Senate Bill No. 67

Introduced By benedict

By Request of the Governor



A Bill for an Act entitled: An Act Generally Revising Workers' Compensation Laws; increasing to seven members the state compensation insurance fund board and authorizing a licensed insurance producer member; providing for THE TRANSFER OF $63.8 MILLION TO THE OLD FUND ACCOUNT; terminating the old fund liability tax on employers, employees, and self-employed persons WHEN THE OLD FUND IS ADEQUATELY FUNDED; REMOVING THE LIMITATION ON THE PAYMENT OF DIVIDENDS BY THE NEW FUND; PROVIDING THAT THE AMOUNTS IN EXCESS OF ADEQUATE FUNDING OF THE OLD FUND ARE RETURNED TO THE NEW FUND ACCOUNT AND THAT ANY SHORTFALL IN ADEQUATE FUNDING IS RETURNED TO THE OLD FUND IN AN AMOUNT EQUAL TO THAT RETURNED TO THE NEW FUND; clarifying the definition of "dependent" for fatal injury beneficiary claims; providing that an insurer's failure to meet time limitations is not an acceptance of the claim; providing that a worker who has not reached maximum healing but who is released by a treating physician and refuses the offer of employment in a modified or alternative position at an equivalent or higher wage is not eligible for temporary partial or temporary total disability benefits; increasing access to rehabilitation benefits; PROVIDING FOR FRAUD INVESTIGATION AND PROSECUTION FOR THE UNINSURED EMPLOYERS' FUND BY THE DEPARTMENT OF JUSTICE; DEFINING "TREATING PHYSICIAN" TO INCLUDE THOSE PHYSICIANS LICENSED IN OTHER STATES; INCLUDING PSYCHOLOGISTS AND FUNCTIONAL CAPACITY EVALUATIONS AND PROVIDING FOR EXAMINATIONS BY LICENSED PROVIDERS IN ANOTHER STATE WHEN EXAMINATIONS ARE REQUESTED BY THE INSURER; ADJUSTING THE LIFTING REQUIREMENT FOR LIGHT ACTIVITY FOR PERMANENT PARTIAL DISABILITY BENEFITS; authorizing the state fund to provide "other states" coverage; clarifying the state fund's use of licensed insurance producers; requiring that the state fund repay $20 million to the general fund; PROVIDING FOR UP TO ONE-HALF OF THE PRIOR YEAR'S INVESTMENT INCOME FOR ADMINISTRATIVE EXPENDITURES AND FOR REVIEW BY THE LEGISLATIVE FINANCE COMMITTEE; limiting the time for bringing an action to resolve a benefits dispute; requiring the state fund, the department of justice, and the department of labor and industry to file a joint biennial budget for the workers' compensation fraud office; providing for transfer of the balance in the workers' compensation bond repayment account on June 30, 1997, to the state fund; amending sections 2-15-1019, 2-15-2015, 17-7-502, 33-1-1205, 33-16-1024, 39-71-116, 39-71-318, 39-71-406, 39-71-502, 39-71-605, 39-71-606, 39-71-703, 39-71-712, 39-71-1006, 39-71-2316, 39-71-2320, 39-71-2321, 39-71-2322, 39-71-2327, 39-71-2351, 39-71-2352, 39-71-2363, 39-71-2501, 39-71-2503, 39-71-2505, and 39-71-2905, MCA; repealing sections 39-71-2354, 39-71-2355, 39-71-2501, 39-71-2502, 39-71-2503, 39-71-2504, and 39-71-2506, MCA; and providing effective dates, applicability dates, and termination dates.



WHEREAS, it is the intent of the state compensation insurance fund to assist all Montanans by reducing the unfunded liability of the old fund, terminating the old fund liability tax when the old fund is adequately funded, which is currently estimated to occur as early as June 30, 1999, providing for the payment of dividends to policyholders, and maintaining a viable state compensation insurance fund; and

WHEREAS, there was an unfunded liability of $355 million as of June 30, 1996, for claims for workers' compensation injuries occurring before July 1, 1990, in the old fund, which included $129 million in outstanding bond debt; and

WHEREAS, the old fund is funded with the old fund liability tax paid by employers, employees, and self-employed persons, generating as much as $50 million each year; and

WHEREAS, the surplus of $231 in the new fund as of June 30, 1996, allowed the Board of Directors of the State Fund to declare a dividend of up to $109 million to retire the outstanding bond debt in the old fund; and

WHEREAS, the unfunded liability in the old fund will be an estimated $200 million deficit by June 30, 1997, and the surplus or the excess of assets above the reserves that are set aside to meet the claim liability in the new fund will be an estimated $127 million by June 30, 1997; and

WHEREAS, current state law requires the State Fund to use dividends to be applied first to old fund outstanding liability rather than paying dividends directly to policyholders, the State Fund shall, no later than June 30, 1998, transfer $63.8 million to the old fund account to pay old fund claims to allow direct payment of dividends to policyholders; and

WHEREAS, the $20 million appropriation received by the State Fund from the general fund during the June 1989 Special Session partially addressed the unfunded liability issue existing at that time in the old fund and canceled a planned 22% rate increase; and

WHEREAS, the State Fund now agrees to repay the $20 million appropriation to the general fund by June 30, 1999, in lieu of transferring additional funds to the old fund account to provide the general fund with additional revenue and to remove any perception that the State Fund remains a burden on the general fund; and

WHEREAS, because decreases in premium rates totaled 35% in fiscal years 1996 and 1997 and legislative changes in benefit levels have resulted in the return of private carriers, the 15% limitation on administration expenses as a percent of the prior year's premium will significantly impact the State Fund's ability to provide service to policyholders and their injured workers; and

WHEREAS, the State Fund seeks to improve the level of services provided to customers without increasing existing State Fund staffing levels by working with private sector-licensed insurance producers; and

WHEREAS, in response to Haag v. Montana Schools Group Insurance Authority, 274 M 109, 906 P.2d 693 (1995), in which the Montana Supreme Court ruled that an insurer's failure to comply with the time limitations for accepting or denying a workers' compensation claim constituted acceptance of the claim, current law needs to be clarified to provide that the failure to comply with the time limitations does not constitute acceptance of the claim.



Be it enacted by the Legislature of the State of Montana:



Section 1.  Section 2-15-1019, MCA, is amended to read:

"2-15-1019.   Board of directors of the state compensation insurance fund. (1) There is a board of directors of the state compensation insurance fund.

(2)  The board is allocated to the department for administrative purposes only as prescribed in 2-15-121. However, the board may employ its own staff.

(3)  The board may provide for its own office space and the office space of the state fund.

(4)  The board consists of five seven members appointed by the governor. The executive director of the state fund is an ex officio nonvoting member.

(5)  At least three four of the five seven members shall must represent state fund policyholders and may be employees of state fund policyholders. At least three four members of the board shall represent private, for-profit enterprises. One of the seven members may be a licensed insurance producer. A member of the board may not:

(a)  except for the licensed insurance producer member, represent or be an employee of an insurance company that is licensed to transact workers' compensation insurance under compensation plan No. 2; or

(b)  be an employee of a self-insured employer under compensation plan No. 1.

(6)  A member is appointed for a term of 4 years. The terms of board members must be staggered. A member of the board may serve no more than two 4-year terms. A member shall hold office until a successor is appointed and qualified.

(7)  The members must be appointed and compensated in the same manner as members of a quasi-judicial board as provided in 2-15-124, except that the requirement that at least one member be an attorney does not apply."



Section 2.  Section 2-15-2015, MCA, is amended to read:

"2-15-2015.   Workers' compensation fraud office. There is a workers' compensation fraud investigation and prosecution office in the department of justice. The office shall investigate and prosecute cases referred by the state compensation insurance fund or the department of labor and industry on behalf of the uninsured employers' fund. The office is under the supervision and control of the attorney general and consists of:

(1)  four persons one or more investigators qualified by education, training, experience, and high professional competence in investigative procedures who shall investigate violations of the provisions of Title 39, chapters 71 and 72, at the request of the state compensation insurance fund or the department of labor and industry on behalf of the uninsured employers' fund; and

(2)  one person one or more attorneys licensed to practice law in Montana who shall prosecute violations of the provisions of Title 39, chapters 71 and 72. The attorney attorneys may also assist county attorneys in prosecuting violations of Title 39, chapters 71 and 72, without charge to the county.

(3) The state compensation insurance fund, the department of labor and industry, and the department of justice shall submit to the legislature for approval one proposed biennial budget for the workers' compensation fraud office. The proposed budget for staffing and related expenses must be based upon the needs of the state compensation insurance fund and the department of labor and industry on behalf of the uninsured employers' fund for investigating and prosecuting workers' compensation fraud."



Section 3.  Section 17-7-502, MCA, is amended to read:

"17-7-502.   Statutory appropriations -- definition -- requisites for validity. (1) A statutory appropriation is an appropriation made by permanent law that authorizes spending by a state agency without the need for a biennial legislative appropriation or budget amendment.

(2)  Except as provided in subsection (4), to be effective, a statutory appropriation must comply with both of the following provisions:

(a)  The law containing the statutory authority must be listed in subsection (3).

(b)  The law or portion of the law making a statutory appropriation must specifically state that a statutory appropriation is made as provided in this section.

(3)  The following laws are the only laws containing statutory appropriations: 2-9-202; 2-17-105; 2-18-812; 3-5-901; 5-13-403; 10-3-203; 10-3-310; 10-3-312; 10-3-314; 10-4-301; 15-1-111; 15-23-706; 15-30-195; 15-31-702; 15-37-117; 15-38-202; 15-65-121; 15-70-101; 16-1-404; 16-1-410; 16-1-411; 16-11-308; 17-3-106; 17-3-212; 17-5-404; 17-5-424; 17-5-804; 17-6-101; 17-6-201; 17-7-304; 18-11-112; 19-2-502; 19-6-709; 19-9-1007; 19-17-301; 19-18-512; 19-18-513; 19-18-606; 19-19-205; 19-19-305; 19-19-506; 20-8-107; 20-8-111; 20-9-361; 20-26-1503; 23-5-136; 23-5-306; 23-5-409; 23-5-610; 23-5-612; 23-5-631; 23-7-301; 23-7-402; 32-1-537; 37-43-204; 37-51-501; 39-71-503; 39-71-907; 39-71-2321; 39-71-2504; 44-12-206; 44-13-102; 50-4-623; 50-5-232; 50-40-206; 53-6-150; 53-6-703; 53-24-206; 60-2-220; 67-3-205; 75-1-1101; 75-5-1108; 75-6-214; 75-11-313; 76-12-123; 80-2-103; 80-2-222; 80-4-416; 81-5-111; 82-11-136; 82-11-161; 85-1-220; 85-20-402; 90-3-301; 90-4-215; 90-6-331; 90-7-220; 90-7-221; and 90-9-306.

(4)  There is a statutory appropriation to pay the principal, interest, premiums, and costs of issuing, paying, and securing all bonds, notes, or other obligations, as due, that have been authorized and issued pursuant to the laws of Montana. Agencies that have entered into agreements authorized by the laws of Montana to pay the state treasurer, for deposit in accordance with 17-2-101 through 17-2-107, as determined by the state treasurer, an amount sufficient to pay the principal and interest as due on the bonds or notes have statutory appropriation authority for the payments. (In subsection (3): pursuant to sec. 7, Ch. 567, L. 1991, the inclusion of 19-6-709 terminates upon death of last recipient eligible for supplemental benefit; and pursuant to sec. 7(2), Ch. 29, L. 1995, the inclusion of 15-30-195 terminates July 1, 2001.)"



Section 4.  Section 33-1-1205, MCA, is amended to read:

"33-1-1205.   Duties of authorized insurers, adjusters, administrators, consultants, and producers -- notice exception. (1) Each insurer, independent adjuster, independent administrator, independent consultant, and independent producer shall cooperate fully with the commissioner with respect to the provisions of this part.

(2)  An Except as provided in subsection (4), an insurer, an officer, employee, or producer of the insurer, an independent adjuster, an independent administrator, an independent consultant, or an independent producer who has reason to believe that an insurance fraud has been or is being committed shall provide notice of the alleged insurance fraud to the commissioner within 60 days.

(3)  Notice to the commissioner by an insurer who has reason to believe that an insurance fraud has been committed in connection with an insurance claim, application, or policy tolls any applicable time period, for the commissioner, in any applicable insurance statute, related insurance regulation, or applicable sections of the criminal code and tolls any time period arising under 33-18-232 or 33-18-242 regarding unfair claims settlement practices.

(4) Notice of an alleged insurance fraud involving an insurance claim or application submitted to the state compensation insurance fund or a policy issued by the state compensation insurance fund must be made within 60 days to the fraud detection and prevention unit established pursuant to 39-71-211."



Section 5.  Section 33-16-1024, MCA, is amended to read:

"33-16-1024.   Plan No. 3 membership in licensed workers' compensation advisory organization -- reporting requirements. (1) The plan No. 3 insurer under Title 39, chapter 71, part 23, is required to be a member of a licensed workers' compensation advisory organization or a licensed workers' compensation rating organization under Title 33, chapter 16, part 4.

(2)  If the plan No. 3 insurer is not a member of the workers' compensation advisory organization designated under 33-16-1023, then, subject to the deviations from the uniform statistical plan, uniform classification system, and uniform experience rating plan that may be approved by the board of directors of the plan No. 3 insurer as provided in 39-71-2316(5), the insurer shall:

(a)  record and report its workers' compensation experience to the designated advisory organization as required in the uniform statistical plan of the designated workers' compensation advisory organization approved by the commissioner, the uniform classification system, and the uniform experience rating plan that have been filed by the designated advisory organization with and approved by the commissioner; and

(b)  use the forms and adhere to the rules that the designated advisory organization develops and files with the commissioner under 33-16-1023."



Section 6.  Section 39-71-116, MCA, is amended to read:

"39-71-116.   Definitions. Unless the context otherwise requires, words and phrases used in this chapter have the following meanings:

(1)  "Actual wage loss" means that the wages that a worker earns or is qualified to earn after the worker reaches maximum healing are less than the actual wages the worker received at the time of the injury.

(2)  "Administer and pay" includes all actions by the state fund under the Workers' Compensation Act and the Occupational Disease Act of Montana necessary to:

(a)  investigation, review, and settlement of claims;

(b)  payment of benefits;

(c)  setting of reserves;

(d)  furnishing of services and facilities; and

(e)  use of actuarial, audit, accounting, vocational rehabilitation, and legal services.

(2) "Administer and pay" includes all actions by the state fund under the Workers' Compensation Act and the Occupational Disease Act of Montana necessary to:

(a) investigation, review, and settlement of claims;

(b) payment of benefits;

(c) setting of reserves;

(d) furnishing of services and facilities; and

(e) use of actuarial, audit, accounting, vocational rehabilitation, and legal services.

(3)(3)  "Aid or sustenance" means any public or private subsidy made to provide a means of support, maintenance, or subsistence for the recipient.

(4)(4)  "Average weekly wage" means the mean weekly earnings of all employees under covered employment, as defined and established annually by the department. It is established at the nearest whole dollar number and must be adopted by the department prior to July 1 of each year.

(5)(5)  "Beneficiary" means:

(a)  a surviving spouse living with or legally entitled to be supported by the deceased at the time of injury;

(b)  an unmarried child under 18 years of age;

(c)  an unmarried child under 22 years of age who is a full-time student in an accredited school or is enrolled in an accredited apprenticeship program;

(d)  an invalid child over 18 years of age who is dependent, as defined in 26 U.S.C. 152, upon the decedent for support at the time of injury;

(e)  a parent who is dependent, as defined in 26 U.S.C. 152, upon the decedent for support at the time of the injury if a beneficiary, as defined in subsections (5)(a) through (5)(d), does not exist; and

(f)  a brother or sister under 18 years of age if dependent, as defined in 26 U.S.C. 152, upon the decedent for support at the time of the injury but only until the age of 18 years and only when a beneficiary, as defined in subsections (5)(a) through (5)(e), does not exist.

(6)(6)  "Casual employment" means employment not in the usual course of the trade, business, profession, or occupation of the employer.

(7)(7)  "Child" includes a posthumous child, a dependent stepchild, and a child legally adopted prior to the injury.

(8)(8)  "Construction industry" means the major group of general contractors and operative builders, heavy construction (other than building construction) contractors, and special trade contractors, listed in major groups 15 through 17 in the 1987 Standard Industrial Classification Manual. The term does not include office workers, design professionals, salespersons, estimators, or any other related employment that is not directly involved on a regular basis in the provision of physical labor at a construction or renovation site.

(9)(9)  "Days" means calendar days, unless otherwise specified.

(10)(10) "Department" means the department of labor and industry.

(11)(11) "Fiscal year" means the period of time between July 1 and the succeeding June 30.

(12)(12) "Household or domestic employment" means employment of persons other than members of the household for the purpose of tending to the aid and comfort of the employer or members of the employer's family, including but not limited to housecleaning and yard work, but does not include employment beyond the scope of normal household or domestic duties, such as home health care or domiciliary care.

(13)(13) "Insurer" means an employer bound by compensation plan No. 1, an insurance company transacting business under compensation plan No. 2, or the state fund under compensation plan No. 3.

(14)(14) "Invalid" means one who is physically or mentally incapacitated.

(15)(15) "Limited liability company" is as defined in 35-8-102.

(16)(16) "Maintenance care" means treatment designed to provide the optimum state of health while minimizing recurrence of the clinical status.

(17)(17) "Medical stability", "maximum healing", or "maximum medical healing" means a point in the healing process when further material improvement would not be reasonably expected from primary medical treatment.

(18)(18) "Objective medical findings" means medical evidence, including range of motion, atrophy, muscle strength, muscle spasm, or other diagnostic evidence, substantiated by clinical findings.

(19)(19) "Order" means any decision, rule, direction, requirement, or standard of the department or any other determination arrived at or decision made by the department.

(20)(20) "Palliative care" means treatment designed to reduce or ease symptoms without curing the underlying cause of the symptoms.

(21)(21) "Payroll", "annual payroll", or "annual payroll for the preceding year" means the average annual payroll of the employer for the preceding calendar year or, if the employer has not operated a sufficient or any length of time during the calendar year, 12 times the average monthly payroll for the current year. However, an estimate may be made by the department for any employer starting in business if average payrolls are not available. This estimate must be adjusted by additional payment by the employer or refund by the department, as the case may actually be, on December 31 of the current year. An employer's payroll must be computed by calculating all wages, as defined in 39-71-123, that are paid by an employer.

(22)(22) "Permanent partial disability" means a physical condition in which a worker, after reaching maximum medical healing:

(a)  has a permanent impairment established by objective medical findings;

(b)  is able to return to work in some capacity but the permanent impairment impairs the worker's ability to work; and

(c)  has an actual wage loss as a result of the injury.

(23)(23) "Permanent total disability" means a physical condition resulting from injury as defined in this chapter, after a worker reaches maximum medical healing, in which a worker does not have a reasonable prospect of physically performing regular employment. Regular employment means work on a recurring basis performed for remuneration in a trade, business, profession, or other occupation in this state. Lack of immediate job openings is not a factor to be considered in determining if a worker is permanently totally disabled.

(24)(24) The "plant of the employer" includes the place of business of a third person while the employer has access to or control over the place of business for the purpose of carrying on the employer's usual trade, business, or occupation.

(25)(25) "Primary medical services" means treatment prescribed by a treating physician, for conditions resulting from the injury, necessary for achieving medical stability.

(26)(26) "Public corporation" means the state or any county, municipal corporation, school district, city, city under a commission form of government or special charter, town, or village.

(27)(27) "Reasonably safe place to work" means that the place of employment has been made as free from danger to the life or safety of the employee as the nature of the employment will reasonably permit.

(28)(28) "Reasonably safe tools and appliances" are tools and appliances that are adapted to and that are reasonably safe for use for the particular purpose for which they are furnished.

(29)(29) (a) "Secondary medical services" means those medical services or appliances that are considered not medically necessary for medical stability. The services and appliances include but are not limited to spas or hot tubs, work hardening, physical restoration programs and other restoration programs designed to address disability and not impairment, or equipment offered by individuals, clinics, groups, hospitals, or rehabilitation facilities.

(b)  (i) As used in this subsection (29) (29), "disability" means a condition in which a worker's ability to engage in gainful employment is diminished as a result of physical restrictions resulting from an injury. The restrictions may be combined with factors, such as the worker's age, education, work history, and other factors that affect the worker's ability to engage in gainful employment.

(ii) Disability does not mean a purely medical condition.

(30)(30) "Sole proprietor" means the person who has the exclusive legal right or title to or ownership of a business enterprise.

(31)(31) "Temporary partial disability" means a physical condition resulting from an injury, as defined in 39-71-119, in which a worker, prior to maximum healing:

(a)  is temporarily unable to return to the position held at the time of injury because of a medically determined physical restriction;

(b)  returns to work in a modified or alternative employment; and

(c)  suffers a partial wage loss.

(32)(32) "Temporary service contractor" means a person, firm, association, partnership, limited liability company, or corporation conducting business that hires its own employees and assigns them to clients to fill a work assignment with a finite ending date to support or supplement the client's workforce in situations resulting from employee absences, skill shortages, seasonal workloads, and special assignments and projects.

(33)(33) "Temporary total disability" means a physical condition resulting from an injury, as defined in this chapter, that results in total loss of wages and exists until the injured worker reaches maximum medical healing.

(34)(34) "Temporary worker" means a worker whose services are furnished to another on a part-time or temporary basis to fill a work assignment with a finite ending date to support or supplement a workforce in situations resulting from employee absences, skill shortages, seasonal workloads, and special assignments and projects.

(35)(35) "Treating physician" means a person who is primarily responsible for the treatment of a worker's compensable injury and is:

(a)  a physician licensed by the state of Montana under Title 37, chapter 3, and has admitting privileges to practice in one or more hospitals, if any, in the area where the physician is located;

(b)  a chiropractor licensed by the state of Montana under Title 37, chapter 12;

(c)  a physician assistant-certified licensed by the state of Montana under Title 37, chapter 20, if there is not a physician, as defined in subsection (35)(a) (35)(a), in the area where the physician assistant-certified is located;

(d)  an osteopath licensed by the state of Montana under Title 37, chapter 5; or

(e)  a dentist licensed by the state of Montana under Title 37, chapter 4; or

(f) for a claimant residing out of state or upon approval of the insurer, a treating physician defined in subsections (35)(a) through (35)(e) who is licensed or certified in another state.

(36)(36) "Year", unless otherwise specified, means calendar year."



Section 7.  Section 39-71-318, MCA, is amended to read:

"39-71-318.   Hearings -- rules of evidence -- conduct -- filing limits -- exception. (1) The statutory and common-law rules of evidence do not apply to a hearing before the department under this chapter. A petition for a hearing before the department must be filed within 2 years after benefits are denied.

(2)  Except for a hearing before the workers' compensation court, a hearing under this chapter may be conducted by telephone or by videoconference."



Section 8.  Section 39-71-406, MCA, is amended to read:

"39-71-406.   Deduction from wages of any part of premium a misdemeanor. It is unlawful for the employer to deduct or obtain any part of any premium required to be paid by this chapter from the wages or earnings of the employer's workers, and the making or attempt to make any such premium deduction is a misdemeanor. The workers' compensation old fund liability tax under 39-71-2503 is not a premium for the purpose of this section."



Section 9.  Section 39-71-502, MCA, is amended to read:

"39-71-502.   Creation and purpose of uninsured employers' fund. (1) There is created an uninsured employers' fund. The purpose of the fund is to pay:

(a) to an injured employee of an uninsured employer the same benefits the employee would have received if the employer had been properly enrolled under compensation plan No. 1, 2, or 3, except as provided in 39-71-503(2); and

(b) the costs of investigating and prosecuting workers' compensation fraud under 2-15-2015.

(2) The department may refer to the workers' compensation fraud office established in 2-15-2015 cases involving:

(a) false or fraudulent claims for benefits; or

(b) criminal violations of 45-7-501."



Section 10.  Section 39-71-605, MCA, is amended to read:

"39-71-605.   Examination of employee by physician -- effect of refusal to submit to examination -- report and testimony of physician -- cost. (1) (a) Whenever in case of injury the right to compensation under this chapter would exist in favor of any employee, the employee shall, upon the written request of the insurer, submit from time to time to examination by a physician, psychologist, or panel of physicians, who that must be provided and paid for by the insurer, and shall likewise submit to examination from time to time by any physician, psychologist, or panel of physicians selected by the department or as ordered by the workers' compensation judge.

(b)  The request or order for an examination must fix a time and place for the examination, with regard for the employee's convenience, physical condition, and ability to attend at the time and place that is as close to the employee's residence as is practical. An examination that is conducted by a physician, psychologist, or panel licensed in another state is not precluded under this section. The employee is entitled to have a physician present at any examination. If the employee, after written request, fails or refuses to submit to the examination or in any way obstructs the examination, the employee's right to compensation must be suspended and is subject to the provisions of 39-71-607. Any physician, psychologist, or panel of physicians employed by the insurer or the department who makes or is present at any examination may be required to testify as to the results of the examination.

(2)  In the event of a dispute concerning the physical condition of a claimant or the cause or causes of the injury or disability, if any, the department or the workers' compensation judge, at the request of the claimant or insurer, as the case may be, shall require the claimant to submit to an examination as it considers desirable by a physician, psychologist, or panel of physicians within the state or elsewhere who have that has had adequate and substantial experience in the particular field of medicine concerned with the matters presented by the dispute. The physician, psychologist, or panel of physicians making the examination shall file a written report of findings with the claimant and insurer for their use in the determination of the controversy involved. The requesting party shall pay the physician, psychologist, or panel of physicians for the examination.

(3) As used in this section, a panel includes a treating physician, as defined in 39-71-116, and may include a psychologist.

(4) A claimant is required, upon a written request of an insurer, to submit to a functional capacities evaluation conducted by a licensed physical therapist.

(3)(5)  This section does not apply to impairment evaluations provided for in 39-71-711."



Section 11.  Section 39-71-606, MCA, is amended to read:

"39-71-606.   Insurer to accept or deny claim within thirty days of receipt -- notice of benefits and entitlements to claimants -- notice of denial -- notice of reopening -- notice to employer. (1) Every Each insurer under any plan for the payment of workers' compensation benefits shall, within 30 days of receipt of a claim for compensation signed by the claimant or the claimant's representative, either accept or deny the claim, and, if denied, shall inform the claimant and the department in writing of such the denial.

(2)  The department shall make available to insurers for distribution to claimants sufficient copies of a document describing current benefits and entitlements available under Title 39, chapter 71. Upon receipt of a claim, each insurer shall promptly notify the claimant in writing of potential benefits and entitlements available by providing the claimant a copy of the document prepared by the department.

(3)  Each insurer under plan No. 2 or No. 3 for the payment of workers' compensation benefits shall notify the employer of the reopening of the claim within 14 days of the reopening of a claim for the purpose of paying compensation benefits.

(4)  Upon the request of an employer that it insures, an insurer shall notify the employer of all compensation benefits that are ongoing and are being charged against that employer's account.

(5) Failure of an insurer to comply with the time limitations required in this section does not constitute an acceptance of a claim as a matter of law. However, an insurer who fails to comply with 39-71-608 or this section may be assessed a penalty under 39-71-2907 if a claim is determined to be compensable by the workers' compensation court."



Section 12.  Section 39-71-703, MCA, is amended to read:

"39-71-703.   Compensation for permanent partial disability. (1) If an injured worker suffers a permanent partial disability and is no longer entitled to temporary total or permanent total disability benefits, the worker is entitled to a permanent partial disability award if that worker:

(a)  has an actual wage loss as a result of the injury; and

(b)  has a permanent impairment rating that:

(i)  is established by objective medical findings; and

(ii) is more than zero as determined by the latest edition of the American medical association Guides to the Evaluation of Permanent Impairment.

(2)  When a worker receives an impairment rating as the result of a compensable injury and has no actual wage loss as a result of the injury, the worker is eligible for an impairment award only.

(3)  The permanent partial disability award must be arrived at by multiplying the percentage arrived at through the calculation provided in subsection (4) by 350 weeks.

(4)  A permanent partial disability award granted an injured worker may not exceed a permanent partial disability rating of 100%.

(5)  The percentage to be used in subsection (3) must be determined by adding all of the following applicable percentages to the impairment rating:

(a)  if the claimant is 40 years of age or younger at the time of injury, 0%; if the claimant is over 40 years of age at the time of injury, 1%;

(b)  for a worker who has completed less than 12 years of education, 1%; for a worker who has completed 12 years or more of education or who has received a graduate equivalency diploma, 0%;

(c)  if a worker has no actual wage loss as a result of the industrial injury, 0%; if a worker has an actual wage loss of $2 or less an hour as a result of the industrial injury, 10%; if a worker has an actual wage loss of more than $2 more than $2 an hour as a result of the industrial injury, 20%. Wage loss benefits must be based on the difference between the actual wages received at the time of injury and the wages that the worker earns or is qualified to earn after the worker reaches maximum healing.

(d)  if a worker, at the time of the injury, was performing heavy labor activity and after the injury the worker can perform only light or sedentary labor activity, 5%; if a worker, at the time of injury, was performing heavy labor activity and after the injury the worker can perform only medium labor activity, 3%; if a worker was performing medium labor activity at the time of the injury and after the injury the worker can perform only light or sedentary labor activity, 2%.

(6)  The weekly benefit rate for permanent partial disability is 66 2/3% of the wages received at the time of injury, but the rate may not exceed one-half the state's average weekly wage. The weekly benefit amount established for an injured worker may not be changed by a subsequent adjustment in the state's average weekly wage for future fiscal years.

(7)  If a worker suffers a subsequent compensable injury or injuries to the same part of the body, the award payable for the subsequent injury may not duplicate any amounts paid for the previous injury or injuries.

(8)  If a worker is eligible for a rehabilitation plan, permanent partial disability benefits payable under this section must be calculated based on the wages that the worker earns or would be qualified to earn following the completion of the rehabilitation plan.

(9)  As used in this section:

(a)  "heavy labor activity" means the ability to lift over 50 pounds occasionally or up to 50 pounds frequently;

(b)  "medium labor activity" means the ability to lift up to 50 pounds occasionally or up to 25 pounds frequently;

(c)  "light labor activity" means the ability to lift up to 25 20 pounds occasionally or up to 10 pounds frequently; and

(d)  "sedentary labor activity" means the ability to lift up to 10 pounds occasionally or up to 5 pounds frequently."



Section 13.  Section 39-71-712, MCA, is amended to read:

"39-71-712.   Temporary partial disability benefits. (1) If, prior to maximum healing, an injured worker has a physical restriction and is approved to return to a modified or alternative employment that the worker is able and qualified to perform and the worker suffers an actual wage loss as a result of a temporary work restriction, the worker qualifies for temporary partial disability benefits.

(2)  An insurer's liability for temporary partial disability must be the difference between the injured worker's average weekly wage received at the time of the injury, subject to a maximum of 40 hours a week, and the actual weekly wages earned during the period that the claimant is temporarily partially disabled, not to exceed the injured worker's temporary total disability benefit rate.

(3)  Temporary partial disability benefits are limited to a total of 26 weeks. The insurer may extend the period of temporary partial disability payments.

(4)  A worker is not eligible for temporary partial disability benefits or temporary total disability benefits if:

(a) the worker has been released by the treating physician to return to a modified or alternative position that the individual is able and qualified to perform with the same employer;

(b) the wages payable in the modified or alternative position, when combined with the temporary partial disability benefits, would result in an equivalent or higher wage than the worker received at the time of injury; and

(c) the worker refuses to accept the modified or alternative position. A worker requalifies for temporary total disability benefits if the modified or alternative position is no longer available to the worker and the worker continues to be temporarily totally disabled as defined in 39-71-116.

(5)  Temporary partial disability may not be credited against any permanent partial disability award or settlement under 39-71-703."



Section 14.  Section 39-71-1006, MCA, is amended to read:

"39-71-1006.   Rehabilitation benefits. (1) A disabled worker as defined in 39-71-1011 is eligible for rehabilitation benefits if:

(a) (i)  the worker has an actual wage loss meets the definition of a disabled worker as provided in 39-71-1011; or

(ii) the worker has, as a result of the work-related injury, a whole person impairment rating of 15% or greater as a result of the injury, as established by objective medical findings, and has no actual wage loss;

(b) a rehabilitation provider, as designated by the insurer, certifies that the injured worker has reasonable vocational goals and reasonable reemployment opportunity and. If eligible because of an impairment rating of 15% or more, with rehabilitation the worker will have a reasonable increase in the worker's wage compared to the wage that the worker received at the time of injury. If eligible because of a wage loss, the worker will have a reasonable reduction in the worker's actual wage loss with rehabilitation; and.

(c)  a rehabilitation plan agreed upon by the injured worker and the insurer is filed with the department. The plan must take into consideration the worker's age, education, training, work history, residual physical capacities, and vocational interests. The plan must specify a beginning and completion date. If the plan calls for the expenditure of funds under 39-71-1004, the department shall authorize the department of public health and human services to use the funds.

(2)  After filing the rehabilitation plan with the department, the disabled worker is entitled to receive biweekly compensation benefits at the injured worker's temporary total disability rate. The benefits must be paid for the period specified in the rehabilitation plan, not to exceed 104 weeks. The rehabilitation plan must be completed within 26 weeks of the completion date specified in the plan. Rehabilitation benefits must be paid biweekly while the worker is satisfactorily progressing in the agreed-upon rehabilitation plan. Benefits under this section are not subject to the lump-sum provisions of 39-71-741.

(3)  A worker may not receive temporary total benefits and the benefits under subsection (2) during the same period of time.

(4)  A rehabilitation provider authorized by the insurer shall continue to assist the injured worker until the rehabilitation plan is completed.

(5)  To be eligible for benefits under this section, a worker is required to begin the rehabilitation plan within 78 weeks of reaching maximum medical healing.

(6)  A worker may not receive both wages and rehabilitation benefits without the written consent of the insurer. A worker who receives both wages and rehabilitation benefits without written consent of the insurer is guilty of theft and may be prosecuted under 45-6-301."



Section 15.  Section 39-71-2316, MCA, is amended to read:

"39-71-2316.   Powers of state fund -- payment to account for claims for injuries resulting from accidents occurring before July 1, 1990. (1) For the purposes of carrying out its functions, the state fund may:

(1)(a)  insure any employer for workers' compensation and occupational disease liability as the coverage is required by the laws of this state and, as part of the coverage, provide related employers' liability insurance upon approval of the board;

(2)(b)  sue and be sued;

(3)(c)  except as provided in section 21, Chapter 4, Special Laws of May 1990, enter into contracts relating to the administration of the state fund, including claims management, servicing, and payment;

(4)(d)  collect and disburse money received;

(5)(e)  adopt classifications and charge premiums for the classifications so that the state fund will be neither more nor less than self-supporting. Premium rates for classifications may only be adopted and changed using a process, a procedure, formulas, and factors set forth in rules adopted under Title 2, chapter 4, parts 2 through 4. After the rules have been adopted, the state fund need not follow the rulemaking provisions of Title 2, chapter 4, when changing classifications and premium rates. The contested case rights and provisions of Title 2, chapter 4, do not apply to an employer's classification or premium rate. The state fund is required to belong to a licensed workers' compensation advisory organization or a licensed workers' compensation rating organization under Title 33, chapter 16, part 4, and may use the classifications of employment adopted by the designated workers' compensation advisory organization, as provided in Title 33, chapter 16, part 10, and corresponding rates as a basis for setting its own rates. Except as provided in Title 33, chapter 16, part 10, a workers' compensation advisory organization or a licensed workers' compensation rating organization under Title 33, chapter 16, part 4, or other person may not, without first obtaining the written permission of the employer, use, sell, or distribute an employer's specific payroll or loss information, including but not limited to experience modification factors.

(6)(f)  pay the amounts determined due under a policy of insurance issued by the state fund;

(7)(g)  hire personnel;

(8)  declare dividends if there is an excess of assets over liabilities. However, dividends may not be paid until adequate actuarially determined reserves are set aside. If those reserves have been set aside, money that can be declared as a dividend must be transferred to the account created by 39-71-2321 for claims for injuries resulting from accidents that occurred before July 1, 1990, and used for the purposes of that account. After all claims funded by that account have been paid, dividends may be declared and paid to insureds.

(h) upon approval of the board, contract with licensed resident insurance producers;

(i) upon approval of the board, enter into agreements with licensed workers' compensation insurers, insurance associations, or insurance producers to provide workers' compensation coverage in other states to Montana-domiciled employers insured with the state fund;

(9)(j)  perform all functions and exercise all powers of a private insurance carrier that are necessary, appropriate, or convenient for the administration of the state fund.

(2) The state fund shall, no later than June 30, 1998, transfer $63.8 million to the account created in 39-71-2321 to pay claims for injuries resulting from accidents that occurred before July 1, 1990."



Section 16.  Section 39-71-2316, MCA, is amended to read:

"39-71-2316.   Powers of state fund. For the purposes of carrying out its functions, the state fund may:

(1)(1) insure any employer for workers' compensation and occupational disease liability as the coverage is required by the laws of this state and, as part of the coverage, provide related employers' liability insurance upon approval of the board;

(2)(2)  sue and be sued;

(3)(3)  except as provided in section 21, Chapter 4, Special Laws of May 1990, enter into contracts relating to the administration of the state fund, including claims management, servicing, and payment;

(4)(4)  collect and disburse money received;

(5)(5)  adopt classifications and charge premiums for the classifications so that the state fund will be neither more nor less than self-supporting. Premium rates for classifications may only be adopted and changed using a process, a procedure, formulas, and factors set forth in rules adopted under Title 2, chapter 4, parts 2 through 4. After the rules have been adopted, the state fund need not follow the rulemaking provisions of Title 2, chapter 4, when changing classifications and premium rates. The contested case rights and provisions of Title 2, chapter 4, do not apply to an employer's classification or premium rate. The state fund is required to belong to a licensed workers' compensation advisory organization or a licensed workers' compensation rating organization under Title 33, chapter 16, part 4, and may use the classifications of employment adopted by the designated workers' compensation advisory organization, as provided in Title 33, chapter 16, part 10, and corresponding rates as a basis for setting its own rates. Except as provided in Title 33, chapter 16, part 10, a workers' compensation advisory organization or a licensed workers' compensation rating organization under Title 33, chapter 16, part 4, or other person may not, without first obtaining the written permission of the employer, use, sell, or distribute an employer's specific payroll or loss information, including but not limited to experience modification factors.

(6)(6)  pay the amounts determined due under a policy of insurance issued by the state fund;

(7)(7)  hire personnel;

(8)(8)  declare dividends if there is an excess of assets over liabilities. However, dividends may not be paid until adequate actuarially determined reserves are set aside. If those reserves have been set aside, money that can be declared as a dividend must be transferred to the account created by 39-71-2321 for claims for injuries resulting from accidents that occurred before July 1, 1990, and used for the purposes of that account. After all claims funded by that account have been paid, dividends may be declared and paid to insureds.

(9) upon approval of the board, contract with licensed resident insurance producers;

(10) upon approval of the board, enter into agreements with licensed workers' compensation insurers, insurance associations, or insurance producers to provide workers' compensation coverage in other states to Montana-domiciled employers insured with the state fund;

(9)(11)   perform all functions and exercise all powers of a private insurance carrier that are necessary, appropriate, or convenient for the administration of the state fund."



Section 17.  Section 39-71-2320, MCA, is amended to read:

"39-71-2320.   (Temporary) Property of state fund -- investment required -- exception. All (1) Except as provided in subsection (2), all premiums and other money paid to the state fund, all property and securities acquired through the use of money belonging to the state fund, and all interest and dividends earned upon money belonging to the state fund are the sole property of the state fund and must be used exclusively for the operations and obligations of the state fund. The money collected by the state fund may not be used for any other purpose. However, state fund money must be invested by the board of investments provided for in 2-15-1808.

(2) The state fund shall pay to the general fund:

(a) $10 million in the fiscal year ending June 30, 1998; and

(b) $10 million in the fiscal year ending June 30, 1999.

39-71-2320.   (Effective July 1, 1997, on occurrence of contingency) Property of state fund -- investment required -- exception for common stock. (1) All premiums and other money paid to the state fund, all property and securities acquired through the use of money belonging to the state fund, and all interest and dividends earned upon money belonging to the state fund are the sole property of the state fund and must be used exclusively for the operations and obligations of the state fund. The money collected by the state fund may not be used for any other purpose. However, state fund money must be invested by the board of investments provided for in 2-15-1808. Except as provided in subsection (2), state fund money may be invested in common stocks of any corporation.

(2)  State fund money may be invested in common stocks of a corporation if the investment does not cause the book value of state fund common stock investments to exceed 15% of the book value of the state fund total invested assets or does not cause the book value of common stock investments in one corporation to exceed 2% of the book value of the state fund total invested assets on the date of purchase. (Effective on approval by electorate of House Bill No. 463--sec. 5, Ch. 424, L. 1995.)"



Section 18.  Section 39-71-2321, MCA, is amended to read:

"39-71-2321.   What to be deposited in state fund. (1) (a) All premiums, penalties, recoveries by subrogation, interest earned upon money belonging to the state fund, and securities acquired by or through use of money, taxes collected under 39-71-2503 and 39-71-2505, and the interest and penalties on the taxes in accordance with 15-1-501 must be deposited in the state fund. They must be separated into two accounts based upon whether they relate. They must be separated into two accounts based upon whether they relate to claims for injuries resulting from accidents that occurred before July 1, 1990, or claims for injuries resulting from accidents that occur on or after that date.

(b)(2)  All funds deposited in the state fund are statutorily appropriated as provided in 17-7-502.

(2)  The proceeds of bonds issued and loans given to the state fund under 39-71-2354 and 39-71-2355 must be deposited in the account for claims for injuries resulting from accidents that occurred before July 1, 1990.

(3) The proceeds of bonds issued and loans given to the state fund under 39-71-2354 and 39-71-2355 must be deposited in the account for claims for injuries resulting from accidents that occurred before July 1, 1990."



Section 19.  Section 39-71-2321, MCA, is amended to read:

"39-71-2321.   What to be deposited in state fund. (1) (a) All premiums, penalties, recoveries by subrogation, interest earned upon money belonging to the state fund, and securities acquired by or through use of money, taxes collected under 39-71-2503 and 39-71-2505, and the interest and penalties on the taxes in accordance with 15-1-501 must be deposited in the state fund. They must be separated into two accounts based upon whether they relate. They must be separated into two accounts based upon whether they relate to claims for injuries resulting from accidents that occurred before July 1, 1990, or claims for injuries resulting from accidents that occur on or after that date.

(b)(2)  All funds deposited in the state fund are statutorily appropriated as provided in 17-7-502.

(2)  The proceeds of bonds issued and loans given to the state fund under 39-71-2354 and 39-71-2355 must be deposited in the account for claims for injuries resulting from accidents that occurred before July 1, 1990."



Section 20.  Section 39-71-2322, MCA, is amended to read:

"39-71-2322.   Money in state fund held in trust -- disposition of funds upon repeal of chapter -- exception. The Except as provided in 39-71-2320, the money coming into the state fund must be held in trust for the purpose for which the money was collected. If this chapter is repealed, the money is subject to the disposition provided by the legislature repealing this chapter. In the absence of a legislative provision, distribution must be in accordance with the justice of the matter, due regard being had given to obligations of compensation incurred and existing."



Section 21.  Section 39-71-2327, MCA, is amended to read:

"39-71-2327.   Earnings of state fund to be credited to fund -- improper use a felony -- exception. All Except as provided in 39-71-2320, all earnings made by the state fund by reason of interest paid for the deposit thereof of funds or otherwise must be credited to and become a part of the fund, and the making of profit, either directly or indirectly, by any person out of the use of the fund is a felony. A person convicted of an offense under this section is punishable by imprisonment in the state prison for a term not to exceed 2 years or a fine of not more than $5,000, or both."



Section 22.  Section 39-71-2351, MCA, is amended to read:

"39-71-2351.   Purpose of separation of state fund liability as of July 1, 1990, and of separate funding of claims before and on or after that date. (1) An unfunded liability exists in the state fund. It has existed since at least the mid-1980s and has grown each year. There have been numerous attempts to solve the problem by legislation and other methods. These attempts have alleviated the problem somewhat, but the problem has not been solved.

(2)  The legislature has determined that it is necessary to the public welfare to make workers' compensation insurance available to all employers through the state fund as the insurer of last resort. In making this insurance available, the state fund has incurred the unfunded liability. The legislature has determined that the most cost-effective and efficient way to provide a source of funding for and to ensure payment of the unfunded liability and the best way to administer the unfunded liability is to:

(a)  separate the liability of the state fund on the basis of whether a claim is for an injury resulting from an accident that occurred before July 1, 1990, or an accident that occurs on or after that date;

(b)  create an old fund liability tax provided for in 39-71-2503 and dedicate the tax money first to the repayment of bonds issued under 39-71-2354 and 39-71-2355 and then to the repayment of loans given under 39-71-2354 and 39-71-2355 and the direct payment of the costs of administering and paying claims for injuries from accidents that occurred before July 1, 1990.

(3)  The legislature further determines that in order to prevent the creation of a new unfunded liability with respect to claims for injuries for accidents that occur on or after July 1, 1990, certain duties of the state fund should be clarified and legislative oversight of the state fund should be increased."



Section 23. Section 39-71-2352, MCA, is amended to read:

"39-71-2352.   Separate payment structure and sources for claims for injuries resulting from accidents that occurred before July 1, 1990, and on or after July 1, 1990 -- spending limit. (1) Premiums paid to the state fund based upon wages payable before July 1, 1990, may be used only to administer and pay claims for injuries resulting from accidents that occurred before July 1, 1990. Except as provided in 39-71-2316 and 39-71-2354, premiums paid to the state fund based upon wages payable on or after July 1, 1990, may be used only to administer and pay claims for injuries resulting from accidents that occur on or after July 1, 1990.

(2)  The state fund shall:

(a)  determine the cost of administering and paying claims for injuries resulting from accidents that occurred before July 1, 1990, and separately determine the cost of administering and paying claims for injuries resulting from accidents that occur on or after July 1, 1990;

(b)  keep adequate and separate accounts of the costs determined under subsection (2)(a); and

(c)  fund administrative expenses and benefit payments for claims for injuries resulting from accidents that occurred before July 1, 1990, and claims for injuries resulting from accidents that occur on or after July 1, 1990, separately from the sources provided by law.

(3)  The state fund may not spend more than $3 million a year to administer claims for injuries resulting from accidents that occurred before July 1, 1990."



Section 24.  Section 39-71-2352, MCA, is amended to read:

"39-71-2352.   Separate payment structure and sources for claims for injuries resulting from accidents that occurred before July 1, 1990, and before July 1, 1990, and on or after July 1, 1990 -- spending limit -- spending limit. (1) Premiums paid to the state fund based upon wages payable before July 1, 1990, may be used only to administer and pay claims for injuries resulting from accidents that occurred before July 1, 1990. Except as provided in 39-71-2316 and 39-71-2354, premiums Premiums paid to the state fund based upon wages payable before July 1, 1990, may be used only to administer and pay claims for injuries resulting from accidents that occurred before July 1, 1990. Premiums paid to the state fund based upon wages payable on or after July 1, 1990, may be used only to administer and pay claims for injuries resulting from accidents that occur on or after July 1, 1990.

(2)  The state fund shall:

(a)  determine the cost of administering and paying claims for injuries resulting from accidents that occurred before July 1, 1990, and separately determine the cost of administering and paying claims for injuries resulting from accidents that occurred before July 1, 1990, and separately determine the cost of administering and paying claims for injuries resulting from accidents that occur on or after July 1, 1990;

(b)  keep adequate and separate accounts of the costs determined under subsection (2)(a); and

(c)  fund administrative expenses and benefit payments for claims for injuries resulting from accidents that occurred before July 1, 1990, and claims for injuries resulting from accidents that occurred before July 1, 1990, and claims for injuries resulting from accidents that occur on or after July 1, 1990, separately from the sources provided by law.

(3)  The state fund may not spend more than $3 million a year to administer claims for injuries resulting from accidents that occurred before July 1, 1990 The state fund may not spend more than $3 million a year to administer claims for injuries resulting from accidents that occurred before July 1, 1990."



Section 25.  Section 39-71-2363, MCA, is amended to read:

"39-71-2363.   Agency law -- submission of budget -- annual report. (1) The state fund is subject to state laws applying to state agencies, except as otherwise provided by law, and it is exempt from the provisions of The Legislative Finance Act in Title 5, chapter 12, and the provisions of Title 17, chapter 7, parts 1 through 4. The state fund may use the debt collection procedures provided in Title 17, chapter 4, part 1.

(2) The (a) Except as provided in 2-15-2015, the executive director shall annually submit to the board for its approval an estimated budget of the entire expense of administering the state fund for the succeeding fiscal year, with due regard to the business interests and contract obligations of the state fund. The administrative expenditures approved by the board may not exceed 15% of the earned annual premium of the prior fiscal year. A copy of the approved budget must be delivered to the governor and the legislature.

(b) The board may approve administrative expenditures in excess of 15% of the earned annual premium of the prior fiscal year, but the excess amount approved may not exceed one-half of the investment income earned in the prior fiscal year.

(c) Upon approval of the estimated budget for the succeeding fiscal year, the state fund shall, no later than October 1 of each year, submit the approved annual budget for review to the legislative finance committee established under 5-12-201.

(d) Dividends may not be included as administrative expenditures as provided in subsection (2)(a), but are a disbursement of excess surplus pursuant to 39-71-2323 after a determination by the state fund of income from operations.

(3)  The board shall submit an annual financial report to the governor and to the legislature as provided in 5-11-210, indicating the business done by the state fund during the previous year and containing a statement of the estimated liabilities of the state fund as determined by an independent actuary."



Section 26.  Section 39-71-2501, MCA, is amended to read:

"39-71-2501.   Definitions. As used in this part, the following definitions apply:

(1)  "Account" means the workers' compensation bond repayment account established in 39-71-2504.

(2)(1)  "Department" means the department of revenue provided for in 2-15-1301.

(3)(2)  "Employee" includes an officer, employee, or elected public official of the United States, the state of Montana, or any political subdivision of the United States or the state of Montana or any agency or instrumentality of the United States, the state of Montana, or a political subdivision of the United States or the state of Montana. The term "employee" also includes an officer of a corporation.

(4)(3)  (a) "Employer" means, except as provided in subsection (4)(b) (3)(b), the person for whom an individual performs or performed any service, of whatever nature, as an employee of the person.

(b)  If the person for whom the individual performs or performed the service does not have control of the payment of the wages for the service, the term "employer" means the person who has control of the payment of wages.

(5)(4)  "Federal workers' compensation legislation" means federal legislation that provides an employee with compensation or remuneration for accidental injury or death. This legislation includes but is not limited to the Federal Employers' Liability Act, the Federal Employees' Compensation Act, and the Defense Base Act.

(6)(5)  "Ongoing activities" means obligations or occurrences that are continuous, rather than intermittent or occasional, that exist for a definite period of time during the year, or that are intended to cover or apply to successive and similar obligations or occurrences.

(7)(6)  "Publicly traded limited partnership" means a business entity that issues shares or similar ownership interests that are sold or purchased by persons through certified stockbrokers or licensed traders on a public exchange recognized by the securities exchange commission.

(8)(7)  "State fund" means the state compensation insurance fund.

(9)(8)  "Tax" or "old fund liability tax" means the workers' compensation old fund liability tax provided for in 39-71-2503, created to address the unfunded liability for claims for injuries resulting from accidents that occurred before July 1, 1990.

(10)(9) "Wages" means all remuneration for services performed in the state of Montana by an employee for an employer, including the cash value of all remuneration paid in any medium other than cash. The term does not include remuneration paid:

(a)  for casual labor not in the course of the employer's trade or business performed in any calendar quarter by an employee unless the cash remuneration paid for the service is $50 or more and the service is performed by an individual who is regularly employed by the employer to perform the service. For purposes of this subsection (10)(a) (9)(a), an individual is considered to be regularly employed by an employer during a calendar quarter only if:

(i)  on each of 24 days during the calendar quarter, the individual performs service not in the course of the employer's trade or business for the employer for some portion of the day; and

(ii) the individual was regularly employed, as determined under subsection (10)(a)(i) (9)(a)(i), by the employer in the performance of service during the preceding calendar quarter.

(b)  for services not in the course of the employer's trade or business, to the extent that remuneration is paid in any medium other than cash, when the payments are in the form of lodging or meals and the payments are received by the employee at the request of and for the convenience of the employer;

(c)  to or for an employee as a payment for or a contribution toward the cost of any group plan or program that benefits the employee, including but not limited to life insurance, hospitalization insurance for the employee or the employee's dependents, and employees' club activities;

(d)  as payments from a multiple employer welfare arrangement, as defined in 29 U.S.C. 1002, to a qualified individual employee;

(e)  as wages or compensation, the taxation of which is prohibited by federal law;

(f)  as wages or compensation for services performed by Montana residents outside the borders of the state of Montana."



Section 27.  Section 39-71-2503, MCA, is amended to read:

"39-71-2503.   Workers' compensation old fund liability tax. (1)  (a) There is imposed on each employer, except an employer whose employees are covered by federal workers' compensation legislation, a workers' compensation old fund liability tax in an amount equal to 0.28%, plus the additional amount of old fund liability tax provided in 39-71-2505, of the wages paid by the employer:

(i)  for the preceding payroll period for employers subject to the payment schedule contained in 15-30-204(1);

(ii) for the preceding month for employers subject to the payment schedule contained in 15-30-204(2); and

(iii) for the preceding year for employers subject to the payment schedule contained in 15-30-204(3)(a).

(b)  There is imposed on each employee, except an employee who is covered by federal workers' compensation legislation, an old fund liability tax, as provided in 39-71-2505, on the employee's wages. An employer paying wages for services performed in Montana shall deduct and withhold the tax from the wages.

(c)  (i) There is imposed on each business of a sole proprietor, on each subchapter S. corporation shareholder, on each partner of a partnership, and on each member or manager of a limited liability company a workers' compensation old fund liability tax, as provided in 39-71-2505, on the profit of each separate business of a sole proprietor and on the distributive share of ordinary income of each shareholder, partner, or member or manager derived from ongoing activities.

(ii)  The tax imposed in this subsection (1)(c) applies only to the ordinary income of a shareholder, partner, member, or manager as the term "ordinary income" is defined in the Internal Revenue Code.

(iii) Partners of a publicly traded limited partnership are not subject to the tax imposed in this subsection (1)(c).

(d)  A corporate officer of a subchapter S. corporation who receives wages as an employee of the corporation shall pay the old fund liability tax on both the wages and any distributive share of ordinary income at the employee rate. The subchapter S. corporation is not liable for the tax on the corporate officer's wages.

(e)  A corporate officer of a closely held corporation who owns stock in a closely held corporation that meets the stock ownership test under section 542(a)(2) of the Internal Revenue Code and receives wages as an employee of the corporation is required to pay the old fund liability tax only on the wages received. The corporation is not liable for the tax on the corporate officer's wages.

(f)  This old fund liability tax must be used to reduce the unfunded liability in the state fund incurred for claims for injuries resulting from accidents that occurred before July 1, 1990. If one or more loans or bonds are outstanding, the legislature may not reduce the security for repayment of the outstanding loans or bonds, except that the legislature may forgive payment of a tax or reduce a tax rate for any 12-month period if the workers' compensation bond repayment account contains on the first day of that period an amount, regardless of the source, that is in excess of the reserve maintained in the account and that is equal to the amount needed to pay and dedicated to the payment of the principal, premium, and interest that must be paid during that period on the outstanding loans or bonds.

(f) This old fund liability tax must be used to reduce the unfunded liability in the state fund incurred for claims for injuries resulting from accidents that occurred before July 1, 1990.

(g)(g)  Each employer shall maintain the records that the department requires concerning the old fund liability tax. The records are subject to inspection by the department and its employees and agents during regular business hours.

(h)(h)  An employee does not have any right of action against an employer for any money deducted and withheld from the employee's wages and paid to the state in compliance or intended compliance with this section.

(i)(i)  The employer is liable to the state for any amount of old fund liability taxes, plus interest and penalty, when the employer fails to withhold from an employee's wages or fails to remit to the state the old fund liability tax required by this section.

(j)(j)  A sole proprietor, subchapter S. corporation shareholder, partner of a partnership, or member or manager of a limited liability company is liable to the state for the old fund liability tax, plus interest and penalty, when the sole proprietor, shareholder, partner, or member or manager fails to remit to the state the old fund liability tax required by this section.

(2)  All collections of the tax must be deposited as received in the account provided for in 39-71-2321. The tax is in addition to any other tax or fee assessed against persons subject to the tax.

(3)  (a) Tax payments and returns required by subsections (1)(a) and (1)(b) must be made pursuant to 15-30-204. The department shall first credit a payment to the liability under 15-30-202 and credit any remainder to the account provided for in 39-71-2504 39-71-2321.

(b)  Tax payments due from sole proprietors, subchapter S. corporation shareholders, partners of partnerships, and members or managers of limited liability companies must be made with and at the same time as the returns filed pursuant to 15-30-144 and 15-30-241. The department shall first credit a payment to the liability under 15-30-103 or 15-30-202 and shall then credit any remainder to the account account as provided for in 39-71-2504 39-71-2321.

(4)  An employer's officer or employee with the duty to collect, account for, and pay to the department the amounts due under this section who fails to pay an amount is liable to the state for the unpaid amount and any penalty and interest relating to that amount.

(5)  Returns and remittances under subsection (3) and any information obtained by the department during an audit are subject to the provisions of 15-30-303, but the department may disclose the information to the department of labor and industry for the purpose of investigation and prevention of noncompliance, tax evasion, fraud, and abuse under the unemployment insurance laws, under circumstances and conditions that ensure the continued confidentiality of the information.

(6)  The department of labor and industry and the state fund shall give the department a list of all employers having coverage under any plan administered or regulated by the department of labor and industry and the state fund. The department of labor and industry and the state fund shall update the lists weekly. The department of labor and industry and the state fund shall provide the department with access to their computer data bases and paper files and records for the purpose of the department's administration of the tax imposed by this section.

(7)  The provisions of Title 15, chapter 30, that are not in conflict with the provisions of this part regarding administration, remedies, enforcement, collections, hearings, interest, deficiency assessments, credits for overpayment, statute of limitations, penalties, estimated taxes, and department rulemaking authority apply to the tax, to employers, to employees, to sole proprietors, to subchapter S. corporation shareholders, to partners of partnerships, to members or managers of limited liability companies, and to the department."



Section 28.  Section 39-71-2505, MCA, is amended to read:

"39-71-2505.   Payment of unfunded of unfunded liability for injuries resulting from accidents occurring before July 1, 1990. (1) The state fund shall pay for the cost of administering and paying claims for injuries resulting from accidents that occurred before July 1, 1990, not covered by any other funding source, by borrowing from the reserves accumulated from premiums paid to the state fund, based upon wages payable on or after July 1, 1990, and invested by the board of investments, from time to time, the amount that the state fund determines and that the budget director certifies, as provided in 39-71-2354, will be needed to pay for administering and paying the claims for the ensuing year.

(2)  (a) In January of each year, prior to the start of the following fiscal year, the state fund shall forward to the budget director information pertaining to the amount that the state fund will borrow for the ensuing fiscal year to pay for the cost of administering and paying claims for the injuries provided for in subsection (1). In addition, the state fund shall forward to the budget director the schedule of projected liability payments and cash needs on which the amount to be borrowed is based. The schedule must include but is not limited to total projected liability payments, loans and bond debt payments, revenue from the old fund liability tax provided for in 39-71-2503, projected fiscal yearend cash, and the projected fiscal yearend cash for the year 2007. (1) The state fund shall pay for the cost of administering and paying claims for injuries resulting from accidents that occurred before July 1, 1990, not covered by any other funding source, by borrowing from the reserves accumulated from premiums paid to the state fund, based upon wages payable on or after July 1, 1990, and invested by the board of investments, from time to time, the amount that the state fund determines and that the budget director certifies, as provided in 39-71-2354, will be needed to pay for administering and paying the claims for the ensuing year.

(2) In January of each year, prior to the start of the following fiscal year, the state fund shall forward to the budget director information pertaining to the amount that the state fund will borrow for the ensuing fiscal year to pay for the cost of administering and paying claims for the injuries provided for in subsection (1). In addition, the state fund shall forward to the budget director the schedule of projected liability payments and cash needs on which the amount to be borrowed is based. The schedule must include but is not limited to total projected liability payments, loans and bond debt payments, revenue from the old fund liability tax provided for in 39-71-2503, projected fiscal yearend cash, and the projected fiscal yearend cash for the year 2007.

(b)  (i)(3) There is imposed on each employer a workers' compensation old fund liability tax as provided in 39-71-2503. The employer old fund liability tax is an amount equal to 0.5% of the employer's payroll in the preceding calendar quarter.

(ii)(4) The employee old fund liability tax is an amount equal to 0.2% of the employee's wages in the preceding calendar quarter.

(iii)(5) The Except as provided in subsection (7)(e), the old fund liability tax is an amount equal to 0.2% on the profit of each separate business of a sole proprietor and on the distributive share of ordinary income of each subchapter S. corporation shareholder, partner of a partnership, or member or manager of a limited liability company.

(iv)(6) The rate of the employer old fund liability tax determined by this section includes the 0.28% employer old fund liability tax provided for in 39-71-2503.

(v)  (A) The employer old fund liability tax that is in excess of the 0.28% tax provided for in 39-71-2503 terminates at the end of fiscal year 2007.

(7) (a) The old fund liability tax imposed under 39-71-2503 and 39-71-2505 terminates on either January 1 or July 1 of the year in which claims for injuries resulting from accidents that occurred before July 1, 1990, are projected to be adequately funded.

(b) As used in this part, "adequately funded" means the present value of:

(i) the total cost of future benefits remaining to be paid;

(ii) the cost of administering the claims; and

(iii) an additional amount equal to 10% of the total of the amounts in subsections (7)(b)(i) and (7)(b)(ii).

(c) Each fiscal year until the old fund liability tax terminates, the independent actuary engaged by the state fund pursuant to 39-71-2330 shall project the unpaid claims liability, as of the following June 30, for claims for injuries resulting from accidents that occurred before July 1, 1990.

(d) The old fund liability tax terminates on January 1 if, by October 15 of the prior year, the budget director certifies to the department that, based upon the independent actuary's selected best estimate ultimate projections and as approved by the state fund board of directors, claims for injuries resulting from accidents that occurred before July 1, 1990, will be adequately funded as of January 1.

(e) The old fund liability tax terminates on July 1 if, by February 28 of the year the budget director certifies to the department that, based upon the independent actuary's selected best estimate ultimate projections and, as approved by the state fund board of directors, claims for injuries resulting from accidents that occurred before July 1, 1990, will be adequately funded as of July 1.

(f) If the old fund liability tax terminates on July 1, the amount of tax imposed under subsection (5) is an amount equal to 0.1% for the full calendar year.

(g) In determining whether claims for injuries resulting from accidents that occurred before July 1, 1990, are adequately funded, the estimated future amounts of old fund liability tax must be included.

(h) By October 1 of each year following the first full fiscal year after termination of the old fund liability tax, any funds in excess of the adequate funding amount established in subsection (7)(b) must be returned to the account established in 39-71-2321 to pay claims for injuries resulting from accidents that occurred after July 1, 1990. Under this section, the total amount of funds returned to the account may not exceed $63.8 million.

(i) If, in any fiscal year after the old fund liability tax is terminated and claims for injuries resulting from accidents that occurred after July 1, 1990, are not adequately funded, any amount returned to the account in 39-71-2321 to pay claims for injuries resulting from accidents that occurred after July 1, 1990, pursuant to subsection (7)(h) must be transferred back to the account established in 39-71-2321 to pay claims for injuries resulting from accidents that occurred before July 1, 1990.

(j) The independent actuary engaged by the state fund pursuant to 39-71-2330 shall project the unpaid claims liability for claims for injuries resulting from accidents that occurred before July 1, 1990, each fiscal year until all claims are paid.

(B)  If the debt service account has sufficient funds to pay outstanding bonds or if no bonds are outstanding, the old fund liability tax may not be imposed after the end of fiscal year 2007.

(vi)(8) The old fund liability tax described in this section must be collected and deposited as provided in 39-71-2321 and 39-71-2503 and 39-71-2504.

(3)  If in any January the cumulative projected amount to be borrowed by the state fund from reserves accumulated from premiums paid to the state fund based on wages payable on or after July 1, 1990, to administer and pay claims for injuries resulting from accidents that occurred before July 1, 1990, not including any outstanding bonds as of May 13, 1993, exceeds $80 million for the following fiscal year, the tax rate on the persons subject to the old fund liability tax must be increased by 0.05% for the following fiscal year over the current tax rate. If in any January the projected fiscal yearend cash balance for the current fiscal year exceeds $25 million, the tax rate on the persons subject to the old fund liability tax must be reduced by 0.05% from the current tax rate for the following fiscal year.

(4)  The total tax on the persons subject to the old fund liability tax may not exceed 0.75%.

(5)  The budget director shall certify the cash flow projections of the state fund required by this section and shall notify the department of revenue no later than April 1 of the rate of tax to be collected pursuant to this section."



Section 29.  Section 39-71-2905, MCA, is amended to read:

"39-71-2905.   Petition to workers' compensation judge -- time limit on filing. (1) A claimant or an insurer who has a dispute concerning any benefits under chapter 71 of this title may petition the workers' compensation judge for a determination of the dispute after satisfying dispute resolution requirements otherwise provided in this chapter. In addition, the district court that has jurisdiction over a pending action under 39-71-515 may request the workers' compensation judge to determine the amount of recoverable damages due to the employee. The judge, after a hearing, shall make a determination of the dispute in accordance with the law as set forth in chapter 71 of this title. If the dispute relates to benefits due to a claimant under chapter 71, the judge shall fix and determine any benefits to be paid and specify the manner of payment. After parties have satisfied dispute resolution requirements provided elsewhere in this chapter, the workers' compensation judge has exclusive jurisdiction to make determinations concerning disputes under chapter 71, except as provided in 39-71-317 and 39-71-516. The penalties and assessments allowed against an insurer under chapter 71 are the exclusive penalties and assessments that can be assessed by the workers' compensation judge against an insurer for disputes arising under chapter 71.

(2) A petition for hearing before the workers' compensation judge must be filed within 2 years after benefits are denied."



Section 30.  Transfer of funds. The balance remaining in the workers' compensation bond repayment account on June 30, 1997, must be deposited in the state fund as provided in 39-71-2321.



Section 31.  Repealer. (1) Section 39-71-2504, MCA, is repealed.

(2) Sections 39-71-2354, 39-71-2355, 39-71-2501, 39-71-2502, 39-71-2503, and 39-71-2506, MCA, are repealed.



Section 32.  Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications.



Section 33.  Retroactive applicability. (1) [Sections 6(35)(f) and 10] apply retroactively, within the meaning of 1-2-109, to claims for injuries occurring prior to [the effective date of sections 6(35)(f) and 10].

(2) [Section 11] applies retroactively, within the meaning of 1-2-109, to claims filed on or after March 27, 1973.



Section 34.  Effective dates -- applicability. (1) [Sections 1 through 5, 6(1) through 6(34) and 6(36), 9, 15, 17, 18, 20, 21, 23, 25 through 28, 30, and 31(1)] are effective July 1, 1997.

(2) [Sections 7, 12 through 14 and 29] are effective July 1, 1997, and apply to claims for injuries occurring on or after [the effective dates of sections 7, 12 through 14 and 29].

(3) [Sections 8, 19, 22, 24, and 31(2)] are effective on the date that the budget director certifies that the old fund liability tax is terminated pursuant to [section 28].

(4) [ Section 16 ] is effective July 1, 1998.

(5) [Sections 6(35), 10, 11, 32, 33, 35, and this section] are effective on passage and approval.



Section 35.   Termination. (1) [Sections 18 and 23] terminate on the date that the old fund liability tax is terminated pursuant to [section 28].

(2) [Section 15] terminates June 30, 1998.

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