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Illinois Chamber Lawsuit Settlement Brings $27 Million RAF Savings

More news from the Illinois Chamber of Commerce:

Insurers and self-insured employers will see a direct savings of as much as $27 million beginning January 1, 2011 from the Illinois Chamber’s lawsuit settlement with the State of Illinois regarding the workers’ compensation fee established in 2003.

One element of the settlement was payment of an approximately $13 million loan to the State General Revenue Fund for payment of benefits from the Rate Adjustment Fund (RAF). Moneys collected for the RAF by the Illinois Workers’ Compensation Commission (IWCC) had been building up since the assessment had been increased in 2005. However, the RAF had an outstanding liability to the GRF of as much as $19 million that had not been paid.

Section 8(e) of the Workers’ Compensation Act in part provides, “On August 1, 1996 and on February 1 and August 1 of each subsequent year, the Commission shall examine the special fund designated as the “Rate Adjustment Fund” and when, after deducting all advances or loans made to said fund, the amount therein is $4,000,000, the amount required to be paid by employers pursuant to paragraph (f) of Section 7 shall be reduced by one-half. When the Rate Adjustment Fund reaches the sum of $5,000,000 the payment therein shall cease entirely. However, when said Rate Adjustment Fund has been reduced to $3,000,000 the amounts required by paragraph (f) of Section 7 shall be resumed in the manner herein provided.

With the loan paid, the RAF balance exceeds $5 million and a cash flow analysis provided to the Chamber by the Commission projects that there will be an RAF assessment holiday for the next 3 cycles or 18 months. The savings will be approximately $27 million.

For each individual insurer and self-insured employer the savings equates to 1.25% of compensation benefits paid in the prior six months. (see Section 7(f) of the Act)

The Commission does advise that Second Injury Fund assessments will be made and sent as required.

If you would like more information, please contact G. Steven Murdock or Scott McCain, who are our firm’s liaisons to the Illinois Chamber of Commerce Employment Law Council’s Workers Compensation Committee.

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