The SIBTF is funded through a payroll surcharge levied on all employers, based on a percentage of the premium paid by insured employers, and based on a percentage of indemnity paid during the most recent year for self-insured employers. In 2023, noting rapid increases in the volume of applications and payments for SIBTF benefits, DIR contracted with RAND to “conduct a comprehensive study of the SIBTF.” This report, published in June 2024, identified startling trends concerning the long-term liabilities of the SIBTF and its resulting financial instability.
Insured employers pay roughly $1.4 billion in permanent disability payments. Self-insured employers – private and public – likely add another $500 million to $1 billion. Together, total annual permanent disability payouts under the standard workers’ compensation system likely total about $2 billion. SIBTF, once a relatively small program, now pays more permanent disability payments ($2 billion to $3 billion) than the state’s core workers’ compensation program.
AB 1329 was passed by the legislature with the stated purpose of reforming the SIBTF to reduce costs and the expected deficits in funding. Among other reforms AB1329 would specify that medical-legal evidence in an SIBTF claim proceeding can only be obtained through the QME process, and would require the AD to create and maintain a database of QME physicians with the necessary training and expertise to evaluate SIBTF claims from which to empanel QMEs for these purposes. Unfortunately, Gavin Newsom vetoed the proposed law. His veto letter provided the following reasons to the legislature.
“I am returning Assembly Bill 1329 without my signature. This bill would make assorted changes to the Subsequent Injury Benefit Trust Fund (SIBTF), a World War II-era program created to protect disabled veterans entering the workforce. Proposed changes include incorporating a Qualified Medical Evaluator (QME) process, excluding certain medical conditions from the definition of pre-existing disabilities, and adding a statute of limitations on claims.”
“I commend the author for identifying the SIBTF as needing significant reform. Over the past decade, SIBTF has expanded significantly beyond its original purpose. The number of claims has sky rocketed, leading to an unsustainable future for the program. The Deportment of Industrial Relations estimates that, without comprehensive reform, the annual assessment paid by all employers will increase from $372 million in FY 2021-22 to $1.5 billion in FY 2029-30. As the Legislative Analyst’s Office noted in a July 2025 report, workers submitting SIBTF claims today could see processing delays of up to ten years unless we take comprehensive action. Notably, other states, facing similar pressures, have chosen to eliminate their programs rather than reform them. This situation is dire and the state must act immediately.”
“Unfortunately, AB 1329 does not contain the comprehensive reforms necessary to save SIBTF. While some of the changes, such as the proposed QME process and the statute of limitations, are important, other changes take the program in the wrong direction. For example, including the impact on the “activities of daily living” in the determination of a prior disability contradicts the concept that the prior disability must be labor-disabling. This change would increase SIBTF claims and liabilities.”
“To ensure this program continues to serve workers as intended, comprehensive SIBTF reform must be pursued next year. I am directing the Department of Industrial Relations and its Division of Workers’ Compensation to develop a proposal for comprehensive reform to include in January’s 2026-27 budget proposal. I look forward to working with the Legislature to ensure this program continues to serve California workers.”