On June 21, 2023, the Governor of Puerto Rico, Hon. Pedro Pierluisi Urrutia together with the Administrator of the State Insurance Fund Corporation (“hereinafter referred to as the “Fund”), Jesús M. Rodríguez Rosa, announced dramatic measures, and proposals to revamp the Fund. The majority of employers and injured workers will benefit from these measures. The Governor announced a historic 50% reduction in workers’ compensation premiums for most employers, effective July 1st, 2023, as well as a legislative bill to increase weekly allowances by 100% and make cost-of-living adjustments for injured workers.
In his announcement, the Governor stated that it is necessary that the premiums for workers’ compensation insurance should be fair and affordable for our small and medium-sized businesses, and after a thorough investigation, it was determined that a reduction in premiums was possible. This is not surprising given that the Fund has been operating with surpluses for decades, which the legislature has then redistributed for expenses and other budgetary initiatives elsewhere in the government, rather than lowering premiums and/or increasing benefits to the injured.
The first new benefit is a 50% reduction in annual premiums for small and medium-sized businesses in fiscal years 2023-2024 and 2024-2025. It will take effect on July 1st, when employers are required by law to submit payroll statements.
They stated that the incentive will be available to all employers with permanent policies who have 50 or fewer employees and an annual payroll of $ 1,525,000 or less. These are the two specific requirements for qualifying as a small or medium-sized business for the 50% reduction in premium paid to the Fund.
According to the Fund, 95.6% of insured employers have 50 or fewer employees and an annual payroll of no more than $1,525,000. Currently, the fund serves over 33,000 employers. As a result, the Fund estimates that 31,700 employers would be eligible, while approximately 1,450 employers would be ineligible.
They also reported that Law 120 of 2014 provides another similar incentive that grants a 50% reduction and currently benefits 900 employers. The Department of Economic Development and Commerce is responsible for administering Law 120 of 2014, the Employment Generation and Retention Incentives Act. However, this special incentive is only available to startups, companies that are expanding and creating jobs, or businesses that are experiencing financial difficulties. Those employers will be qualified for this new incentive if they meet the requirements, according to the Governor and Administrator’s announcement once the Department of Economic Development and Commerce’s incentive expires.
The Fund estimated that the economic impact of this new incentive would be $55.6 million per year, resulting in increased economic activity. Puerto Rico’s Financial Oversight and Management Board (“FOMB”) has approved this incentive. We applaud the administration for taking these steps to advance Puerto Rico and make our island a better place to do business and invest.
On the other hand, the Governor and the Administrator announced that they will be submitting a bill to the next session of the Legislative Assembly that will increase several benefits for those who have been injured by temporary or transitory disability.
Under workers’ compensation legislation, Law 45 of 1935, financial compensation benefits known as “dietas” or allowances are those that assist an employee who suffers an injury at work in being able to sustain due to loss of income until they can return to work while attending to the occupational health condition. According to reports, this amount has not been adjusted since 2004, or nearly 19 years ago. The Statute would be amended to increase the weekly payment of compensation for injured employees from $100 to $200. In other words, it doubles the payment of injured workers’ weekly allowance. This temporary “dieta” or allowance can be received by an injured person for a maximum of 312 weeks.
The bill that will be presented to the Legislative Assembly, on the other hand, will request that the Fund be authorized to make cost-of-living adjustments on all types of compensation provided by the Fund to the infirm or injured every three years. These benefits for covered workers have yet to be approved by the FOMB.
Given the Fund’s current positive fiscal position, the Administration does not anticipate the FOMB objecting to this measure, which it will submit for consideration at the next session of the Legislative Assembly.
Transcript of public announcement of June 21, 2023