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Minutes for SB339 - Committee on Commerce
Short Title
Making workers compensation death benefits adequate and equivalent with respect to recent benefit limit changes.
Minutes Content for Thu, Feb 8, 2018
Chairperson Lynn opened the hearing on SB 339 and requested Revisor Chuck Reimer to provide an overview of the bill.
Chairperson Lynn recognized Senator Tom Holland who provided testimony in support of the bill. Senator Holland was contacted by a constituent who lost a stepson in the Bartlett Grain Elevator explosion on October 21, 2011 in Atchison, Kansas. Five other people were killed in the accident. The constituent shared his concerns regarding the on-the-job death benefits as currently defined in Kansas' workers compensation statutes. Many of these amounts were established some 30 to 40 years ago and are inadequate. This bill is intended to adjust those amounts to better compensate dependents and estates for the loss of a loved one working on the job. (Attachment 1)
Senator Holland indicated the purpose of the hearing today was to provide information to Committee members about an issue which he believed needs to be addressed as future changes are considered regarding workers compensation legislation.
Senator Alley asked how many work-related deaths occur each year in Kansas. Larry Karns, Director, Division of Workers Compensation, responded there were 42 deaths in Kansas in 2017.
Chairperson Lynn recognized Pam Scott, Kansas Funeral Directors Association (KFDA), who provided testimony in support of the bill. She indicated the KFDA supports the amendment which would increase the funeral benefit paid under workers compensation from $5,000 to $15,000. The last time the funeral benefit was increased was in 1998 when it was increased from $4,300 to $5,000. According to the National Funeral Directors Association 2017 General Price List Study, the national medium cost of a funeral with viewing and burial for calendar year 2016 was $7,360. If a vault is included, the price increases to $8,755. This includes a funeral with viewing and a ceremony and includes the following products and services: basic services fee, removal/transfer of remains to funeral home, embalming and other preparation of the body, use of facilities and staff for viewing and for a ceremony at the funeral home, hearse, service car or van, basic memorial printed package and metal casket. It does not include cemetery expenses, monument or marker costs or miscellaneous cash advance charges such as flowers, death certificates or an obituary. The national medium cost of an adult funeral with viewing and cremation was $6,260 in 2016. (Attachment 2)
Senator Olson stated he made arrangements recently for several funerals and found the cost to be approximately $15,000.
Chairperson Lynn recognized Jan Fisher, on behalf of Kansas Trial Lawyers Association, who provided testimony in support of the bill. Ms. Fisher indicated she is an attorney and has practiced in the area of workers compensation for over 30 years. One of the purposes of workers compensation law, in cases in which the work injury results in death of the employee, is to provide funds to cover burial expenses. Increasing the maximum paid by the employer from $5,000 to $15,000 allows for the realistic cost of a funeral and burial. (Attachment 3)
The other purpose of providing benefits, in cases of death from work injury, is to take care of the members of the decedent's family and other individuals who were economically dependent upon the decedent's capacity to earn income. The maximum compensation paid for a work-related death is $300,000. Prior to the 2011 amendments to the Kansas Workers Compensation Act, the maximum compensation payable in case of a work-related death was $250,000. Not all work-related deaths result in payment of $300,000. This is only the maximum amount of compensation available. All compensation is based on two-thirds of the employee's average weekly wage. The statute gives priority to the claims of the spouse and children of the decedent.
The current statute mandates an initial payment of $40,000 to be paid to the spouse and to the children. SB 339 increases this amount to $60,000. The bill does not increase the total amount of compensation that a dependent may receive. It increases the amount to be paid upfront. Increasing the amount of compensation to be paid initially from $40,000 to $60,000 is an acknowledgment that there are substantial expenses that are immediately incurred with the death of the employee. This increase allows for a smoother transition for the spouse and children and reduces financial pressure to settle the death case for a fraction of the money owed.
The bill also increases the amount that an employer may be liable to pay for a court-appointed conservator from $1,000 to $5,000. When there are minor children involved, Kansas statutes mandate the appointment of a conservator to protect those monies due to any minor children. The services of a conservator may be complicated and expensive when there are competing interests involved.
If there are no surviving spouse or dependent children, compensation is paid to other dependents who are "members of the family" and who are wholly dependent upon the employee's earnings. If there are members of the family, other than a spouse and or children, who are wholly dependent, all compensation is paid to these wholly dependent individuals. An example of a wholly dependent member of the family might be an elderly parent or disabled sibling. K.S.A. 44-510b currently limits compensation to these individuals to $18,500. A maximum benefit of $18,500 is inadequate. The bill increases the maximum benefit to $100,000. Compensation is paid on a weekly basis and is based on two-thirds of the decedent's average weekly wage. The testimony reviewed additional details concerning payments for various scenarios.
The current statute limits compensation to $25,000. No payment is required if the employer has procured a life insurance policy with beneficiaries designated by the employee which provides coverage in the amount of not less than $18,500. Subsection (d) is not equivalent to a life insurance policy. Life insurance is a fringe benefit bargained for by the employee as part of the compensation package. It is paid regardless of the cause of death. Life insurance should not be substituted for compensation paid due to a work-related death.
SB 339 increases the lump-sum payment to $100,000. This is paid to the legal heirs of the employee in accordance with Kansas law. In 2011, when the overall maximum compensation for death benefits increased to $300,000, there was not a corresponding increase in payment to the heirs of a worker who dies as a result of a work accident. This increase brings Subsection (d) benefits in line with the overall increase in death benefits provided for in the 2011 amendments to the Kansas Workers Compensation Act.
There were no questions.
Chairperson Lynn recognized John Ostrowski, Kansas AFL-CIO, who provided testimony in support of the bill. Kansas AFL-CIO would suggest that there is no impact on premiums to employers if this bill becomes law. There are approximately 45 job-related fatalities per year in Kansas. The suggested changes have little to no effect in the majority of these fatalities. While the Kansas AFL-CIO is unable to run the exact computations, it is recalled that in 2011, when death benefits were increased from $250,000 to $300,000, NCCI stated the impact was "so slight" it could not be measured. This bill would have even less of an impact. (Attachment 4)
Kansas AFL-CIO supports increasing the initial payment to $60,000. The proposed upfront payment helps bridge the gap. It also helps discourage a lump sum settlement of the death benefits, at a large discount offered by insurance carriers, for the family to meet their current financial needs. Benefits paid over time at a set weekly amount historically are more beneficial to a family who suddenly loses their wage earner.
In several places, the bill proposes an increase from $18,500 to $100,000 in certain circumstances. The amount of $18,500 in the current statute was set over 45 years ago. At that time, the total death benefit was $50,000, as opposed to the current $300,000. This is a sixfold increase over the years with no corresponding change for certain recipients. These suggested changes are an attempt to correct inadequacies due to inflation.
SB 339 proposes striking the life insurance forfeiture provision. Life insurance provided by an employer is a fringe benefit. Fringe benefits are offered as an incentive to hire or retain employees. Many times, employees accept fringe benefits in lieu of increased wages. It makes little sense that such employees should forfeit their fringe benefits after they are killed in an on-the-job situation.
Kansas AFL-CIO supports the proposed increases in funeral expense and estate costs.
Senator Faust-Goudeau asked if all of the individuals discussed had life insurance. Mr. Ostrowski explained those who do have life insurance, have it as a benefit provided by their employer. The concern is the requirement for the forfeiture of the life insurance.
Senator Holland commented that increasing the initial payment from $40,000 to $60,000 would provide the family with more of a financial a cushion as they work through the situation.
Chairperson Lynn recognized Eric Stafford, Kansas Chamber of Commerce (Chamber), who provided testimony in opposition to the bill. While the Chamber recognizes the importance of insuring families, and dependents receiving benefits when a workplace death occurs because of injury, SB 339 does not increase the overall amount of direct compensation to the dependents. Rather, it increases payments to third parties which could result in unintended consequences. If there is not a legal spouse or wholly dependent child or children to receive death compensation benefits, SB 339 specifies that other dependents or partial dependents can claim partial benefits, but the bill provides no clear definition of who might qualify as a partial dependent or what qualifies them as a dependent or partial dependent. This could result in any number of people claiming whole or partial dependency without any clear direction on the validity of their claim. (Attachment 5)
In the instance of no dependents, SB 339 increases the payment from $25,000 to $100,000 to legal heirs of the employee, essentially turning the work comp system into a life insurance system. In addition to this increase, this bill strikes a provision where the $25,000 (proposed increase to $100,000) payment will be required if the employer has provided a life insurance policy, provided that the coverage is not less than $18,500. This change may disincentivize smaller employers from providing life insurance as a benefit since the insurance policy would then be built into the work comp system.
Workers compensation death benefits were intended to provide support and compensation to spouses and dependents when they lose their loved one in a workplace accident. SB 339 creates the opportunity for confusion and litigation for individuals who have never had a claim to benefits in the past while also increasing payouts to third parties.
Senator Baumgardner asked whether the Chamber had worked with any of the proponents to arrive at some sort of agreement. Historically, it appears 50 individuals in Kansas die each year from a workplace injury. A $5,000 funeral benefit is not adequate. What can be done to correct this situation now rather than waiting. Mr. Stafford replied if the main concern of the Committee is the funeral cost benefit, and a commitment is received from the Committee not to offer amendments to the bill, the Chamber would be happy to have the discussion. Senator Baumgardner responded the funeral benefit was not the only issue, and referred to the life insurance benefit. She reported she had attended a round table discussion at which multiple examples were provided of workers not updating their beneficiary information on their life insurance plans.
Mr. Stafford replied the Chamber had not been requested to enter into negotiations on the bill. He noted some reforms were made in 2011 concerning workers compensation, but the reforms in this bill were not requested. He stated workers compensation is not intended to be a life insurance policy. Senator Baumgardner responded by inviting the Chamber to talk about these issues with the appropriate parties. She said she was not interested in waiting for a mega bill that would address a number of workers compensation issues. Rather, why not start by simply addressing the funeral expense benefit. To do this, data needs to be provided concerning the number of instances that have occurred in the last 3 to 5 years in order to understand the real implications.
Chairperson Lynn explained her concerns about opening up a Workers Compensation bill at this time and Senator Holland had indicated he understood her rationale. She noted the importance of negotiations between the two sides of the issue and the need for sufficient data to be presented to the Committee to allow for effective deliberations.
Senator Givens said insurance premium rates for workers compensation insurance are based on the experience level of the employer. Increasing these benefits may not be neutral to the employer paying the premiums.
Out of the 42 work-related deaths in 2017, Senator Sykes said she was interested in how many families took a lump sum death benefit, and how many will benefit from the $300,000 maximum death benefit.
Senator Holland requested information concerning of the total number of deaths in the past few years, how many of the individuals had no dependents.
Senator Bollier reiterated the importance of the parties negotiating on these issues and providing sufficient information to the Committee to enable decisions to be made.
Written only testimony in support of the bill was provided by:
Zoe and Kevin Bock, Private Citizens (Attachment 6)
No written only testimony was submitted in opposition or neutral to the bill.
Chairperson Lynn closed the hearing on SB 339. The meeting was adjourned at 9:26 a.m. The next meeting is scheduled for February 13, 2018.
