Montana’s administrative fund tax is an assessment on workers’ compensation insurers and self-insured employers that pays for the state’s oversight of the workers’ compensation system. Authorized under MCA 39-71-201, it is capped at 4% of an entity’s paid losses from the prior calendar year, though the rate actually set each year runs well below that ceiling. The Department of Labor and Industry uses the money to run its regulatory operations, resolve benefit disputes, and enforce workplace safety rules without drawing on general tax revenue.
Who Owes the Assessment
Montana groups every workers’ compensation insurer into one of three plans under MCA 39-71-116, and all three owe a share of administrative costs. How you pay depends on which plan applies.
- Plan 1 covers employers who self-insure. They pay a direct assessment to the Department of Labor and Industry based on their own paid losses.
- Plan 2 covers private insurance carriers writing workers’ compensation policies in Montana. Plan 2 insurers fund their share through a premium surcharge collected from the employers they insure.
- Plan 3 is the Montana State Fund. It pays a direct assessment for claims that arose before July 1, 1990, and funds post-1990 costs through the same premium surcharge mechanism Plan 2 uses.
If you’re an employer buying coverage through a Plan 2 carrier or the State Fund, the surcharge shows up as a separate line item on your policy. It cannot be folded into the base insurance rate.
How the Amount Is Calculated
The assessment is built on paid losses, not premiums or payroll. Paid losses under MCA 39-71-201 include total compensation benefits and total medical benefits paid during the preceding calendar year, whether or not a deductible applied. Medical benefits above $200,000 per occurrence are excluded from the calculation.
Each year the department determines the percentage needed to cover its budget, subject to the 4% statutory cap. For the fiscal year beginning July 1, 2026, the administrative fund premium surcharge rate is 0.005441, or roughly 0.54% of premium. For the fiscal year that began July 1, 2025, the rate was 0.005443. Those rates apply to Plan 2 and Plan 3 premium surcharges. Plan 1 employers receive a separate assessment notice tied to their own paid losses.
By April 30 each year, the department notifies Plan 1 employers and the State Fund of their specific assessment amounts and publishes the surcharge rate that Plan 2 and Plan 3 insurers will collect during the coming fiscal year.
Reporting and Payment Deadlines
Every Plan 1 employer, Plan 2 insurer, and the State Fund must file a paid-losses report with the department by March 1 each year, covering benefits paid during the prior calendar year and using the format the department prescribes.
Payment schedules split by plan:
- Plan 1 employers pay in one lump sum due July 1, or in two equal installments due July 1 and December 31.
- The State Fund’s direct assessment for pre-1990 claims follows the same schedule: one payment on July 1 or two on July 1 and December 31.
- Plan 2 and Plan 3 premium surcharges are collected from employers whenever a premium is paid. Insurers remit everything collected during a calendar quarter within 20 days after the quarter ends.
- A Plan 2 insurer that paid benefits in the prior year but won’t collect any premium in the following fiscal year owes a direct assessment of up to 4% of paid losses, due by July 1.
Surcharge rate notices, reporting templates, and the quarterly remittance form are posted by the department’s Employment Relations Division.
Other Surcharges on the Same Policy
The administrative fund surcharge is not the only line item Montana adds to a workers’ compensation premium. A Subsequent Injury Fund surcharge (0.003844 for the fiscal year beginning July 1, 2025) and an OSHA fund surcharge (0.004922 for the same year) are collected through the same quarterly mechanism. Together the three surcharges total roughly 1.42% of premium for Plan 2 and Plan 3 employers in fiscal year 2026. Each must appear separately on the policy or an accompanying document.
Penalties for Late or Unpaid Amounts
Missing a deadline is expensive. Under MCA 39-71-201, the department can impose a $500 administrative fine plus 12% annual interest on any delinquent amount. That applies to Plan 1 employers, the State Fund, and Plan 2 insurers that fail to remit collected surcharges on time.
There is a second trap for employers. If an employer fails to pay both the premium surcharge and the underlying premium, the statute requires the insurer to apply whatever payment it receives to the surcharge first and the premium second. An underpayment can therefore leave the actual insurance premium short, giving the insurer grounds to cancel the workers’ compensation policy for nonpayment. Losing coverage exposes the business to personal liability for workplace injuries and to penalties under Montana’s mandatory coverage laws.
The department also audits paid-loss reports. If an audit finds that an insurer or self-insured employer underreported losses, the department will demand the difference plus penalties. Keeping internal claims records reconciled with your annual report is the most reliable defense against a surprise assessment.
Disputing an Assessment
If you believe the department miscalculated your assessment or used the wrong paid-loss figures, Montana law requires you to work it out with the department before going to court. The dispute resolution process for workers’ compensation matters starts with a written request to the responding party and a 15-working-day response window. If that fails, mediation through the department’s Dispute Resolution Section is required before a petition can be filed in the Workers’ Compensation Court.
Most assessment disputes turn on whether specific claims were correctly classified as paid losses, or whether the $200,000 medical-benefit exemption was applied correctly. Pull the underlying claims payment records before you call the department. Disputing a bottom-line number without the detail behind it rarely goes anywhere.