An Act To Amend Group Insurance Funding Requirements
Maine Legislature, Session 122, LD 0346
Committee: Insurance and Financial Services
Sponsors: PERRY, MAYO, MILLS, MARRACHE
Amends: 39-A MRSA §403

Legislative Document 
No. 346 
S.P. 108 
In Senate, January 20, 2005 
An Act To Amend Group Insurance Funding Requirements 
Reference to the Committee on Insurance and Financial Services suggested and ordered 
printed. 
Presented by Senator PERRY of Penobscot. 
Cosponsored by Representative PERRY of Calais and 
JOY J. O'BRIEN 
Secretary of the Senate 
Senators: MAYO of Sagadahoc, MILLS of Somerset, Representative: MARRACHE of 
Waterville. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
619, 
Sec. 1. 39-A MRSA §403. sub-§3. 1rC. as amended by PL 1995, c. 
§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 actuarially 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 
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: 
so 
(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 
super intendent wi thin 60 
days of the receipt of the 
required information. 
Any deficit below the required 
conf idence level, as determined by the super intendent, 
that results from a distribution under this paragraph 
must be funded wi thin 45 days 
from the date of the 
notice by the superintendent. 
(2) 
A group self-insurer may elect to fund at a higher 
conf idence 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 
proportionate share of the liabilities and obligations 
of the trust to the 
9S~" confidence level. 
If for any 
reason the departing member fails to fund the member's 
proportionate share of the trust's exposure to the 9So,0 
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) 
Depending 
upon 
the 
financial 
condition of 
the 
self-insurer, and if approved by the superintendent, a 
self-insurer 
that 
has 
maintained 
an 
actuarially 
determined fully funded trust for a period of 5 or more 
consecutive years 
may 
fund all years, 
including the 
prospective fund year, in the aggregate at the 
75~0 or 
higher confidence level. 
Subject to approval by the 
superintendent, 
a self-insurer that has maintained an 
actuarially determined fully funded trust for~eriod 
of 10 or more consecutive years may fund all years, 
including the prospective fund year, in the aggregate 
at the 65% or higher confidence level. 
(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. 
SUMMARY 
This 
bill 
provides 
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°" or higher 
confidence level.