the Workers’ Comp Board.  The assets of the plan under supervision failed to be recovered.  The solution to this debacle is still ongoing albeit very slowly.

Unpaid assessments are piling up, and no real effort at collection has been initiated. Injured workers have been waiting for another shoe to drop if their cases were initiated against an employer participating in these “trusts”. The latest turn is an Article VII bill, S.2807A/A.4007A which contains in part G, language that causes the debt incurred by the defaulted trusts to be assumed by every other group trust, individual self insurer, private and public workers’ compensation carriers, as well as by the special funds of the industry.  In other words, the special interests want every other entity which paid inflated workers’ compensation premium assessments because of the group trusts to now pick up the tab for the entire remaining debt.  This debt could be well above a billion dollars when all is said and done. 

    In the most recent development, insurers statewide are unhappily opening envelops announcing their share of an industry-wide additional assessment; funding the uninsured employers’ fund to make up for the shortfall resulting, in large part, from the insolvency of the self-insured group trusts. The hit is estimated at some $30 million.