H.B. 14

1

SELF INSURED PREMIUM ASSESSMENT
2 1997 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: Gerry A. Adair
5 AN ACT RELATING TO LABOR; AMENDING PROVISION ON ASSESSMENT PAID BY
6 EMPLOYERS WHO PAY WORKERS COMPENSATION DIRECTLY; MAKING
7 TECHNICAL CORRECTIONS; PROVIDING FOR RETROSPECTIVE OPERATION; AND
8 PROVIDING AN EFFECTIVE DATE.
9 This act affects sections of Utah Code Annotated 1953 as follows:
10 AMENDS:
11 35-1-53 (Renumbered 07/01/97), as last amended by Chapter 205, Laws of Utah 1995
12 35A-3-202 (Effective 07/01/97), as renumbered and amended by Chapter 240, Laws of Utah
13 1996
14 Be it enacted by the Legislature of the state of Utah:
15 Section 1. Section 35-1-53 is amended to read:
16 35-1-53 (Renumbered 07/01/97). Assessment on employers and counties, cities,
17 towns, or school districts paying compensation direct.
18 (1) (a) An employer, including a county, city, town, or school district, who by authority
19 of the [commission] Industrial Commission under Section 35-1-46 is authorized to pay
20 compensation direct shall pay annually, on or before March 31, an assessment [of the same
21 percentage as required by law to be paid by an insurance company upon its premiums, based upon
22 an amount equivalent to premiums, that would be paid by the employer, if insured in the Workers'
23 Compensation Fund of Utah; the assessment is] in accordance with this section and rules made by
24 the Industrial Commission under this section.
25 (b) The assessment required by Subsection (1)(a) is to be [computed and] collected by the
26 State Tax Commission and paid by [it] the State Tax Commission into the state treasury as
27 provided in Subsection 59-9-101(2).

1 (c) The assessment under Subsection (1)(a) shall be based on a total calculated premium
2 multiplied by the premium assessment rate established pursuant to Subsection 59-9-101(2).
3 (d) The total calculated premium, for purposes of calculating the assessment under
4 Subsection (1)(a), shall be calculated by:
5 (i) multiplying the total of the standard premium for each class code calculated in
6 Subsection (1)(e) by the employer's experience modification factor; and
7 (ii) multiplying the total under Subsection (1)(d)(i) by a safety factor determined under
8 Subsection (1)(g).
9 (e) A standard premium shall be calculated by:
10 (i) multiplying the prospective loss cost for the year being considered, as filed with the
11 insurance department pursuant to Section 31A-19-414, for each applicable class code by
11a h [ 1.15 ] 1.10 h to
12 determine the manual rate for each class code; and
13 (ii) multiplying the manual rate for each class code under Subsection (1)(e)(i) by each
14 $100 of the employer's covered payroll for each class code.
15 (f) (i) Each employer paying compensation direct shall annually obtain the experience
16 modification factor required in Subsection (1)(d)(i) by using the rate service organization
17 designated by the insurance commissioner in Subsection 31A-19-407(3).
18 (ii) If an employer's experience modification factor under Subsection (1)(f)(i) is less than
19 0.50, the employer shall use an experience modification factor of 0.50 in determining the total
20 calculated premium.
21 (g) To provide incentive for improved safety, the safety factor required in Subsection
22 (1)(d)(ii) shall be determined based on the employer's experience modification factor as follows:
23 EXPERIENCE
24 MODIFICATION FACTOR SAFETY FACTOR
25 Less than or equal to 0.90 0.56
26 Greater than 0.90 but less than or equal to 1.00 0.78
27 Greater than 1.00 but less than or equal to 1.10 1.00
28 Greater than 1.10 but less than or equal to 1.20 1.22
29 Greater than 1.20 1.44
30 (h) (i) A premium or premium assessment modification other than a premium or premium
31 assessment modification under this section may not be allowed.

lilac-January 24, 1997

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1 (ii) If an employer paying compensation direct fails to obtain an experience modification
2 factor as required in Subsection (1)(f)(i) within the reasonable time period established by rule by
3 the State Tax Commission, the State Tax Commission shall use an experience modification factor
4 of 2.00 and a safety factor of 2.00 to calculate the total calculated premium for purposes of
5 determining the assessment.
6 (iii) Prior to calculating the total calculated premium under Subsection (1)(h)(ii), the State
7 Tax Commission shall provide the employer with written notice that failure to obtain an
8 experience modification factor within a reasonable time period, as established by rule by the State
9 Tax Commission:
10 (A) shall result in the State Tax Commission using an experience modification factor of
11 2.00 and a safety factor of 2.00 in calculating the total calculated premium for purposes of
12 determining the assessment; and
13 (B) may result in the Industrial Commission revoking the employer's right to pay
14 compensation direct.
15 (i) The Industrial Commission may immediately revoke an employer's certificate issued
16 under Section 35-1-46 that permits the employer to pay compensation direct if the State Tax
17 Commission assigns an experience modification factor and a safety factor under Subsection (1)(h)
18 because the employer failed to obtain an experience modification factor.
19 [(b) An] (2) Notwithstanding the annual payment requirement in Subsection (1)(a), an
20 employer whose total assessment obligation under Subsection (1) for the preceding year was
21 $10,000 or more shall pay the assessment in quarterly installments in the same manner provided
22 in Section 59-9-104 and subject to the same penalty provided in Section 59-9-104 for not paying
23 or underpaying an installment.
24 [(2)] (3) The State Tax Commission shall have access to all the records of [the office of]
25 the Industrial Commission for the purpose of [computing] auditing and collecting any amounts
26 described in this section.
27 (4) (a) A review of appropriate use of job class assignment and calculation methodology
28 may be conducted as directed by the Industrial Commission at any reasonable time as a condition
29 of the employer's certification of paying compensation direct.
30 (b) The State Tax Commission shall make any records necessary for the review available
31 to the Industrial Commission.

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1 (c) The Industrial Commission shall make the results of any review available to the State
2 Tax Commission.
3 Section 2. Section 35A-3-202 is amended to read:
4 35A-3-202 (Effective 07/01/97). Assessment on employers and counties, cities, towns,
5 or school districts paying compensation direct.
6 (1) (a) An employer, including a county, city, town, or school district, who by authority
7 of the department under Section 35A-3-201 is authorized to pay compensation direct shall pay
8 annually, on or before March 31, an assessment [of the same percentage as required by law to be
9 paid by an insurance company upon its premiums, based upon an amount equivalent to premiums,
10 that would be paid by the employer, if insured in the Workers' Compensation Fund of Utah] in
11 accordance with this section and rules made by the department under this section.
12 (b) The assessment required by Subsection (1)(a) is to be [computed and] collected by the
13 State Tax Commission and paid by the State Tax Commission into the state treasury as provided
14 in Subsection 59-9-101(2).
15 (c) The assessment under Subsection (1)(a) shall be based on a total calculated premium
16 multiplied by the premium assessment rate established pursuant to Subsection 59-9-101(2).
17 (d) The total calculated premium, for purposes of calculating the assessment under
18 Subsection (1)(a), shall be calculated by:
19 (i) multiplying the total of the standard premium for each class code calculated in
20 Subsection (1)(e) by the employer's experience modification factor; and
21 (ii) multiplying the total under Subsection (1)(d)(i) by a safety factor determined under
22 Subsection (1)(g).
23 (e) A standard premium shall be calculated by:
24 (i) multiplying the prospective loss cost for the year being considered, as filed with the
25 insurance department pursuant to Section 31A-19-414, for each applicable class code by
25a h [1.15 ] 1.10 h to
26 determine the manual rate for each class code; and
27 (ii) multiplying the manual rate for each class code under Subsection (1)(e)(i) by each
28 $100 of the employer's covered payroll for each class code.
29 (f) (i) Each employer paying compensation direct shall annually obtain the experience
30 modification factor required in Subsection (1)(d)(i) by using the rate service organization
31 designated by the insurance commissioner in Subsection 31A-19-407(3).

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1 (ii) If an employer's experience modification factor under Subsection (1)(f)(i) is less than
2 0.50, the employer shall use an experience modification factor of 0.50 in determining the total
3 calculated premium.
4 (g) To provide incentive for improved safety, the safety factor required in Subsection
5 (1)(d)(ii) shall be determined based on the employer's experience modification factor as follows:
6 EXPERIENCE
7 MODIFICATION FACTOR SAFETY FACTOR
8 Less than or equal to 0.90 0.56
9 Greater than 0.90 but less than or equal to 1.00 0.78
10 Greater than 1.00 but less than or equal to 1.10 1.00
11 Greater than 1.10 but less than or equal to 1.20 1.22
12 Greater than 1.20 1.44
13 (h) (i) A premium or premium assessment modification other than a premium or premium
14 assessment modification under this section may not be allowed.
15 (ii) If an employer paying compensation direct fails to obtain an experience modification
16 factor as required in Subsection (1)(f)(i) within the reasonable time period established by rule by
17 the State Tax Commission, the State Tax Commission shall use an experience modification factor
18 of 2.00 and a safety factor of 2.00 to calculate the total calculated premium for purposes of
19 determining the assessment.
20 (iii) Prior to calculating the total calculated premium under Subsection (1)(h)(ii), the State
21 Tax Commission shall provide the employer with written notice that failure to obtain an
22 experience modification factor within a reasonable time period, as established by rule by the State
23 Tax Commission:
24 (A) shall result in the State Tax Commission using an experience modification factor of
25 2.00 and a safety factor of 2.00 in calculating the total calculated premium for purposes of
26 determining the assessment; and
27 (B) may result in the department revoking the employer's right to pay compensation direct.
28 (i) The department may immediately revoke an employer's certificate issued under Section
29 35A-3-201 that permits the employer to pay compensation direct if the State Tax Commission
30 assigns an experience modification factor and a safety factor under Subsection (1)(h) because the
31 employer failed to obtain an experience modification factor.

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1 [(c) An] (2) Notwithstanding the annual payment requirement in Subsection (1)(a), an
2 employer whose total assessment obligation under Subsection (1)(a) for the preceding year was
3 $10,000 or more shall pay the assessment in quarterly installments in the same manner provided
4 in Section 59-9-104 and subject to the same penalty provided in Section 59-9-104 for not paying
5 or underpaying an installment.
6 [(2)] (3) The State Tax Commission shall have access to all the records of [the office of]
7 the department for the purpose of [computing] auditing and collecting any amounts described in
8 this section.
9 (4) (a) A review of appropriate use of job class assignment and calculation methodology
10 may be conducted as directed by the department at any reasonable time as a condition of the
11 employer's certification of paying compensation direct.
12 (b) The State Tax Commission shall make any records necessary for the review available
13 to the department.
14 (c) The department shall make the results of any review available to the State Tax
15 Commission.
16 Section 3. Retrospective operation.
17 This act has retrospective operation to January 1, 1997.
18 Section 4. Effective date.
19 h (1) h If approved by two-thirds of all the members elected to each house, h [this act
19a takes ] THE AMENDMENTS TO SECTION 35-1-53 IN THIS ACT TAKE h effect
20 upon approval by the governor, or the day following the constitutional time limit of Utah
21 Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto, the
22 date of veto override.
22a h (2) THE AMENDMENTS TO SECTION 35A-3-202 IN THIS ACT TAKE EFFECT ON JULY 1, 1997. h



Legislative Review Note
as of 11-18-96 11:01 AM

A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

lilac-January 24, 1997

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