The director may not accept as a deposit to secure incurred liabilities for the payment of compensation and the performance of obligations of a self-insured employer;

The director may not accept as a deposit to secure incurred liabilities for the payment of compensation and the performance of obligations of a self-insured employer;

• A. Certificate of Deposit
• B. Cash
• C. Securities
• D. Surety Bonds

Answer: (A)

Collateral to secure incurred liabilities must be highly liquid and readily available to cover workers’ compensation payments and other obligations of a self-insured employer. Cash and marketable securities meet this requirement because they can be accessed or converted quickly. A surety bond provides a separate guarantee to back the obligations. A certificate of deposit, however, is a time deposit with a fixed term and penalties for early withdrawal, making it not readily redeemable when funds are needed. Therefore, the director cannot accept a certificate of deposit as the deposit to secure incurred liabilities.

Collateral to secure incurred liabilities must be highly liquid and readily available to cover workers’ compensation payments and other obligations of a self-insured employer. Cash and marketable securities meet this requirement because they can be accessed or converted quickly. A surety bond provides a separate guarantee to back the obligations. A certificate of deposit, however, is a time deposit with a fixed term and penalties for early withdrawal, making it not readily redeemable when funds are needed. Therefore, the director cannot accept a certificate of deposit as the deposit to secure incurred liabilities.