Workman's Comp Plans

[Guest Kathleen Fouquet]

Is a workman's comp. plan a qualified plan? An H.R. person for one of the companies I deal with mentioned that she'd heard that they don't need a fidelity bond to insure the assets in their W.C. Plan any longer. Instead, they can use a portion of the assets in the plan to secure the assets. Does anyone know if this is true? If so, how would you go about securing the assets?

[KIP KRAUS]

It has always been my understanding that any plan that is a mandated employee coverage is not a qualified plan subject to ERISA reporting and disclosure. Fidelity bonds are applicable to ERISA qualified plans. However, in some states (New York is one) where you can self-insure Workers’ Comp. the state may require a fidelity bond or an assignment of employers assets for self-insured employers. Otherwise, if you have an insured WC plan no fidelity bond is required.

By the way, how does their WC plan have assets? Is it a self-insured plan set up with some kind of trust?

[Guest Kathleen Fouquet]

I believe this is an older plan that continues to use a trust. I've heard that the newer plans don't use a trust any longer, but pay claims directly from the assets of the ER, correct? Since this one uses a trust, it sounds like they would have to set aside a portion of the assets as security. I'm not sure how they would go about doing that.

[mbozek]

Workers comp plans are not qualified plans becuse they do not provide retirement benefits or provide for the sharing of profits by the employees. However it is my understanding that some worker's comp plans may established as tax exempt VEBAs under IRC 501©(9). A VEBA would not be subject to ERISA's requirement for a fidelity bond if it was operated exclusivley to comply with wc laws because wc plans are exempt from ERISA. .