State Fund Operations
State funds are, by law, designed to be self-supporting from their
premium and investment revenue. As nonprofit departments of the
state, or as independent nonprofit companies, they are able to return
dividends or safety refunds to their policyholders. This reduces
the overall cost of workers' compensation insurance. Numerous court
decisions have determined that the assets, reserves, and surplus
of the funds are not public funds, but are the property of employers
who are insured by the funds or are in the nature of a trust to
be held for the benefit of insured employers and their injured workers.
Most state funds created in the last 20 years have been organized
as mutual insurance companies.
State funds, for the most part, are subject to the same regulatory
requirements as private companies, in terms of surplus and reserves.
Major independent accounting and actuarial firms validate the funds'
financial position and reserves.