An Act To Protect Small Payroll Processors
Maine Legislature, Session 122, LD 1878
Committee: Business, Research and Economic Development
Sponsors: ROBINSON, DIAMOND, AUSTIN, BEAUDETTE, CROSBY, JACOBSEN, RECTOR, BROMLEY, DOW
Amends: 10 MRSA §980-D, 10 MRSA §1495, 10 MRSA §1495-E

Legislative Document 
No. 1878 
H.P.1318 
House of Representatives, January 3,2006 
An Act To Protect Small Payroll Processors 
Approved for introduction by a majority of the Legislative Council pursuant to Joint Rule 
203. 
Received by the Clerk of the House on December 28,2005. Referred to the Committee on 
Business, Research and Economic Development pursuant to Joint Rule 308.2 and ordered 
printed pursuant to Joint Rule 401. 
Presented by Representative ROBINSON of Raymond. 
Cosponsored by Senator DIAMOND of Cumberland and 
-m~/J7.7l/~ 
MILLICENT M. MacFARLAND 
Clerk 
Representatives: AUSTIN of Gray, BEAUDETTE of Biddeford, CROSBY of Topsham, 
JACOBSEN of Waterboro, RECTOR of Thomaston, Senators: BROMLEY of Cumberland, 
DOW of Lincoln. 
Printed on recyc led paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. I. 10 MRSA §980-D is enacted to read: 
§980-D. 
PQyroII Processor Recovery Fund 
The Payroll Processor Recovery Fund, 
referred to in this 
section as "the fund," is created. 
The fund must be deposited 
with 
and 
maintained 
by 
the 
authority. 
The 
fund 
must 
be 
gQffiinistered by the Director of the Qffice of Consumer Credit 
Regulation within the Department of Professional and Financial 
Regulation, 
referred 
to 
in 
this 
section 
as 
"the 
fund 
administrator," in accordance with the provisions 
of chapter 
222. 
All 
money 
received 
by 
the 
authority 
from 
the 
fund 
administrator for the purpose of providing a source of recovery 
for employers injured by a payroll processor's failure to pay 
taxes or unemployment premiums must be credited to the fund. 
A 
portion of the interest earned on money in the fund may be used 
to 
pay the 
fund maintenance 
expenses 
of 
the authority; 
the 
balance must be credited to the fund. 
The balance in the fund 
must revert to the fund administrator if the need for the fund is 
obviated. 
Sec. 2. 10 MRSA §1495, sub-§I-A, as enacted by PL 2003, c. 
668, §1 and affected by §12, is amended to read: 
I-A. 
Administrator. 
"Administrator" means, except in cases 
in 
which 
the 
payroll 
processor 
is 
a 
supervised 
financial 
organization 
or 
a 
wholly 
owned 
subsidiary 
of 
a 
supervised 
financial organization 
as--de-f...,i-ned--9y-..!l'...,i-t...J.-e--9-AT-~...,i-(H'}--1-~G1T 
sI:ol9see-t-w.a--J8-A, the Director of the Office of Consumer Credit 
Regulation within the Department of Professional and Financial 
Regulation. 
In 
cases 
in which 
the 
payroll 
processor 
is 
a 
supervised financial organization or a wholly owned subsidiary of 
a 
supervised financial organization 
as-~~~»eG-~-~4~~€--9-AT 
seet:iell---l-J.Q~"7---~t:-ion---~8-A, 
"administrator" 
means 
the 
Superintendent of Financial Institutions within the Department of 
Professional and Financial Regulation. 
For the purposes of this 
subsection, 
"supervised financial 
organization" 
has 
the 
same 
meaning as in Title 9 A, section 1~301, subsection 38 A. 
Sec. 3. 10 MRSA §1495-E, sub-§2, as amended by PL 2005, c. 
278, §4, is further amended to read: 
2. 
Modification 
of 
bond 
requirement. 
If--~--is 
I:olllavaila91e-~--~-~e~ffis-~~~~-ef-~~...,i~-~r-~ne 
The 
administrator, 
within the administrator's discretion, 
may 
modify t:n9se terms and conditions specified in subsection 1 or 
may permit submission of an irrevocable letter of credit or other 
Page l-LR2704(1) 
alternative 
form 
of 
security 
so 
as 
to 
ensure 
the 
maximum 
practicable or appropriate protection for employers. 
Sec. 4. 10 MRSA §1495-E, sub-§2-A is enacted to read: 
2-A. 
Alternative 
security: 
Payroll 
Processor 
Recovery 
f'~d. 
The Director Qf the Office Qf CQnsumer Credit RegulatiQn 
within the Department of Professional and Financial Regulation, 
referred tQ in this subsection as "the fund administrator," shall 
administer the Payroll Processor Recovery Fund, established in 
section 980-D and referred to in this section as "the fund." 
Participation in the fund must be made available to any payroll 
processor that is not 
a 
supervised financial organization as 
defined in Title 9-A, section 1-301, subsection 38-A or a wholly 
owned subsidiary of such 
a 
supervised financial organization. 
The fund administrator may increase the fund, replenish the fund 
and 
seek 
reimbursement 
for 
the 
fund 
administrator's 
initial 
deposit 
intQ 
the 
fund 
through 
annual 
or 
special 
assessments 
against payroll processors using the fund. 
Before being eligible 
to participate in the fund, 
a payroll processor must provide a 
$10,000 surety bond or irrevQcable letter of credit in a 
form 
acceptable tQ the fund administrator. 
Assessments into the fund 
must be in amQunts equal to 1°" of the balance of bond cQverage 
required pursuant to this section. 
An initial deposit into the 
~und must be made by the fund administrator in an amQunt nQt less 
than 1/2 of the maximum amount of a surety bond or other security 
required pursuant to subsection 1. 
All amounts assessed by the 
fund administrator must be paid into the fund until the fund 
.r..eaches the maximum amount of a surety bond or other security 
required pursuant to subsection L 
after which time assessments 
must 
be 
equally divided between payments 
into 
the 
fund 
and 
payments to the fund administrator until the fund administrator 
is reimbursed for the fund administrator's initial depQsi t 
into 
the fund. 
If an employer's loss due to a participating payroll 
processor's 
failure 
to 
pay 
taxes 
Qr 
unemployment 
insurance 
premiums 
is 
demonstrated 
to 
the 
satisfactiQn 
Qf 
the 
fund 
administrator, the fund administrator shall require release of 
funds tQ the fund administratQr fQr the benefit Qf the employer. 
If employer lQsses exceed the maximum amount recoverable pursuant 
tQ this subsectiQn, funds are distributed to emplQyers Qn a pro 
rata basis, based on the magnitude of the demonstrated loss. 
In 
the event an initial claim is made against the fund, any other 
claims arlslng within 45 
days of the initial claim must be 
treated as having arisen on the same day as the initial claim for 
purpQses of allocating recoveries to affected employers. 
Total 
funds released as a result of the failure of anyone payroll 
prQcessor to pay taxes or unemployment insurance premiums may not 
exceed 50°" of the current fund balance. 
Fund proceeds must be 
us~d Qnly fQr recovery Qf unpaid taxes and unemployment insurance 
premiums and may nQt be used for any other purpose. 
SUMMARY 
This bill creates the Payroll Processor Recovery Fund, to be 
maintained by the Finance Authority of Maine and administered by 
the Department of Professional and Financial Regulation, Office 
of Consumer Credit Regulation. 
This bill protects employers and 
assists 
small 
payroll 
processors 
by 
giving 
those 
payroll 
processors the option of providing a $10, 000 bond or letter of 
credit and then using the fund in lieu of additional surety bonds 
or letters of credit. 
The Office of Consumer Credit Regulation 
provides an initial deposit into the fund and annually assesses 
those payroll processors that opt to participate in the fund. 
The annual assessments against payroll processors using the fund 
equal 
1% 
of their total 
bond or letter of credit coverage 
requirement. 
The bill also clarifies that supervised financial 
organizations 
acting 
as 
payroll 
processors 
are 
subject 
to 
regulation by the Superintendent of Financial Institutions within 
the Department of Professional and Financial Regulation.