Section 408.43j. Group self-insurers' funds; advance premium discounts; surplus monies; surplus investment income and premiums; unfunded claims.

j. (1) The trustees of any group self-insurers' fund shall not authorize advance premium discounts to any member in excess  of   those authorized by the excess insurance underwriter and approved by the bureau.

If discounts are approved by the excess carrier and the  bureau,   the  excess carrier shall agree to base the loss fund on the  premium   collected  after discount.

(2)   Any surplus monies for a fund year in excess of the amount necessary to fulfill all obligations under the act for that fund year, including a provision for claims incurred but not reported, may be declared to  be refundable by the trustees at any time, and the amount of  the   declaration shall be a fixed liability of the fund at the time of the declaration. The date of payment shall be as agreed to by the trustees and the bureau, except that monies not needed to satisfy the loss fund requirements, as established by the aggregate excess contract, may be refunded  immediately after the end of the fund year with the approval of the bureau. The intent of this rule is to ensure that sufficient monies are retained  so  that total assets are greater than total liabilities for each fund year.

(3)    If premiums collected and earned investment income  associated  with any fund year are insufficient to completely fund all reported claims and expenses for that year, unfunded amounts, by fund year, shall be reported immediately to the bureau with the proposed plan to achieve 100% funding.

The plan to achieve 100% funding for  all  claims  is    subject     to   bureau approval.

A plan may include, but is not limited to, all of the following:

(a)   Use of premiums collected in other fund years, but not necessary   for payment of claims or expenses in the year collected.

(b)   Use of investment earnings associated with other fund years, but not necessary for payment of claims or expenses in  the   year   in   which associated.

(c)   Assessment of members by order of the bureau.

(4)      The bureau may allow investment income earned  by  a   group self- insurance fund during a calendar year to be returned to the  fund membership without prior bureau approval if the fund trustees provide all of the following documentation:

(a)   Certification, to the bureau, in the form of a letter from a certified public accountant, attesting to the amount of investment income earned during the calendar year.

(b)    Certification to the bureau, by the board of trustees, of the amount of the investment income and of the employers to whom the investment income is to be distributed.

(c)    Certification by the board of trustees and the group's certified public accountant that, after the distribution of investment income,  the aggregate retention in the current fund year, as determined by the group's excess insurance carrier, and all administrative expenses  will  be  fully funded.

(d)   If the fund operates with specific excess insurance only or a letter of credit in place of aggregate excess insurance, the board of trustees and the group's certified public accountant shall certify that, after  the distribution of investment income, ultimate  loss,  as  calculated  by    a certified actuary at  a  90%   confidence  level,   and all  administrative expenses will be fully funded.

(e)    Certification by the board of trustees and the fund's certified public accountant that the fund's financial statements are not discounted and do not consider the time value of money.

The information specified in subdivisions (a) to (e) of this rule shall be received by the bureau not earlier than December 1, and not later than December 31, of the calendar year in which the investment income is earned and is to be distributed. If the information specified in this rule is not received by the bureau in a timely manner, then the bureau may  withdraw the fund's privilege  of   returning  investment   income  to fund   members without prior bureau approval.

History: 1980 AACS; 1984 AACS; 1996 AACS.