By: Hagenbuch S.B. No. 1455
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. Sections 201.051(a) and (d), Insurance Code, are
amended to read as follows:
(a) Except as otherwise provided by this code or another
insurance law of this state, the comptroller shall administer and
enforce the provisions of this code and other insurance laws of this
state that relate to the administration, collection, and reporting
of taxes and certain fees, surcharges, and assessments imposed
under this code or another insurance law of this state, as
specifically provided by this code.
(d) Subtitles A and B, Title 2, Tax Code, apply to the
administration, collection, and enforcement by the comptroller of
taxes and certain fees, surcharges, and assessments under this code
or another insurance law of this state. Except as otherwise
provided by this code, the powers granted to the comptroller under
those provisions of the Tax Code do not limit and are exclusive of
the powers granted to the department or the commissioner in
relation to other fees, surcharges, and assessments under this
code.
SECTION 5. 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 6. 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 7. 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 8. The heading to Section 251.004, Insurance Code,
is amended to read as follows:
Sec. 251.004. DEPOSIT OF MAINTENANCE TAXES AND SURCHARGES.
SECTION 9. 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 10. 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 11. The heading to Section 281.006, Insurance Code,
is amended to read as follows:
Sec. 281.006. TREATMENT OF CERTAIN TAX REDUCTIONS,
SURCHARGES, AND CREDITS.
SECTION 12. Section 281.006, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) Notwithstanding Section 281.005(4), a surcharge imposed
by Chapter 255 of this code or Chapter 403, 405, 407, or 407A, Labor
Code, is considered to be a fee paid in this state for purposes of
this chapter.
SECTION 13. 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 14. 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 15. 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 16. The heading to Section 403.003, Labor Code, is
amended to read as follows:
Sec. 403.003. RATE OF SURCHARGE [ASSESSMENT].
SECTION 17. 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 18. 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 19. 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 20. 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 21. 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 22. 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 23. 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 24. 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 25. 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 26. 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 27. The heading to Subchapter G, Chapter 407A,
Labor Code, is amended to read as follows:
SUBCHAPTER G. TAXES, SURCHARGES [FEES], AND ASSESSMENTS
SECTION 28. 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 29. 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 30. 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 31. 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 32. This Act takes effect January 1, 2026.