Ohio Workers’ Comp Fund Returning $1 Billion in Dividends to Employers

Ohio’s governor and the state workers’ compensation fund want to return $1 billion in dividends to Ohio businesses, bolster workplace safety initiatives, and modernize the way employers pay into the fund.

A higher-than-expected return on investments is making possible the $1 billion dividend distribution that, if approved by the board of the Ohio Bureau of Workers’ Compensation, would be given back to employers in a June-July time frame, according to BWC Administrator/CEO Steve Buehrer.

Buehrer said the one-time dividend is one of the largest ever distributed by the BWC. It is part of a three-pronged package of proposals aimed at stimulating the state’s economy.

Included in that package is the conversion of the workers’ comp system from a retrospective payment system to a prospective one, at which time Ohio employers would benefit from $900 million in premium credits.

A tripling of the BWC’s planned investment in its safety education program — from $5 million to $15 million — is the third part of the proposal.

All 210,000 customers of the Ohio BWC — both public and private employers — would benefit from the returned dividend, Gov. John R. Kasich said in announcing the proposal, which is part of the governor’s effort to promote job creation in the state.

“Our greatest moral purpose is job creation because it strengthens families, strengthens our communities and gives people the chance to reach their full potential,” Kasich said. “Our efforts to create a jobs-friendly climate are paying off and Ohio has gone from having lost 400,000 jobs to creating more than 115,000 jobs.

In 2009, the board of the BWC established a ratio for determining what the “proper balance in the fund might be,” Buehrer said during a phone call with reporters on May 2. “Over the last several years that balance has grown to the point that we are not only on the high end of our proposed ratio … but in effect, above it.”

The dividend must be approved by the BWC’s board, which next meets at the end of May. Two board members expressed their support for the proposals during the phone call with reporters.

“This announcement certainly will help businesses,” said Tracie Sanchez, a BWC board member representing business interests.

“This supports growth in Ohio businesses no matter the size,” said Sanchez, who is corporate president of Lima Palette Company in Lima, Ohio. “It places the dollars back into businesses.”

Likewise, David Caldwell, a longtime member of the United Steel Workers of America and the labor representative on BWC’s board, said he “can’t say enough positive things about” the current focus on the injured worker and the proposed increase in safety grants.

“I truly believe tripling of the grants will definitely decrease the number of accidents and injuries,” Caldwell said.

Along with significantly increasing the amount of money available to employers through the safety grants, the plan would also make it easier for employers to participate in the safety program, Buehrer said.

The governor and the BWC plan to ask Ohio’s General Assembly to pass legislation that would authorize the fund to switch to a prospective payment system.

“Ohio is in today the extreme minority of states — I believe there are only three — that do a retrospective payment,” Buehrer said. “Ohio would seek to convert to a prospective payment system. We would join basically all private insurers all over the country, and state funds too.”

Once authorized by the General Assembly, Buehrer said the conversion would likely take place in July 2014. At that time, employers “would receive a credit for six months of their retrospective payments that would be otherwise due at that time. And they would then make their payments for the prospective six months going forward. This would be a $900 million premium credit for employers at time of conversion,” he said.

In addition, conversion to the prospective system is anticipated to result in a base premium cut of 2 percent for private sector employers and 4 percent for public employers, Buehrer said.

Buehrer said the proposed dividend is unrelated to the nearly $860 million the BWC was ordered by an Ohio court to repay to a group of employers who brought suit against the agency for overcharges in previous years.

That money was placed in reserve in December 2012, Buehrer said. However, he added the BWC is appealing the ruling.

The BWC currently has net assets of about $8.3 billion and the state insurance fund has about $7.3 billion in assets, Buehrer said.