Employees needing to file compensation claims may have a longer commute to do so starting next summer.
According to a letter to Fort Smith Mayor Sandy Sanders, the Arkansas Workers’ Compensation Commission is considering closing either its Fort Smith or Springdale offices as a result of a $135 million unfunded liability.
“This decision, unfortunately, was made necessary by the fact that the AWCCs’ Death and Permanent Disability Trust Fund is faced with an approximate $135 million unfunded liability,” wrote AWCC Chairman Watson Bell. “Although they Governor has kept management and labor apprised of this status for some time now, they have failed to agree on any of the proposed resolutions put forth, leaving no option to address this issue other than these closings.”
Watson said the General Assembly’s failure to address the $135 million liability contributed to the closings, as well.
“Because the issue of the shortfall was not addressed in the 2013 General Session of the Arkansas Legislature, we have been forced to adopt a strategic financial plan that includes closing one of the offices in Northwest Arkansas as a first step. Additional steps could include a reduction in force.”
The Fort Smith office employees six people while the Springdale office employees three, according to AWCC Assistant CEO James Daniel. He said plans to do not call for layoffs at this time.
“We would not lay anyone off. I am not clear on (where they would work should one of the offices close). I would presume they would work out of whichever office is kept open,” he said. “I would have to research that.”
Daniel said of the 6,672 claims filed with the commission during fiscal year ending June 30, Sebastian County had 322 claims filed versus 419 filed in Washington County.
The determination on which office to close will not only be made based on the number of claims in the offices’ respective counties, he said, adding that a lot of filings come in from other counties and the majority of filings are done by mail or computer.
The reason for the shortfall was due to the increase in claims and the amount paid in weekly benefits while the tax percentage on workers’ compensation insurance plans has remained at 3% for the last 40 years, Daniel said.
He also pointed to a study he wrote in 2011, titled “The Case for a Premium Tax Increase” that explained how insurance companies have not had their maximum liabilities increased since 1987.
“The maximum weekly benefit had been increased to $154 in 1987, and at that time Act 1015 of 1987 tied the maximum weekly benefit to the state average weekly wage. Subsequently, although the maximum liability of the employer stayed at $75,000, the maximum weekly benefit increased each year as the state eaverage weekly increased each year. By 2007, the maximum weekly benefit had increased to $504. That meant that the employer or carrier, still at the $75,000 maximum liability, would only pay the disabled worker for less than 3 years before the Trust Fund took over.”
Daniel said the only funding the commission receives is the 3% from the premium tax.
“We don’t get sales tax revenue. Everything we get is when a worker’s compensation policy is issued. Three percent of that policy is forwarded by the insurance company to us. We have to make a decision as to how much will go to run agency and how much to the trust fund. There were years where we didn’t put any in the trust fund and years in the past when we didn’t charge the entire 3% because we didn’t need it.”
He said now about 1.5% of the tax revenue goes to running the commission, while the rest of the money, 98.5% of the funds taken in, go to the trust fund.
“We’ve done about all we can do,” he said, adding that the commission has reduced its employee number from 140 individuals to 105.
“We did that all by attrition, not laying off. We just didn’t re-hire when people quit or retired.”
Fort Smith City Administrator Ray Gosack said his office would work with the commission to highlight the city’s need a continued presence by the commission.
“Having an office 45 miles away makes it much more difficult for citizens who need service to attend hearings or get service,” he said, adding that once the decision is made, it would be final.
“I don’t have an idea on when they’ll make a decision and to my knowledge there is no appeals process. The commission will make the final decision.”
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