An Act To Amend Group Insurance Funding Requirements
Maine Legislature, Session 122, LD 0346
Committee Amendment CA_A_S83 (Senate)
Amends: 39-A MRSA §403

COMMITTEE AMENDMENT ·A .. to S.P. 108, L.D. 
Act To Amend Group Insurance Funding Requirements" 
346, Bill, "An 
Amend the bill by striking out everything after the enacting 
clause and before the summary and inserting in its place the 
following: 
· Sec. 1. 39-A MRSA §403, sub-§3, as amended by PL 1999, c. 
113, §30 and by PL 2001, c. 44, §11 and affected by §14, is 
further amended by amending the first blocked paragraph to read: 
A self-insurer may, with the approval of the Superintendent of 
Insurance, use the foll<.ming types of security to satisfy the 
self-insurer' s responsibility to post security required by the 
superintendent: a surety bond; an irrevocable standby letter of 
credit; 
cash 
deposits 
and 
acceptable 
securities; 
and 
an 
actuarially determined fully funded trust. 
For purposes of this 
section, "tangible net worth" means equity less assets that have 
no physical existence and depend on expected future benefits for 
their 
ascribed 
value. 
A-
Unless 
disa~~roved 
by 
the 
su~erintendent ~ursuant to 
~aragra~h C. 
sub~aragraphs (5) 
and 
(6), 
a group self-insurer that maintains a trust actuarially 
funded to the confidence level required by the superintendent may 
use an irrevocable standby letter of credit as follows: 
only in 
an amount not greater than the difference between the funding to 
the required confidence level and funding to the confidence level 
reduced by 10 percentage points; only as long as the trust assets 
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COMMITTEE AMENDMENT ,,~, to S.P. 108, L.D. 346 
are not used as collateral for the letter of credit; and only as 
long as the value of trust assets, excluding the value of the 
letter of credit, are at least equal to the present value of 
ultimate eH]!Ieet;ee. incurred claims, claims settlement costs and, 
if determined necessary by the superintendent, 
administrative 
costs. 
Sec. 2. 39-A MRSA §403, sub-§3, ,C, as amended by PL 1995, c. 
619, §7, is further amended to read: 
C. 
A self-insurer may establish an actuarially determined 
fully 
funded 
trust, 
funded 
at 
a 
level 
sufficient 
to 
discharge 
those 
obligations 
incurred 
by 
the 
employer 
pursuant to this Act as they become due and payable from 
time to time, as long as the Superintendent of Insurance 
requires that the value of trust assets be at least equal to 
the present value of ultimate expected incurred claims and 
claims settlement costs, plus required safety margins and, 
if 
determined 
necessary 
by 
the 
superintendent, 
administrative costs 
for 
the 
operation of 
the plan of 
self-insurance. 
For the purpose of determining whether an 
actuarially determined fully funded trust has a surplus of 
funds in excess of that required by this subsection, the 
superintendent shall consider, based upon the group's audit 
for all completed plan years, only the following assets held 
outside the trust account: 
cash up to $10,000; accounts 
receivable, limited to amounts collected and deposited in 
the trust account by the date of the surplus distribution; 
accrued interest on trust account assets 
that will 
be 
collected and deposited in the trust account within 6 months 
from the date of the surplus determination; tangible assets 
that will be converted to cash and deposited in the trust 
account prior to the distribution date of any surplus; and a 
letter of credit to be used to partially fund the trust to 
the extent allowed under this section and rules adopted by 
the superintendent, as supported in the actuarial review. 
The 
superintendent shall consider cash held outside the 
trust account in excess of $10,000 if the self-insurer 
provides, 
to 
the 
superintendent's 
satisfaction, 
documentation regarding why the money is being held outside 
the trust account. 
An actuaria11y determined fully funded 
trust must be 
funded 
as 
follows, 
as 
determined by the 
superintendent. 
(1) 
For individual and group self-insurers, the amount 
of security must be determined based upon an actuarial 
review. 
The 
actuarial 
review 
must 
take 
into 
consideration the use by a group self-insurer of any 
irrevocable 
standby 
letter 
of 
credit. 
Except 
as 
provided in subparagraph (3), initial funding for each 
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COMMITTEE AMENDMENT ·A .. to s.P. 108, L.D. 346 
plan year must be maintained at the 
90% or higher 
confidence level. 
Funding after the completion of the 
initial plan year may be established no lower than the 
75% confidence level if the following has occurred: 
(a) 
A year considered for reduction is completed; 
(b) 
The supporting actuarial review includes an 
evaluation of the completed year experience with 
claims evaluated not less than 6 months from the 
end of the plan year, or in the case of a group 
self-insurer in existence for at least 36 months, 
not less than 4 months from the end of the plan 
year; and 
(c) 
For individual self-insurers, prior approval 
from the superintendent is obtained. 
For the purposes of determining the confidence level, 
all completed years at the same confidence level may be 
aggregated. 
For individual self-insurers, 
funds 
may 
not be released from the trust or transferred between 
years except as approved by the superintendent. 
The 
governing body of a group self-insurer may at any time 
declare 
a 
surplus 
of 
funds 
above 
the 
required 
confidence level, but may only release funds after the 
completion of any plan year. 
The superintendent may 
request 
information regarding 
any 
such declaration. 
Any distribution of surplus must be based upon 
an 
actuarial review of all outstanding obligations for all 
completed plan years, an audited financial statement of 
the group for all completed plan years and a surplus 
distribution worksheet for all completed plan years on 
a 
form 
approved 
by 
the 
superintendent. 
The 
group 
self-insurer 
must 
provide 
the 
required 
information 
within 10 days after the distribution. 
Any surplus 
declared or distributed pursuant to this paragraph is 
subject 
to 
adjustment 
after 
review 
by 
the 
superintendent within 60 days of the receipt of the 
required information. 
Any deficit below the required 
confidence level, as determined by the superintendent, 
that results from a distribution under this paragraph 
must be funded within 45 days from the date of the 
notice by the superintendent. 
(2) 
A group self-insurer may elect to fund at a higher 
confidence level through the use of cash, marketable 
securities or reinsurance. 
If a 
member of a 
group 
self-insurer terminates membership in the group for any 
reason, 
that 
member 
shall 
fund 
the 
member's 
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COMMITTEE AMENDMENT ,A .. to S.P. 108, L.D. 346 
proportionate share of the liabilities and obligations 
of the trust to the 95' confidence level. 
If for any 
reason the departing member fails to fund the member's 
proportionate share of the trust's exposure to the 95°-& 
level of confidence, the remaining members of the group 
shall make the additional contribution no later than 
the anniversary date of the program as required to fund 
the departing member's exposure in accordance with this 
provision. 
(3) 
~eFeBeiB~--~P&&-~-~-~-~~~~~-e~--~he 
sel~-iBsQ~e~T--a&4--~-~~-~--~he--SQFe~iB~eBeeB~ 
Subject to prior approval by the superintendent in 
accordance with subparagraph (5), a self-insurer that 
has successfully maintained an actuarially determined 
fully 
funded 
trust 
for 
a 
period 
of 
or 
more 
consecutive years may fund all years, 
including the 
prospective fund year, 
ia--t-he-~l'-~a~e at the 75' or 
higher confidence level in the aggregate and a groyp 
self-insyrer 
that 
has 
successfully 
maintained 
an 
actuarially determined fylly funded tryst for a period 
of 10 or more consecyti ve years may fund all years, 
including the prospective fund year. at the 65' or 
higher confidence level in the aggregate. 
(4) 
Trust assets must consist of cash or marketable 
securities of a type and risk character as specified in 
subsection 9. 
The trustee shall submit a report to the 
superintendent not less frequently than quarterly that 
lists the assets comprising the corpus of the trust, 
including a statement of their market value and the 
investment activity during the period covered by the 
report. 
The trust must be established and maintained 
subject to the condition that trust assets may not be 
transferred or revert in any manner to the employer 
except to the extent that the superintendent finds that 
the value of the trust assets exceeds the present value 
of incurred claims and claims settlement costs with an 
actuarially 
indicated 
margin 
for 
future 
loss 
development. 
In 
all 
other 
respects, 
the 
trust 
instrument, including terms for certification, funding, 
designation of trustee and payout, must be as approved 
by the superintendent, except that the value of the 
trust account must be actuarially calculated at least 
annually by a casualty actuary who is a member of the 
American 
Academy 
of Actuaries 
and 
adjusted to 
the 
required level of funding. 
(5) 
In 
determining 
whether 
a 
self-insurer 
that 
maintains an actuarially determined fully funded trust 
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COMMITTEE AMENDMENT A" to S.P. 108, L.D. 346 
qualifies for a reduction in the required confidence 
level pursuant to subparagraph (1) or (3) or is subject 
to 
an 
enhanced 
confidence 
level 
pursuant 
to 
subparagraph (6), the superintendent shall consider the 
financial condition of the self-insurer in relation to 
the potential workers' 
compensation liabilities. 
The 
factors the superintendent may consider include the 
self-insurer's liquidity, leverage, tangible net worth, 
size and net income. 
For group self-insurers, 
the 
superintendent's review must be based on the aggregate 
financial 
condition of 
the 
group 
members. 
At 
the 
request of the superintendent, 
a 
group self-insurer 
shall report relevant financial information, on a form 
prescribed by the superintendent. at such intervals as 
the 
suPerintendent directs. 
The 
superintendent may 
establish additional review criteria or procedures by 
rule. 
Rules adopted pursuant to this subparagraph are 
routine technical rules as defined in Title 5, chapter 
375, subchapter 2-A. 
(6) 
If the superintendent determines, 
based on an 
evaluation 
of 
a 
self-insurer's 
financial 
condition 
pursuant to subparagraph (5), that the confidence level 
at which the self-insurer has been authorized to fund 
its 
trust 
is 
not 
sufficient 
to 
provide 
adequate 
security for the self-insurer' s reasonably anticipated 
potential 
workers' 
compensation 
liabilities, 
the 
suPerintendent 
shall 
make 
a 
determination 
of 
the 
appropriate confidence level and order the self-insurer 
to take prompt action to increase funding to that level 
wi thin 60 days.' 
SUMMARY 
This amendment replaces the bill. 
The amendment retains the 
substance of the bill to provide that a 
self-insured group 
workers' compensation trust that has been in existence for 10 
years may, upon approval of the superintendent, fund at the 65'90 
or higher 
confidence level. 
The 
amendment 
also establishes 
criteria for the superintendent's review of a 
request by an 
individual or group self-insurer for a reduction in the required 
confidence level. 
FISCAL NOTE REQUIRED 
(See attached) 
COMMITTEE AMENDMENT 
Fiscal Detail and Notes 
Approved: 03125/05 ~ae 
LD346 
LR1503(02) 
An Act To Amend Group Insurance Funding Requirements 
Fiscal Note for Bill as Amended by Committee Amendment A 
Committee: Insurance and Financial Services 
Fiscal Note Required: Yes 
Fiscal Note 
Minor cost increase - Other Special Revenue Funds 
Any additional cost to the Department of Professional and Financial Regulation in implementing this bill can be 
absorbed utilizing existing resources. 
LR1503(2) - Fiscal Note - Page 1 of 1