Explanation of Second Injury Fund and covered benefits
The Second Injury Fund (SIF) was enacted in 1949 and is established under Indiana Code 22-3-3-13.
The following benefits are payable from the SIF:
- 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.
- 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.
- 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.
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.
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 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 annually. 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.”
SIF Policy Surcharge
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 and current premium volume in the state. The ICRB has issued several advisory informational circulars 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.
For carriers who desire to assign a statistical code to the surcharge, it may be reported under statistical code 0935 “Second Injury Fund Surcharge.”