The purpose of the Self-Insurer's Security Deposit is to secure payment of compensation obligations.

• A. To fund ongoing payroll
• B. To secure payment of compensation obligations
• C. To cover administrative costs
• D. To fund future expansions

Answer: (B)

The key idea here is that a Self-Insurer’s Security Deposit acts as a financial guarantee to ensure that workers’ compensation benefits will be paid. When a California employer self-insures, they take on the obligation to cover all compensation and medical costs for injured workers. To protect employees (and the state) from the risk that the self-insurer can’t meet those obligations, a security deposit is required as collateral. If benefits are owed or reserves fall short, the funds in the deposit can be used to satisfy those obligations. This deposit isn’t intended to fund daily payroll, administrative costs, or future expansions; those needs come from the employer’s ongoing operations and finances.