Glossary · PA Workers' Comp

Retrospective Rating Plan

A workers' comp pricing plan for large accounts where actual losses directly affect final premium, with minimum and maximum premium limits.

Definition

A retrospective rating plan is a premium calculation method used for large workers' comp accounts where the final annual premium is largely determined by the account's actual losses during the policy period, subject to minimum and maximum premium limits.

Retrospective Rating Plans: Who They Are For and How the Final Premium Is Calculated

Retro plans are appropriate for larger employers — typically those with $100,000+ in annual premium — who want to take on more pricing risk in exchange for potential savings if their claims are low.

The standard retro formula applies a basic premium, an excess loss premium factor, and a loss conversion factor to the actual incurred losses, subject to the agreed minimum and maximum. If claims are low, the employer pays closer to the minimum; if high, closer to the maximum.

Retro plans create a strong financial incentive for loss control — every dollar of claims savings translates directly into premium reduction. They are particularly appropriate for safety-focused employers in high-hazard industries.