Keenan Briefings

Briefing

California Workers’ Compensation Budget & Assessment

PREPARING FOR A POSSIBLE DIR ASSESSMENT INCREASE IN 2026

The purpose of this briefing is to prepare our clients for the potential that their self-insured assessment invoice in December 2026 could be significantly higher than expected.

WHY ASSESSMENTS ARE NEEDED

All California employers, whether self-insured or fully insured, share in the funding of the Department of Industrial Relations (DIR). This funding goes toward several programs and regulatory functions, including:

• Subsequent Injuries Benefits Trust Fund (SIBTF)
• Uninsured Employers Benefits Trust Fund (UEBTF)
• Occupational Safety and Health Fund Assessment (OSHF)
• Workers’ Compensation Fraud Account Assessment (FRAUD)
• Workers’ Compensation Administrative Revolving Fund Assessment (WCARF)
• Labor Enforcement and Compliance Fund (LECF)

HOW ASSESSMENTS ARE DETERMINED

For self-insured employers, an annual report is submitted annually, March 1 for nonpublic employers and October 1 for public agencies. Included in these reports is the amount of indemnity (temporary disability and permanent disability) paid for the prior year (calendar year for nonpublic employers and fiscal year for public agencies).

The indemnity paid, as reported in the annual report, is then applied to funding factors established by the DIR to determine each employer’s assessment amount for that year.

DECEMBER 2026 ASSESSMENT PROJECTIONS

According to information shared by the California Association of Joint Powers Authorities (CAJPA) in April 2026, preliminary DIR projections indicate potential assessment increases ranging from 85% to 95%—an unprecedented year-over-year increase from historical assessment amounts.

The primary driver of these projected increases is the continued growth of liabilities associated with the Subsequent Injuries Benefits Trust Fund (SIBTF). CAJPA reports that SIBTF claim costs and benefit payments have increased substantially over the past decade, with actuarial estimates placing total liabilities for resolved and pending claims at approximately $28 billion. Rising administrative costs associated with managing the program have also contributed to the projected funding needs.

While these projections remain preliminary and may change before final assessments are issued, employers should consider incorporating higher assessment costs into their 2026 budgeting process.

SENATE BILL 171 (SB 171) – SOME POTENTIAL GOOD NEWS!

SB 171 is part of California’s broader workers’ compensation reform efforts and includes significant proposed changes to the administration and eligibility requirements of the Subsequent Injuries Benefits Trust Fund.

The legislation is intended to address growing claim inventories, escalating liabilities, and long-term sustainability concerns associated with SIBTF. Proposed reforms include changes to eligibility standards, benefit calculations, and claim administration procedures designed to improve program efficiency and reduce future liabilities.

Because SIBTF represents a significant component of DIR assessments, successful implementation of these reforms may help moderate future assessment growth and improve long-term cost predictability for California employers.

OPPORTUNITIES FOR EMPLOYERS TO POSITIVELY IMPACT ASSESSMENTS

Although employers have limited influence over the assessment factors, they can take proactive steps to manage the indemnity costs that affect their individual assessment obligations.

A well-structured Return-to-Work (RTW) program remains one of the most effective strategies for controlling Temporary Disability costs. Prompt medical management, early employee engagement, and identification of appropriate transitional work opportunities can help reduce disability duration and improve claim outcomes.

By reducing Temporary Disability and other indemnity payments, employers may positively influence future assessment calculations while also improving overall workers’ compensation program performance.

KEENAN SUPPORT

Keenan offers several resources designed to help employers manage workers’ compensation costs and improve claim outcomes, including:

Return-to-Work Support — Programs and resources that facilitate the safe and timely return of injured employees to productive work, helping reduce Temporary Disability duration and related indemnity costs.

Frontline Provider Partnerships — Access to provider networks focused on occupational injury management, early intervention, and evidence-based treatment strategies that support faster recovery outcomes.

Company Nurse® — Telephonic nurse triage services provide immediate injury assessment, direct employees to the appropriate level of care, and help ensure consistent injury reporting and management.

Advanced Analytics — Data-driven reporting and claim analytics that identify trends, emerging risks, and claim cost drivers to support informed decision-making and program improvement.

Assessment Projections and Budget Planning Support — Strategic guidance to help employers understand assessment trends, evaluate potential financial impacts, and incorporate projected assessment costs into future budgeting efforts.

KEY TAKEAWAYS

• California employers should prepare for potentially significant increases in workers’ compensation assessments in December 2026.
• All California employers contribute to funding DIR-administered workers’ compensation programs, while self-insured employers receive direct assessments based largely on their reported indemnity payments.
• Preliminary projections indicate potential assessment factor increases of 85%–95% compared to last year, primarily driven by growing SIBTF liabilities and administrative costs.
• Self-insured employers can positively influence future assessments by reducing Temporary Disability and Permanent Disability payments through effective claims management and return-to-work strategies.
• SB 171 reforms are intended to improve the long-term sustainability of SIBTF and could help moderate future assessment growth if successfully implemented.
• Keenan’s Return-to-Work resources, Frontline Provider partnerships, Company Nurse services, analytics capabilities, and assessment projection support can help employers manage workers’ compensation costs and budget with greater confidence.

Keenan is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities, and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.