California DIR Approved 2014/15 Alternative Security Program For Employers In California Who Self-Insure

Today, the California Department of Industrial Relations (DIR) announced that it has approved implementation of the 2014/15 Alternative Security Program (ASP), which it boasts that this “first-in-the-nation, innovative program” “frees $7.54 billion in working capital and provides self-insured California businesses greater financial flexibility.”

All employers in California are required to have workers’ compensation insurance to protect themselves and workers, and to minimize the impact of work-related injuries and illnesses. Meeting California’s requirement that all employers in California have workers’ compensation insurance can be done either by buying an insurance policy, or through obtaining authority from DIR’s Office of Self Insurance Plans (OSIP) to self-insure the employer’s workers’ compensation liabilities.

OSIP reports Self Insurance by the Numbers – 2013 Annual Report Statistics as follows:

• $177 Billion total self-insured payroll
• 4 Million CA Workers covered by self-insurance
• 1 in 4 CA Workers is covered by self-insurance
• 9,849 CA Employers are active self-insurers

The ASP, which is operated by the non-profit California Self Insurers’ Security Fund with the DIR, provides financial guarantees to replace security deposits required to collateralize self-insured workers’ compensation liabilities. Otherwise, if an employer is self-insured, it is required to maintain a deposit to collateralize its risk in an amount equal to estimated liabilities as determined by an actuary, e.g., cash, letters of credit, surety bonds or securities. An ASP member’s cash or line of credit is freed up, enabling them to invest these monies into its business.

Additional Source: DIR News Release No. 2014-56, California’s Alternative Security Program Frees $7.5 Billion in Working Capital for Businesses (Jul. 2, 2014); Office of Self Insurance Plans