Largest Dividend Paid by Montana Workers’ Comp Fund

Many Montana businesses will share a $20 million windfall from the state workers’ compensation fund.

The Montana State Fund’s board in November approved its largest dividend ever for most of its 27,000 business customers in the state.

The dividend equates to an average 16 percent reduction of workers’ compensation insurance premiums paid by businesses in 2012, fund officials said.

The amount of dividend a company receives will be based on how much premium it pays and its worker safety record. About 95 percent of the business insured by the State Fund will get a dividend, fund officials said.

“This is the best way that we can award employers who are doing a good job,” board member Joe Brenneman said.

By law, all employers in Montana must carry workers’ compensation coverage, which insures them against on-the-job injuries suffered by their employees.

Four years ago, Montana had the highest workers’ compensation rates in the nation, according to a biennial study.

Partly in response to reforms passed by the 2011 Legislature, Montana’s rates dropped to No. 8 in the nation in 2012.

Laurence Hubbard, the State Fund’s president and CEO, said the latest study showed Montana’s workers’ compensation rates dropping to 11th in the nation for 2014, but they’re still higher than any neighboring state.

Hubbard said the State Fund’s continued strong financial position allowed it to award the historically high dividend. Its net revenue for fiscal 2014, which ended this summer, was $54 million, or $22 million higher than projected, he said.

“If there is excess equity that can be safely returned to customers who paid the premium, the board can do that,” he said. “It’s like a retroactive rate reduction, because we’re returning premiums from prior years to deserving policyholders.”

The State Fund awarded a $12.5 million dividend last year and has paid out dividends over the last two decades that equate to an average premium reduction of about 4.4 percent a year, Hubbard said.

Board member Bruce Mihelish said the big dividend is a testament to good management at the fund and improved workers’ comp policies.

However, he noted that Montana still has the highest workers’ comp premiums in the region.

Hubbard said the fund hopes to keep rates as low as possible, but that Montana’s rates are higher than other states in part because it pays higher levels of benefits to injured workers than in many other states.