An Act To Amend the Workers' Compensation Self-insurance Laws
Maine Legislature, Session 126, LD 0706
Committee: Insurance and Financial Services
Sponsors: TUTTLE
Amends: 39-A MRSA §403

Legislative Document 
No. 706 
S.P. 255 
In Senate, February 26, 2013 
An Act To Amend the Workers' Compensation Self-insurance Laws 
Reference to the Committee on Insurance and Financial Services suggested and ordered 
printed. 
DAREK M. GRANT 
Secretary of the Senate 
Presented by Senator TUTTLE of York. 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1.  39-A MRSA §403, sub-§3, ¶C, as amended by PL 2011, c. 98, §1, 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: 
(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 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 trust is responsible for that member's liabilities and 
obligations to the trust. If the superintendent finds that a material risk to the 
trust's ability to satisfy its liabilities and obligations in full exists due to the 
failure of one or more departing members to fund the departing members' 
proportionate share of those liabilities and obligations to the 95% confidence 
level or due to the failure of the group trust to enforce the funding requirement, 
the superintendent shall consider the unfunded share of the trust's exposure when 
approving a determination of a surplus or deficit in the trust. 
(3)  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 5 or more consecutive years may 
fund all years, including the prospective fund year, at the 75% or higher 
confidence level in the aggregate and a group self-insurer that has successfully 
maintained an actuarially determined fully funded trust for a period of 10 or more 
consecutive 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 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.  A group self-insurer that has been in existence 
for 5 years or more and is a member of a reinsurance account approved pursuant 
to subsection 4-A and that secures reinsurance with an attachment point of 
$1,000,000 or less and that has assets subject to joint and several liability of at 
least $40,000,000 is deemed to qualify for the 65% confidence level under 
subparagraph (3) if the group self-insurer presents an actuarial opinion that 
funding at the 65% confidence level is sufficient.  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 within 60 days. 
SUMMARY 
This bill specifies that a group self-insurer that is part of a reinsurance account that 
has net assets of at least $40,000,000 and that obtains reinsurance coverage with an initial 
attachment point of no greater than $1,000,000 has sufficient assets in the aggregate to 
qualify for funding the group's workers' compensation exposures at the 65% level of 
confidence.