bill turning workers’ comp taxes into surcharges

The text as introduced · 3,341 words

89R2192 RDR-F

By: Hefner
H.B. No. 4483

A BILL TO BE ENTITLED

AN ACT

relating to the funding mechanism for the regulation of workers'

compensation and workers' compensation insurance; authorizing

surcharges.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. The heading to Title 3, Insurance Code, is

amended to read as follows:

TITLE 3. DEPARTMENT FUNDS, FEES, SURCHARGES, AND TAXES

SECTION 2. The heading to Subtitle C, Title 3, Insurance

Code, is amended to read as follows:

SUBTITLE C. INSURANCE MAINTENANCE TAXES AND SURCHARGES

SECTION 3. Section 201.001(a), Insurance Code, is amended

to read as follows:

(a) The Texas Department of Insurance operating account is

an account in the general revenue fund. The account includes the

following:

(1) taxes , surcharges, and fees received by the

commissioner or comptroller that are required by this code or other

law to be deposited to the credit of the account; and

(2) money or credits received by the department or

commissioner from sales, reimbursements, and fees authorized by law

other than this code, including money or credits received from:

(A) charges for providing copies of public

information under Chapter 552, Government Code;

(B) the disposition of surplus or salvage

property under Subchapters C and D, Chapter 2175, Government Code;

(C) the sale of publications and other printed

material under Section 2052.301, Government Code;

(D) miscellaneous transactions and sources under

Section 403.011 or 403.012, Government Code;

(E) charges for postage spent to serve legal

process under Section 17.025, Civil Practice and Remedies Code;

(F) the comptroller involving warrants for which

payment is barred under Chapter 404, Government Code;

(G) sales or reimbursements authorized by the

General Appropriations Act; and

(H) the sale of property purchased with money

from the account or a predecessor fund or account.

SECTION 4. Section 251.001(a), Insurance Code, is amended

to read as follows:

(a) The commissioner shall annually determine the rate of

assessment of each maintenance tax or workers' compensation

surcharge imposed under this subtitle.

SECTION 5. Section 251.002, Insurance Code, is amended to

read as follows:

Sec. 251.002. DUTY TO ADVISE COMPTROLLER OF RATE. The

commissioner shall advise the comptroller of the applicable rate of

assessment of a maintenance tax or workers' compensation surcharge

not later than the 45th day before the due date of the tax or

surcharge report for the period for which that tax or surcharge is

due.

SECTION 6. Section 251.003, Insurance Code, is amended to

read as follows:

Sec. 251.003. EFFECT OF LATE ADVISEMENT OF

RATE. (a) Except as provided by Subsection (b), if the

commissioner does not advise the comptroller of the applicable rate

of assessment of a maintenance tax or workers' compensation

surcharge by the date required by Section 251.002, the rate of

assessment is the rate applied in the previous tax or surcharge

period.

(b) If the commissioner advises the comptroller of the

applicable rate of assessment of a maintenance tax or workers'

compensation surcharge after the tax or surcharge has been

assessed, the comptroller shall:

(1) advise each taxpayer or surcharge payer in writing

of the amount of any additional taxes or surcharges due; or

(2) refund any excess taxes or surcharges paid.

SECTION 7. The heading to Section 251.004, Insurance Code,

is amended to read as follows:

Sec. 251.004. DEPOSIT OF MAINTENANCE TAXES AND SURCHARGES .

SECTION 8. Section 251.004(a), Insurance Code, is amended

to read as follows:

(a) Except as provided by Subsection (b), maintenance taxes

collected under this subtitle and surcharges collected under

Chapter 255 shall be deposited in the general revenue fund and

reallocated to the Texas Department of Insurance operating account.

SECTION 9. Chapter 255, Insurance Code, is amended to read

as follows:

CHAPTER 255. WORKERS' COMPENSATION INSURANCE

Sec. 255.001. SURCHARGE [ MAINTENANCE TAX ] IMPOSED. (a) A

surcharge [ maintenance tax ] is imposed on each authorized insurer

with gross premiums subject to the surcharge [ taxation ] under

Section 255.003, including a:

(1) stock insurance company;

(2) mutual insurance company;

(3) reciprocal or interinsurance exchange; and

(4) Lloyd's plan.

(b) The surcharge [ tax ] required by this chapter is in

addition to [ other ] taxes or other surcharges imposed that are not

in conflict with this chapter.

Sec. 255.002. MAXIMUM RATE; ANNUAL ADJUSTMENT. (a) The

sum of the rates [ rate ] of assessment for the surcharge imposed by

this chapter and the surcharges imposed by Chapters 403 and 405,

Labor Code, set by the commissioner , may not exceed 2.7 [ 0.6 ]

percent of the gross premiums subject to surcharges [ taxation under

Section 255.003 ].

(b) The commissioner shall annually adjust the rate of

assessment of the surcharge [ maintenance tax ] so that the surcharge

[ tax ] imposed that year, together with any unexpended funds

produced by the surcharge [ tax ], produces the amount the

commissioner determines is necessary to pay the expenses during the

succeeding year of regulating workers' compensation insurance.

Sec. 255.003. PREMIUMS SUBJECT TO SURCHARGE [ TAXATION ].

(a) An insurer shall pay the surcharge [ maintenance taxes ] under

this chapter on the correctly reported gross workers' compensation

insurance premiums from writing workers' compensation insurance in

this state, including the modified annual premium of a policyholder

that purchases an optional deductible plan under Subchapter E,

Chapter 2053.

(b) The rate of assessment for a surcharge shall be applied

to the modified annual premium before application of a deductible

premium credit.

Sec. 255.004. SURCHARGE [ MAINTENANCE TAX ] DUE DATES. (a)

The insurer shall pay the surcharge [ maintenance tax ] annually or

semiannually.

(b) The comptroller may require semiannual payment only

from an insurer whose surcharge [ maintenance tax ] liability under

this chapter for the previous surcharge [ tax ] year was at least

$2,000.

Sec. 255.005. RECOVERY OF SURCHARGE. An insurer may

recover a surcharge under this chapter by:

(1) reflecting the surcharge as an expense in a rate

filing required under this code; or

(2) charging the insurer's policyholders.

SECTION 10. Section 402.076(b), Labor Code, is amended to

read as follows:

(b) The operations of the division under this section are

funded through the surcharge [ maintenance tax ] assessed under

Section 403.002.

SECTION 11. Section 403.001(a), Labor Code, is amended to

read as follows:

(a) Except as provided by Sections 403.006, 403.007, and

403.008, or as otherwise provided by law, money collected under

this subtitle, including surcharges and advance deposits for

purchase of services, shall be deposited in the general revenue

fund of the state treasury to the credit of the Texas Department of

Insurance operating account.

SECTION 12. Section 403.002, Labor Code, is amended to read

as follows:

Sec. 403.002. SURCHARGES [ MAINTENANCE TAXES ]. (a) Each

insurance carrier, other than a governmental entity, shall pay an

annual surcharge [ maintenance tax ] to pay the costs of

administering this subtitle and to support the prosecution of

workers' compensation insurance fraud in this state.

(b) The rate of assessment is applied to [ may not exceed an

amount equal to two percent of ] the correctly reported gross

workers' compensation insurance premiums, including the modified

annual premium of a policyholder that purchases an optional

deductible plan under Subchapter E, Chapter 2053 [ Article 5.55C ],

Insurance Code. The rate of assessment shall be applied to the

modified annual premium before application of a deductible premium

credit.

(c) A workers' compensation insurance company is assessed

the surcharge [ taxed ] at the rate established under Section 403.003

and as limited by Section 255.002(a), Insurance Code . The

surcharge [ tax ] shall be collected in the manner provided for

collection of other surcharges [ taxes ] on gross premiums from a

workers' compensation insurance company as provided in Chapter 255,

Insurance Code.

(d) Each certified self-insurer shall pay a fee and

surcharge [ maintenance taxes ] as provided by Subchapter F, Chapter

407.

SECTION 13. The heading to Section 403.003, Labor Code, is

amended to read as follows:

Sec. 403.003. RATE OF SURCHARGE [ ASSESSMENT ].

SECTION 14. Section 403.003(a), Labor Code, is amended to

read as follows:

(a) The commissioner of insurance shall set and certify to

the comptroller the rate of the surcharge, [ maintenance tax

assessment ] taking into account:

(1) any expenditure projected as necessary for the

division and the office of injured employee counsel to:

(A) administer this subtitle during the fiscal

year for which the rate of assessment is set; and

(B) reimburse the general revenue fund as

provided by Section 201.052, Insurance Code;

(2) projected employee benefits paid from general

revenues;

(3) a surplus or deficit produced by the surcharge

[ tax ] in the preceding year;

(4) revenue recovered from other sources, including

reappropriated receipts, grants, payments, fees, gifts, and

penalties recovered under this subtitle; and

(5) expenditures projected as necessary to support the

prosecution of workers' compensation insurance fraud.

SECTION 15. Section 403.004, Labor Code, is amended to read

as follows:

Sec. 403.004. COLLECTION OF SURCHARGE [ TAX ] AFTER

WITHDRAWAL FROM BUSINESS. The commissioner or the commissioner of

insurance immediately shall proceed to collect surcharges [ taxes ]

due under this chapter from an insurance carrier that withdraws

from business in this state, using legal process as necessary.

SECTION 16. Section 403.005, Labor Code, is amended to read

as follows:

Sec. 403.005. SURCHARGE [ TAX ] RATE. The commissioner of

insurance shall annually adjust the rate of assessment of the

surcharge [ maintenance tax ] imposed under Section 403.003 so that

the surcharge [ tax ] imposed that year, together with any unexpended

funds produced by the surcharge [ tax ], produces the amount the

commissioner of insurance determines is necessary to pay the

expenses of administering this subtitle.

SECTION 17. Chapter 403, Labor Code, is amended by adding

Section 403.0055 to read as follows:

Sec. 403.0055. RECOVERY OF SURCHARGE. An insurer may

recover a surcharge under this chapter by:

(1) reflecting the surcharge as an expense in a rate

filing required under the Insurance Code; or

(2) charging the insurer's policyholders.

SECTION 18. Section 403.007(e), Labor Code, is amended to

read as follows:

(e) If the commissioner determines that the funding under

Subsection (a) is not adequate to meet the expected obligations of

the subsequent injury fund established under Section 403.006, the

fund shall be supplemented by the collection of a surcharge

[ maintenance tax ] paid by insurance carriers, other than a

governmental entity, as provided by Sections 403.002 and 403.003.

The rate of assessment must be adequate to provide 120 percent of

the projected unfunded liabilities of the fund for the next

biennium as certified by an independent actuary or financial

advisor.

SECTION 19. The heading to Section 405.003, Labor Code, is

amended to read as follows:

Sec. 405.003. FUNDING; SURCHARGE AND RECOVERY OF SURCHARGE

BY INSURERS [ MAINTENANCE TAX ].

SECTION 20. Section 405.003, Labor Code, is amended by

amending Subsections (a), (b), (c), and (d) and adding Subsection

(g) to read as follows:

(a) The group's duties under this chapter are funded through

the assessment of a surcharge [ maintenance tax ] collected annually

from all insurance carriers, and self-insurance groups that hold

certificates of approval under Chapter 407A, except governmental

entities.

(b) The department shall set the rate of the surcharge

[ maintenance tax ] based on the expenditures authorized and the

receipts anticipated in legislative appropriations. The surcharge

[ tax ] rate for insurance companies may not exceed the limitation in

Section 255.002(a), Insurance Code. The surcharge rate is applied

to [ may not exceed one-tenth of one percent of ] the correctly

reported gross workers' compensation insurance premiums. The

surcharge [ tax ] rate for certified self-insurers may not exceed the

limitation in Section 255.002(a), Insurance Code. The surcharge

rate is applied to [ may not exceed one-tenth of one percent of ] the

total surcharge [ tax ] base of all certified self-insurers, as

computed under Section 407.103(b). The surcharge [ tax ] rate for

self-insurance groups described by Subsection (a) may not exceed

the limitation in Section 255.002(a), Insurance Code. The

surcharge rate is applied to [ may not exceed one-tenth of one

percent of ] the group's gross premium for the group's retention,

excluding premium collected by the group for excess insurance.

(c) The surcharge [ tax ] imposed under Subsection (a) is in

addition to all [ other ] taxes or other surcharges imposed on those

insurance carriers for workers' compensation purposes.

(d) The surcharge [ tax ] on insurance companies and on

self-insurance groups described by Subsection (a) shall be

assessed, collected, and paid in the same manner and at the same

time as the surcharge [ maintenance tax ] established for the support

of the department under Chapter 255, Insurance Code. The surcharge

[ tax ] on certified self-insurers shall be assessed, collected, and

paid in the same manner and at the same time as the self-insurer

surcharge [ maintenance tax ] collected under Section 407.104.

(g) An insurer may recover a surcharge under this section

by:

(1) reflecting the surcharge as an expense in a rate

filing required under the Insurance Code; or

(2) charging the insurer's policyholders.

SECTION 21. Section 407.103, Labor Code, is amended to read

as follows:

Sec. 407.103. SELF-INSURER SURCHARGE [ MAINTENANCE TAX ];

EFFECT ON GENERAL SURCHARGE [ MAINTENANCE TAX ]. (a) Each certified

self-insurer shall pay a self-insurer surcharge [ maintenance tax ]

for the administration of the division and the office of injured

employee counsel and to support the prosecution of workers'

compensation insurance fraud in this state. Not more than two

percent of the total surcharge [ tax ] base of all certified

self-insurers, as computed under Subsection (b), may be assessed

for a surcharge [ maintenance tax ] under this section.

(b) To determine the surcharge [ tax ] base of a certified

self-insurer for purposes of this chapter, the department shall

multiply the amount of the certified self-insurer's liabilities for

workers' compensation claims incurred in the previous year,

including claims incurred but not reported, plus the amount of

expense incurred by the certified self-insurer in the previous year

for administration of self-insurance, including legal costs, by

1.02.

(c) The surcharge [ tax ] liability of a certified

self-insurer under this section is the surcharge [ tax ] base

computed under Subsection (b) multiplied by the rate assessed

workers' compensation insurance companies under Sections 403.002

and 403.003 , as limited by Section 255.002(a), Insurance Code .

(d) In setting the rate of the surcharge [ maintenance tax

assessment ] for insurance companies, the commissioner of insurance

may not consider revenue or expenditures related to the operation

of the self-insurer program under this chapter.

SECTION 22. Section 407.104, Labor Code, is amended to read

as follows:

Sec. 407.104. COLLECTION OF SURCHARGES [ TAXES ] AND FEES;

ADMINISTRATIVE VIOLATION. (a) The regulatory fee imposed by

Section 407.102 and the surcharge [ taxes ] imposed by Section

407.103 are due on the 60th day after the issuance of a certificate

of authority to self-insure and on the 60th day after each annual

renewal date.

(b) The department shall compute the fee and surcharge

[ taxes ] of a certified self-insurer and notify the certified

self-insurer of the amounts due. The surcharge [ taxes ] and fees

shall be remitted to the division.

(c) The regulatory fee imposed under Section 407.102 shall

be deposited in the Texas Department of Insurance operating account

to the credit of the division. The self-insurer surcharge imposed

under Section 407.103 [ maintenance tax ] shall be deposited in the

Texas Department of Insurance operating account to the credit of

the division.

(d) A certified self-insurer commits an administrative

violation if the self-insurer does not pay the surcharge [ taxes ]

and fee imposed under Sections 407.102 and 407.103 in a timely

manner.

(e) If the certificate of authority to self-insure of a

certified self-insurer is terminated, the commissioner or the

commissioner of insurance shall proceed immediately to collect

surcharges [ taxes ] due under this subtitle, using legal process as

necessary.

SECTION 23. Section 407A.252(b), Labor Code, is amended to

read as follows:

(b) The commissioner has full access to the records,

officers, agents, and employees of a group as necessary to complete

an examination under this section. The commissioner may recover the

expenses of the examination under Sections 401.151 and 401.152

[ Article 1.16 ], Insurance Code, to the extent the surcharge

[ maintenance tax ] under Section 407A.302 does not cover those

expenses.

SECTION 24. The heading to Subchapter G, Chapter 407A,

Labor Code, is amended to read as follows:

SUBCHAPTER G. TAXES, SURCHARGES [ FEES ], AND ASSESSMENTS

SECTION 25. Section 407A.301, Labor Code, is amended to

read as follows:

Sec. 407A.301. SURCHARGE [ MAINTENANCE TAX ] FOR DIVISION AND

RESEARCH FUNCTIONS OF DEPARTMENT. (a) Each group shall pay a

self-insurance group surcharge [ maintenance tax ] under this

section for:

(1) the administration of the division of workers'

compensation of the department;

(2) the prosecution of workers' compensation insurance

fraud in this state;

(3) the research functions of the department under

Chapter 405; and

(4) the administration of the office of injured

employee counsel under Chapter 404.

(b) The surcharge [ tax ] liability of a group under

Subsections (a)(1) and (2) is based on gross premium for that [ the ]

group's retention multiplied by the rate assessed insurance

carriers under Sections 403.002 and 403.003 , as limited by Section

255.002(a), Insurance Code .

(c) The surcharge [ tax ] liability of a group under

Subsection (a)(3) is based on gross premium for the group's

retention multiplied by the rate assessed insurance carriers under

Section 405.003 , as limited by Section 255.002(a), Insurance Code .

(d) The surcharge [ tax ] under this section does not apply to

premium collected by the group for excess insurance.

(e) The surcharge [ tax ] under this section shall be

collected by the comptroller as provided by Section 201.051 and

Chapter 255, Insurance Code.

SECTION 26. Section 407A.302, Labor Code, is amended to

read as follows:

Sec. 407A.302. SURCHARGE [ MAINTENANCE TAX ] FOR DEPARTMENT.

(a) Subject to Subsection (b), each group shall pay the surcharge

[ maintenance tax ] imposed under Chapter 255, Insurance Code, for

the administrative costs incurred by the department in implementing

this chapter.

(b) The surcharge owed by [ tax liability of ] a group under

this section is based on gross premium for the group's retention and

does not include premium collected by the group for excess

insurance.

(c) The surcharge owed [ maintenance tax assessed ] under

this section is subject to Chapter 255, Insurance Code, and shall be

collected by the comptroller in the manner provided by that

chapter.

SECTION 27. Section 407A.303, Labor Code, is amended to

read as follows:

Sec. 407A.303. COLLECTION AND PAYMENT OF SURCHARGES

[ TAXES ]. (a) The group shall remit the surcharges [ taxes ] for

deposit in the Texas Department of Insurance operating account to

the credit of the division.

(b) A group commits an administrative violation if the group

does not pay the surcharges [ taxes ] imposed under Sections 407A.301

and 407A.302 in a timely manner.

(c) If the certificate of approval of a group is terminated,

the commissioner or the commissioner of insurance shall immediately

notify the comptroller to collect surcharges [ taxes ] as directed

under Sections 407A.301 and 407A.302.

SECTION 28. The changes in law made by this Act relating to

surcharges on gross workers' compensation premiums or certified

self-insurers' liabilities and expenses apply only to the gross

annual premiums reported or liabilities and expenses incurred for

an annual period beginning on or after the effective date of this

Act. Maintenance taxes imposed on gross annual workers'

compensation premiums or liabilities and expenses before the

effective date of this Act are governed by the law as it existed

before the effective date of this Act, and the former law is

continued in effect for that purpose.

SECTION 29. This Act takes effect January 1, 2026.