What are the financial requirements for employers to become self-insured in California?

The financial requirement for employers to become self-insured in California stipulates that they must maintain a net worth of at least $5 million. This requirement ensures that the employer has sufficient financial resources to cover potential workers' compensation claims without relying on traditional insurance.

A net worth threshold helps to assure that the self-insured employer can meet its obligations to injured workers. This requirement acts as a benchmark for financial stability, indicating the ability to manage claim payouts and other related costs. By maintaining a minimum net worth, the employer demonstrates that it possesses adequate financial backing to fulfill its responsibilities under workers' compensation laws.

The other options presented do not align with the established requirements. For instance, having a specific amount in an operating account or earning a defined profit margin may reflect financial health, but they are not part of the criteria set forth for self-insurance in California. Additionally, the absence of existing debts, while potentially advantageous, is not a mandated requirement for becoming self-insured. Thus, the focus on net worth is critical for ensuring that self-insured employers can reliably cover their liabilities.