Alabama Administrative Code › Title 480 - ALABAMA DEPARTMENT OF LABOR › Chapter 480-5-3 - GROUP SELF-INSURANCE › Section 480-5-3-.06 - Definitions

Current through Register Vol. 42, No. 9, June 28, 2024
When used in these Rules and Regulations, the following words
				and phrases shall have the following meanings, respectively, unless the context
				clearly indicates a different meaning:
(a) Actuarial Report - A document or other
			 presentation prepared as a formal means of conveying professional conclusions
			 and recommendations of an Actuary.
(b) Actuary - A participant in good standing
			 of the Casualty Actuarial Society or a participant in good standing of the
			 American Academy of Actuaries which has been approved by its Casualty Practice
			 Council.
(c) Actuarially Determined
			 Rates - For those classifications where the Fund has determined to adjust the
			 most current NCCI loss cost for a classification based on the Fund's claims
			 experience and allocated administrative expenses for that classification code.
			 The Minimum Credibility Standard for adjusting an NCCI loss Cost is 50%, which
			 requires the approximate expected loss equivalent of 250 lost time claims,
			 within the NCCI classification, in the most current five year period (i.e., an
			 average of 50 lost time claims per year). The adjusted NCCI classification loss
			 cost is the credibility weighted average of the classification loss cost based
			 on the Funds experience and the most current NCCI classification loss cost
			 multiplied by a single LCM.
Actuarially Determined Rates shall be consistent with the
				Casualty Actuarial Society's Statement of principles Regarding Property and
				Casualty Insurance Ratemaking and with Standards of Practice promulgated by the
				Actuarial Standard Board.
(d) Administrative Code - The Alabama
			 Department of Industrial Relations Administrative Code, promulgated pursuant to
Code of Ala. 1975
, §
								41-21-1, which is a collection of
			 the Administrative Rules of the Department.
(e) Administrative Fund - An amount or
			 percentage of the annual contribution plus the investment earnings of a Fund
			 which are not needed to satisfy the Specific or Aggregate Excess Insurance
			 retention and not otherwise required to pay incurred claims.
(f) Administrator - An individual, who is an
			 Alabama resident, engaged by the Fund's Board of Trustees to carry out the
			 policies established by the Board of Trustees and to provide day-to-day
			 management of the Fund.
(g)
			 Aggregate Excess Insurance - Insurance which provides payment on behalf of or
			 reimburses a Fund for its payment of benefits on claims incurred during a
			 policy period in excess of the aggregate retention amount up to the excess
			 insurer's limit of liability.
(h)
			 Annual Contribution - The total annual contribution determined by multiplying
			 the payroll for each applicable workers' compensation job classification by the
			 appropriate annual contribution rate.
(i) Audited Financial Statement - A report
			 summarizing the financial condition of the Fund on any date or for any period
			 in conformity with these Rules and generally accepted accounting practices
			 (GAAP), statutory accounting practices (SAP or STAT) or governmental accounting
			 principles.
(j) Board of Trustees -
			 The Fund's Trustees as a group.
(k)
			 Bylaws - Rules and regulations adopted by a Fund for its internal
			 governance.
(l) Certified Public
			 Accountant (CPA) - An accountant or accounting firm in good standing with the
			 American Institute of CPA's and, in those states where they are licensed to
			 practice, meets the criteria for independence as set forth by the standards of
			 the American Institute of CPA's and the Alabama Board of Public
			 Accountancy.
(m) Claims Fund (Loss
			 Fund) - That percentage or amount of earned and collected contribution
			 allocated to pay the annual claims liability of a Fund.
(n) Common Interest Employers - Employers
			 engaging in the same or similar business or economic activity, or owned or
			 controlled by the same interest and members of the same sponsoring
			 Association.
(o) Contribution - Any
			 consideration paid to a Fund by a Participant for coverage under the
			 Fund.
(p) Department - The
			 Department of Industrial Relations of the State of Alabama.
(q) Director - The Director of the Department
			 of Industrial Relations of the State of Alabama or the Director's official
			 designee.
(r) Discount - The amount
			 by which the approved contribution requirement can be reduced by a Fund,
			 pursuant to the Director's approval.
(s) Dividend - Any monies held by a Fund
			 which are not required for expenses or claims reserves and which the Director
			 has authorized in writing for the Fund to distribute.
(t) Experience Modification (MOD) - A factor
			 applied to the contribution to reflect a variation from the average
			 risk.
(u) Experience Rating Plan -
			 A formula used to predict future loss experience by utilizing past
			 experience.
(v) Fund - A
			 not-for-profit unincorporated trust consisting of two (2) or more Common
			 Interest Employers who enter into an agreement to pool their Workers'
			 Compensation liabilities for the purpose of qualifying as a Self-Insurer under
			 the Law and these Rules and possessing a valid Certificate of Approval from the
			 Director.
(w) Fund Year - The
			 elected period of coverage, up to twelve (12) months in duration, pursuant to
			 which a Fund extends coverage to its Participants.
(x) Group Self Insurance (GSI) Number - The
			 certificate number given to each employer by the Department that is a
			 participant in a group fund.
(y)
			 Insolvent - A condition arising when, pursuant to audited financial statements,
			 claims reserves evaluations and actuarial reports, a Fund is determined by the
			 Director to have insufficient funds to meet its financial obligations while
			 maintaining appropriate reserves for reported claims and incurred but not
			 reported claims.
(z) Joint and
			 Several Liability - The Participants in a Fund binding themselves both jointly
			 and individually so that all are liable together and each Participant is liable
			 separately for the obligations of the Fund as a whole.
(aa) Law - The Alabama Workers' Compensation
			 Law, as codified and amended.
(bb)
			 Net Contribution - Contribution derived from adjusting the standard
			 contribution by any advance contribution discount.
(cc) Participant - An employer who
			 participates in a Fund.
(dd)
			 Participant Application - A form approved by the Director on which an employer
			 initially applies for participation in a Fund.
(ee) Participation Agreement - A form,
			 approved by the Director, which constitutes a contract between the Participant
			 and the Fund, setting forth the rights, duties and responsibilities of the Fund
			 and the Participant.
(ff) Reserves
			 - Amounts set aside for ultimate financial exposure on a claim.
(gg) Retrospectively Rated Plan - A final
			 contribution calculated on the experience of the Participant during the term of
			 the certificate (including developments after the term of the certificate) and
			 the stipulated formula. The adjustment involves either the payment of a return
			 contribution to the Participant or an additional contribution by the
			 Participant.
(hh) Security Deposit
			 - A certificate of deposit issued by an Alabama bank, corporate or government
			 bond or note, surety bond, or cash given by a Fund to the Director in order to
			 assure the payment of workers' compensation benefits under the Law.
(ii) Service Company - A legal entity which
			 has obtained approval in accordance with these Rules to contract with a Fund
			 for the purpose of providing services necessary to fulfill all or a portion of
			 the Fund's and its Participant's obligations.
(jj) Specific Excess Insurance - Insurance
			 which provides that the excess insurer pays on behalf of or reimburses a Fund
			 for its payment of benefits on each occurrence in excess of the retention up to
			 the amount of the excess insurer's limit of liability.
(kk) Sponsoring Association - A corporation,
			 unincorporated association or other legal entity engaged in substantial
			 non-profit activity for the benefit of its Participants other than the
			 sponsorship of a Fund operated pursuant to these Rules which is a qualified
			 tax-exempt organization under Section 501(c)(6) or other applicable
			 tax-exemption provision of the Internal Revenue Code and which shall have been
			 in existence in Alabama for at least five years prior to the date of
			 application to form a self-insurers fund.
(ll) Trustee - A person who is a resident of
			 the State of Alabama, selected by a Fund according to its Bylaws or trust
			 agreement to serve on the Board of Trustees that directs the administration of
			 a Fund. Trustees must be, during the term of holding office, a member of the
			 Fund or an employee of a member.
Author:
Wilbon S. Spates, Chief, Workers'
				  Compensation Division
Statutory Authority:
Code of Ala.
				  1975
, §
										25-2-2(6).