Newsline No. 03-12
May 24, 2012
OSIP releases regulatory guidance on developing actuarially based rate plans to self-insured groups
The California Department of Industrial Relations’ (DIR) Office of Self Insurance Plans (OSIP) today issued a new regulatory guidance letter to self-insurance groups (SIGs) in California. This letter provides guidance to SIGs on surplus funding, actuarial reports to forecast losses, and calculation of rates charged to members.
There are 31 SIGs in California, representing such businesses as agriculture, construction, restaurants, education, finance, hospitality and transportation. SIGs are required to submit a formal rate plan to OSIP demonstrating that rates charged to members will be sufficient to cover the ultimate cost of claims 80 percent of the time.
“The letter includes best practices to develop an actuarial based rate plan that will provide proper levels of funding for the SIG,” said OSIP Chief Jon Wroten. “Establishing a proper rate plan is a critical first step for SIGs to avoid under-funding situations that can result in a deficit.”
On April 9, OSIP announced it was further tightening oversight and regulations for SIGs to ensure they are properly funded to cover future liabilities, protecting both employers and employees. OSIP authorizes qualified employers to provide their own coverage for workers’ compensation liabilities. All SIGs must be approved by OSIP and are required to post a security deposit covering a minimum of 135 percent of their estimated future liabilities.
The letter is posted on OSIP’s website, which includes other resources and audit tools designed to help self-insured employers and their third-party administrators understand the auditing process. The guidance letter can be found in the “What’s New” section at www.dir.ca.gov\SIP.
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