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Second Injury Fund

Explanation of covered benefits and assessments payable.;

Background
The Second Injury Fund (SIF) was enacted in 1949 and is established under IC 22-3-3-13 of the Indiana Code. The Indiana Code is available on the State of Indiana website at this address: http://www.state.in.us/legislative/ic/code/

Benefits
The following benefits are payable from the SIF:

  1. The excess of workers compensation benefits payable due to a second injury resulting in permanent and total disability, over the amounts payable by the employer as defined under IC 22-3-3-13(a). To receive benefits, applicants must prove a prior total loss or total loss of use of a hand, arm, foot, leg, or eye followed by a "second injury" - the total loss or total loss of use of another such part (any combination such as a leg and an eye) in an accident arising out of and in the course of employment.

    "The employer is required to pay compensation for the second permanent injury, as if the first permanent injury had not occurred. When all payments for that specific harm have been made, the employee is then entitled to SIF payments for the total permanent impairment that results from the two successive losses." Source: Indiana Chamber of Commerce Workers Compensation Handbook, Fourth Edition, page 50.
  2. The workers compensation benefits payable due to an injury resulting in permanent and total disability that exceeds the maximum benefits payable by the employer (currently 500 weeks) as defined under IC 22-3-3-13(g). SIF award is made in 150 week increments and is renewable for life.
  3. The cost of repair or replacement of prosthetic devices originally provided as workers compensation benefits under IC 22-3-3-4 and IC 22-3-7-17.
Payments under the SIF are substantially comprised of items (2) and (3), with item (2) representing the majority of claims. Each item (2) award has a benefit period limited to 150 weeks that can be renewed as long as the underlying disability condition continues. Benefit levels remain fixed at two-thirds of each employee’s wages at the time of injury, subject to minimum and maximum amounts. Thus, item (2) claims are essentially lifetime annuities commencing 500 weeks after the disability occurs.

Item (3) awards became effective during 1997. Thus, the history of such claims is limited.
 
The SIF is administered by the WC Board of Indiana, although the actual SIF funds are maintained by the Treasurer of the State. The Board’s administrative expenses are funded through the general revenues of the State and not through the SIF.

Sources: Open Lines, April, 1997; publication of WC Board of Indiana and "Unfunded Liability of the SIF" by Milliman & Robertson, 1/6/2000
Relevant court case: Linville v. Second Injury Fund, Court of Appeals 664 N.E.2d 1178

Assessment
The SIF is funded through periodic assessments of insurance carriers and other entities insuring or providing workers compensation benefits (including self-insuring employers). The WC Board of Indiana issues the assessments and entities pay assessments to the Board.

Assessments - prior to July 1, 1999
Prior to 7/1/99, a Fund assessment of carriers and self-insureds was made on April 1st of each year in which the balance falls below $500,000. The amount assessed was 1% of total workers compensation paid (excluding medical payments) during the previous calendar year.

Assessments - July 1, 1999 to July 1, 2006 
House Enrolled Act 2085 effective July 1, 1999 revised the assessment provisions of IC 22-3-3-13, providing for an annual assessment of up to 1.5% of total non-medical claim payments from the prior calendar year. HEA 1553 effective July 1, 2001 raised the assessment limit to 2.5%. However, the Board can only access once a year any time the SIF balance falls below $1,000,000 on or before October 1. The Board must conduct an actuarial study by September 1 each year to calculate the recommended funding level.

Assessments - July 1, 2006 and after
House Enrolled Act 1307 effective July 1, 2006 revised the assessment provisions of IC 22-3-3-13, providing:
    • Assessment limit of 2.5% is now based on total paid losses instead of only indemnity losses.
    • Total losses are from all entities (carriers, other insuring entities, and self-insureds).
    • As of November 1, if the SIF balance exceeds 135% of the prior year’s disbursement, no assessment will occur for the next year
    • Assessment applies to “all employers.” Assessment is split between self-insured employers and insured employers based on each group’s portion of total paid losses. For 2007, the split is 14% self-insureds and 86% insured employers.
    • Assessment for insured employers (carriers) is calculated by determining the percentage share of an individual carrier’s premium to all carriers premium.

      Note: HEA 1452 effective July 1, 2007 clarified statute wording by replacing the term
      "entire written premium…” with “direct written premium” which is consistent with the WC Board’s notice and certification letter issued 11/28/06. This corrected wording from HEA 1307.
    • Assessment for self-insureds is calculated by determining the percentage share of a self-insured’s paid losses to all self-insureds’ paid losses.
    • The Board will calculate the recommended funding level by December 1. This study will determine if an assessment is necessary. The Board “may employ a qualified employee or enter into a contract with an actuary or another qualified firm that has experience in calculating worker’s compensation liabilities.”


Recent Assessment Summary

Amount
Due
Board Notice Sent
1.0%
July 1999
May 1999
1.5%
March 2000
January 2000
1.5%
February 3, 2001
January 3, 2001
2.09%
January 2002
Note: Board will accept 50% in January and 50% by June 14, 2002
January 7, 2002
1.887%
January 2003
Note: Board will accept 50% in January and 50% by June 14, 2003
January 6, 2003
2.05%
1.892% to be collected in two installments:
1) 1.04% due February 23, 2004
2) 0.852% due June 14, 2004

Third installment of 0.158% subject to Board determination
January 23, 2004
2.05%
1.8675% to be collected in two installments:
1) 1.02% due February 14, 2005
2) 0.8475% due June 14, 2005

Third installment of 0.1825% subject to Board determination
January 10, 2005
2.5%
2.5% total can be paid in total or 1.25% to be collected in two installments:
1) 1.25% due February 14, 2006
2) 1.25% due June 14, 2006

After second installment Board will determine if a third installment is necessary
January 17, 2006
1.36%
Half of the total can be paid in two installments:
1) due January 31, 2007
2) due June 30, 2007
November 28, 2006
0.54% Half of the total can be paid in two installments:
1) due January 31, 2008

2) due June 16, 2008
November 29, 2007
0.94% Half of the total can be paid in two installments:
1) due January 31, 2009
2) due June 15, 2009
December 7, 2008
1.33% Half of the total can be paid in two installments:
1) due January 31, 2010
2) due June 15, 2010
December 10, 2009
1.05% Half of the total can be paid in two installments:
1) due January 31, 2011
2) due June 15, 2011
December 29, 2010
1% Half of the total can be paid in two installments:
1) due January 31, 2012
2) due June 15, 2012
December 29, 2011
1.24% Half of the total can be paid in two installments:
1) due January 31, 2013
2) due June 14, 2013
December 31, 2012
1.24% Half of the total can be paid in two installments:
1) due January 31, 2014
2) due June 14, 2014
December 31, 2013
1.5% Half of the total can be paid in two installments:
1) due January 31, 2015
2) due June 12, 2015
December 31, 2014
1.44% Half of the total can be paid in two installments:
1) due January 29, 2016
2) due June 30, 2016
December 23, 2015
​​1.37% Half of the total can be paid in two installments:
1) due January 30, 2017
2) due June 30, 2017
December 22, 2015

For additional Second Injury Fund information, go to the Board's website. Here are the current links:
 
Surcharge on Policy
HEA 2085 effective July 1, 1999 added a new section where insurance companies must show the assessment on the policy as a surcharge based on employer's premium. The surcharge can be different for each carrier because it is based on each carrier's prior year direct written premium (prior to 2007, it was based on indemnity losses) and current premium volume in the state. The ICRB has issued several advisory informational circulars (see table below) advising carriers how their surcharge factors could be derived. We did not make a filing for a rule change on this surcharge since the law specifically states the surcharge is not premium, and therefore, the DOI believes a filing is unnecessary. Also, for carriers who desire to assign a statistical code to the surcharge, it may be reported under statistical code 0935 "Second Injury Fund Surcharge."

Circulars Regarding SIF (in date order)

Date
Circular
Topic
07/01/1999
House Enrolled Act 2085
03/27/2000

2000-05

Second Injury Fund Assessment
01/23/2001

2001-01

Second Injury Fund Assessment
07/27/2001

2001-09

Second Injury Fund - Clarification
(includes table showing surcharge calculation examples)
09/21/2001

Second Injury Fund Surcharge Filing.pdf

Item Filing: Second Injury Fund Surcharge - Filing Memorandum
10/01/2001

2001-14

Second Injury Fund Surcharge - Statistical Code
02/17/2004

2004-01

Second Injury Fund Assessment & Policy Surcharge Factor
1/19/2005

2005-01

Second Injury Fund Assessment & Policy Surcharge Factor
1/31/2006
Second Injury Fund Assessment & Policy Surcharge Factor
01/15/2007
Second Injury Fund Assessment & Policy Surcharge Factor
06/13/2007
House Enrolled Act 1452
11/30/2007
Second Injury Fund Assessment & Policy Surcharge Factor
12/11/2008
Second Injury Fund Assessment & Policy Surcharge Factor
12/14/2009
Second Injury Fund Assessment & Policy Surcharge Factor
12/30/2010
Second Injury Fund Assessment & Policy Surcharge Factor
01/05/2012
Second Injury Fund Assessment & Policy Surcharge Factor
01/07/2013
Second Injury Fund Assessment & Policy Surcharge Factor
01/06/2014 ​2014-01 Second Injury Fund Assessment & Policy Surcharge Factor
01/13/2015 2015-01 Second Injury Fund Assessment & Policy Surcharge Factor
01/06/2016 2016-01 Second Injury Fund Assessment & Policy Surcharge Factor
01/05/2017 2017-01 Second Injury Fund Assessment & Policy Surcharge Factor


Other States
Over the time period from 1992-2000, 16 states abolished their second injury funds. It appears that some states believe that with the introduction of the Americans With Disabilities (ADA) Act, the need for SIFs goes away. Also, some states were concerned about increasing SIF assessments and unfunded liabilities. The idea behind the changes is to:
  • return responsibility of managing claims to insurance companies;
  • eventually end assessments against carriers or employers; and
  • stop the unfunded liability from further growth.

The 16 states* and the year action was taken are:
Alabama - 1992
Colorado - 1993
Connecticut - 1995
District of Columbia - 1998
Kansas - 1993
Kentucky - 1996
Maine - 1992
Minnesota - 1995
Nebraska - 1997
New Mexico - 1996
Oklahoma - 2000
South Dakota - 1999
Utah - 1994
Vermont - 1999

*source: American Insurance Association (AIA) position paper

Related Files

The material in this document has been prepared and shared for informational purposes only and should not be relied upon as legal advice on any particular situation.