Starting January 1, 2026, Texas will replace its existing workers’ compensation “maintenance tax” structure with a more flexible surcharge system, aiming to bolster funding for regulation, fraud prosecution, and administrative oversight.
The newly-enrolled Senate Bill 1455 replaces the term “maintenance tax” with “surcharge” across multiple sections of the Insurance and Labor Codes. More importantly, it dramatically increases the maximum combined assessment rate from 0.6% to 2.7% of gross premiums.
That jump gives the Texas Department of Insurance (TDI) and the Division of Workers’ Compensation authority to collect sufficient revenue for effective oversight. Agencies can now adjust the surcharge annually—reflecting costs, projected expenses, and fraud-fighting needs—within that 2.7% cap.
Insurers can recover the surcharge either by including it as an expense in rate filings or passing it directly to policyholders. Self-insured employers and groups are also captured by the law, with assessments tied to their claim liabilities and administrative expenses under a similar surcharge framework.
Read More: S.B.ANo.A1455
A driving factor behind this shift is to reduce retaliatory taxes that domiciled Texas insurers face when writing policies in other states. By reclassifying payments as surcharges rather than taxes, the state aims to mitigate adverse tax treatment like what carriers encounter in California and Illinois.
The legislative journey was smooth and overwhelming: passed unanimously in the Senate 310, and overwhelmingly in the House 13411; it was enrolled on May 22, and now awaits the Governor’s signature.
While businesses won’t immediately feel higher charges, this new structure aims to ensure a stable and well-funded regulatory engine, while reducing tax burdens outside Texas.
