Group Trust Self-Insurance

A self-insurance group trust is a method by which small - to medium - sized employers can pool their workers’ compensation liability with other employers. The group trust is the collective assumption of risk by a group of employers usually within the same industry or members of the same association.

What is a Self-Insurance Group Trust?

A self-insurance group trust is a method by which small - to medium - sized employers can pool their workers’ compensation liability with other employers.

The group trust is the joint and several assumption of risk by a group of employers usually within the same industry or members of the same association. Employers spread out their workers’ compensation risk among all the members of the group trust. Each member pays a premium to the group trust. All losses and expenses for the group trust are paid from the collected premiums. If the losses and expenses exceed the collected premium, then each member will be required to make additional contributions. However, each member may receive a surplus distribution if the losses and expenses for the group trust are less than the collected premium.

The success and proper functioning of a self-insurance group trust comes from its members’ commitment to reducing work place accidents and the efficient administration of its claims and general operations.

Self-Insured Employers: Responsible for Paying SIF Surcharge

The Second Injury Fund (SIF) is funded through a surcharge on employers’ workers’ compensation net deposits, net premiums or net assessments and net premium equivalent for individual self-insured employers. Each year by October 31, the Director of the Division of Workers’ Compensation estimates the benefits payable from the Second Injury Fund during the following calendar year in order to set the surcharge rate. The rate is based on a statutory formula to generate 110% of the moneys to be paid from the Second Injury Fund in the following calendar year less any moneys contained in the fund at the end of the previous calendar year. The rate has been capped at 3 percent.

The surcharge is collected quarterly from insurance companies and self insurers. In order to satisfy your obligation under Section 287.715 RSMo, employers/group trusts that have been authorized to self-insure in Missouri need to register with the SIF Surcharge Unit by sending us an e-mail at SIFsurcharge@labor.mo.gov or by calling us at 573-526-5756.

Read more about how to pay your surcharge

Self-Insured Employers: Responsible for WC Tax

The Division of Workers’ Compensation is funded through the Workers’ Compensation Administrative Tax (WC Tax)/ Workers’ Compensation Administrative Surcharge (Admin Surcharge). Pursuant to Section 287.690 RSMo and Section 287.710 RSMo, the WC Tax is a tax based upon the net deposits, net premiums or net assessments received, whether in cash or notes in this state, or on account of business done in this state by workers' compensation insurance companies or is based upon the net premium equivalents for those self-insured employers (individual self-insured employers and group trusts) authorized to self-insure in Missouri.

The rate for the WC Tax and the Admin Surcharge is the same for both and is set each year by October 31 by the Director of the Division of Workers’ Compensation. The WC Tax rate can vary between 0% and 2%; however, it is based on the funding needs of the Division and is calculated using the formula in the statute.

Each year, the authorized self-insured employers and group trusts file an annual report by March 1 (Table 1 Payroll and Premium Tax Report for self-insured employers) with the Missouri Department of Commerce and Insurance (DCI). Based on the premium certified by April 30 by the DCI the Missouri Department of Revenue (DOR) assesses the annual WC Tax to the self-insured employers. Any additional annual WC Tax is due to the DOR by June 1.

Self-insured employers are assessed quarterly prepayments by the DOR based on 25% of their prior year direct written workers’ compensation premiums (insurance companies) or premium equivalents (self-insured employers) multiplied by the current year tax rate. These quarterly installments or prepayments are due on March 1, June 1, September 1 and December 1 to the DOR. The March 1 assessment is a blank assessment which is completed by the insurance companies or self-insured employers based on the premiums or premium equivalents they reported on the annual report to the DIFP. The June 1 assessment serves three purposes: (1) it determines the annual tax due/overpayment; (2) it reconciles for the 1st quarterly installment made; and (3) it assesses the quarterly amount due for the 2nd quarter. Any credits that develop due to overpayments of the annual tax are credited against the quarterly amounts due starting with the June quarterly installment.

Each year group trusts are required to submit an experience modification factor. Group trusts should contact SI_PTax@insurance.mo.gov for information on how to submit the group experience modification factors.

At the end of each year, DIFP emails each self-insured group trust plan administration regarding their workers' compensation tax information which includes the Table 1 Payroll and Premium Tax Report. The Table 1 Payroll and the Premium Tax Reports are to be filed manually to:

Missouri Department of Commerce and Insurance
P.O. Box 690
Jefferson City, MO 65102-0609

All assessments will be emailed from the DIFP and are due to the DOR with payment by the due dates. Any questions regarding the WC Tax for group trusts should be directed to SI_PTax@insurance.mo.gov.

Advantages of a Self-Insurance Group Trust

• A self-insurance group trust can offer small - to medium - sized employers potential costs savings. If premiums exceed the losses and expenses of the group trust, with division approval, the group trust can refund the surplus to its members. The surplus is comparable to an underwriting profit for an insurance carrier.
• A member of a self-insurance group trust also has greater control over its workers’ compensation costs. A board of group trustees comprised of at least five members of the group trust elected by the membership is responsible for all the operations of the group trust. Members of a group trust have a sense of ownership and a shared motivation for cost reduction.
• A successful group trust offers its members active loss prevention programs and services. These programs provide employees with a better work environment and help improve the group trust’s performance through reduced losses.
• The group trust hires the third party claims administrator, which may help reduce overall cost cases.
• A group trust helps its members stabilize insurance costs. For the most part, the fixed costs associated with self-insurance group trusts do not follow the premium ups and downs that can be experienced with traditional insurance.

Disadvantages of a Self-Insurance Group Trust

• In the event the group trust fails to properly assess its members to meet the group trust’s losses and expenses, the group trust may collect additional assessments from the members to correct the deficit. With an insurance policy, the employer may or may not be responsible for payment of losses that exceed its premium.
• Each member is jointly and severally liable to all other members of the group trust for all liability under the Missouri Workers’ Compensation Law.
• To help ensure the solvency of the group trust, the Division has strict requirements that must be met by the group trust and its members.
• Exposures outside of Missouri must be insured through a traditional workers’ compensation policy or an acceptable alternative.

Regulatory Requirements

The Division of Workers’ Compensation has the regulatory authority over the group trust and the employers who participate in the group trust. The group trust and its members must abide by the Rules Governing Self-Insurance found at 8 CSR 50-3.010 and the statutory requirements set forth in Chapter 287, Revised Statutes of Missouri. Members of the group trust are required to pay the workers’ compensation tax and second injury fund surcharge as required of all Missouri employers.

Forming a New Group Trust

In order to form a new group trust, the following requirements must be met:

• At least 10 members with separate ownership;
• Combined net worth of no less than $5,000,000;
• Estimated annual premium of no less than $1,000,000;
• An acceptable safety program, claims administration system and group trust administration system in place; and
• Ability to provide security, to be determined by the Division, of no less than $500,000. The security must be held in the form of a surety bond, letter of credit, or the deposit of certain securities in escrow.

Upon meeting these requirements the employer will need to fill out all of the application forms found on this Web site and forward them to the Division. The forms must be accompanied by a $500 non-refundable application fee. There is a checklist in the online application that states exactly what is needed to be provided. Please contact the Division at 573-526-3692 with any questions.

How Do I Become a Member of an Existing Group Trust?

Many times a group trust will have minimum premium requirements and underwriting guidelines that must be satisfied before an employer can become a member of the group trust. To find out more about a self-insurance group trust, contact your trade association, business group or call the Missouri Division of Workers’ Compensation, Insurance Unit at 573-526-3692. See next section on how to obtain a listing of group trusts. After a group trust is formed, they have the authority to admit and terminate members pursuant to (8 CSR 50-3.010(5)(E)).

The Division must approve all new members of the Group Trust.

How do I obtain a listing of the Group Trusts?

The Division has listings of individual self-insured companies and group trusts in Missouri. Anyone interested in obtaining the listings should contact the Division at 573-526-3692. A formal written request and payment may be required. It can be sent to the following address:

Division of Workers’ Compensation
Insurance Unit
P.O. Box 58
Jefferson City, MO 65102-0058
Telephone: 573-526-3692

Reporting Requirements

General Reporting Requirement: Pursuant to 8 CSR 50-3.010(6)(A)10. The group trust shall notify the Division at least 30 days prior to any change in ownership, officers, trustees, operations, service company, address, security, or any other change that affects the group trust's self-insurance status. If a member of the group trust changes address or ownership, the group trust shall notify the Division within 30 days of the change.

Quarterly submissions to the Division:

• Loss Runs
• Unaudited financial statements

Annual submissions to the Division:

• Audited Financials, due 150 days after the end of the fiscal year
• Rate filings, to be submitted on the form Proposed Rates for Workers' Compensation Insurance Group Self-Insurance, and accompanied by a report of the estimated annual premium and projected expenses - the Division requests that the rates be submitted 15 days prior to implementation
• Actuarial report
• Insurance certificates including excess insurance on the form WC-121, E&O for Claims Administrators and Plan Administrators, Fidelity Bond/Employer Dishonesty for Claims Administrators and Plan Administrators and Trustees, and D&O for the Group trust.
• Annual Report submitted on the form Annual Report/Claims Development Reports with verification of membership and member experience modification ratings, due 150 days after the end of the year.

As they occur submissions to the Division:

• Board minutes, due 30 days after the board meeting
• Name or address changes
• Member terminations

Will I be Subject to Audits?

Yes, the Division has the authority to conduct claims, safety and other audit deemed necessary and appropriate by the Division. The Division performs four different types of audits: compliance audits, reserve audits, complaint audits, and safety audits.

Compliance Audits are random or specific audits that provide the Division with information on how your workers’ compensation program processes injured employee’s cases and whether the process is in compliance with the Missouri Statues, rules and regulations.

Reserve Audits are generated to determine if the self-insurer has sufficient amount of security based on their claim exposure with the state of Missouri.

Complaint Audits are generated if the Division receives repeated complaints on the same issue or receives a complaint that is indicative of non-compliance issues.

Safety Audits are conducted to review all written safety and health programs as well as the credentials and experience of loss control and safety personnel, the structure of, and resources available to, the loss control or safety department, and to provide an on-site audit of the implementation of the employers’ safety program.