Code of Maine Rules › 02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION › 031 - BUREAU OF INSURANCE › Chapter 250 - REQUIREMENTS OF ELIGIBILITY TO SELF-INSURE WORKERS' COMPENSATION BENEFITS › Section 031-250-I - General Provisions

Current through 2024-29, July 17, 2024
A.
Authority.
This Rule is promulgated by the Superintendent pursuant to
				Title 24-A M.R.S.A. § 212 and 39-A M.R.S.A. § 403.
B.
Purpose.
This rule sets
				forth standards and procedures for employers to establish and maintain
				eligibility to self-insure their Maine workers' compensation risks.
C.
Scope.
This Rule applies to
				employers who operate in the State of Maine and elect to provide workers'
				compensation coverage through workers' compensation programs of self-insurance
				approved by the Superintendent.
D.
Definitions.
When used in this Rule, the following words or terms
				shall have the following meanings.
1.
Act.
The Workers' Compensation Act, Titles 39 and 39-A M.R.S.A. as
				amended.
2.
Actuarial
				Certification
. A statement signed by a qualified actuary and based on an
				actuarial review as of the valuation date in which the actuary expresses an
				opinion that: reserves are calculated in accordance with generally accepted
				loss reserving standards; that reserves are stated fairly and in conformity
				with sound actuarial principles; that recorded reserves make reasonable
				provision for obligations of the self-insurer; that reasonable provision has
				been made by taking any required safety margins into account, net of
				reinsurance credits; and that the funding schedule or rating plan of the group
				is sufficient to meet the obligations incurred by the self-insurer pursuant to
				the Act as they become due and payable from time to time.
3.
Actuarially determined fully funded
				trust.
A trust which meets all of the following conditions:
a. The funding amount is established at a
				level sufficient to discharge those obligations incurred by the employer
				pursuant to the Act as they become due and payable from time to time;
b. The sum of the value of trust assets at
				least equals 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; and
c. A qualified
				actuary has provided an actuarial certification;
4.
Actuarial Review.
An
				actuarial evaluation conducted by a Qualified Actuary which includes the
				following:
a. Estimated ultimate loss and
				loss expense levels for all self-insured years for which there are outstanding
				liabilities, or in the case of a review prepared solely for the purpose of a
				surplus release at other than annual, levels for all completed self-insured
				years for which there are outstanding liabilities, including liability as
				required for terminated members pursuant to Section
				III(E)(3);
b. Estimated ultimate loss and loss expense
				levels for the prospective year;
c
				Estimated financial impact of relief afforded by reinsurance
				contracts;
d. The effects of
				present value discounting, and where present value discounting is applied, the
				appropriateness of any discount rate. If the actuarial review does not include
				an evaluation of the appropriateness of the interest discount rate, the actuary
				must clearly disclose the source of, or basis for, the selected interest rate,
				and the actuary must state that the actuary is expressing no opinion as to
				appropriateness of the rate;
e. The
				safety margins applied to expected loss levels at required confidence
				levels;
f. The effect of the use by
				a group self-insurer of any irrevocable standby letter of credit;
g. An estimate of all other expenses
				anticipated to be paid from the actuarially determined fully funded trust;
				and
h. An actuarial
				certification.
5.
Audited Financial Statements.
Financial statements which have been
				examined by an independent Certified Public Accountant, according to generally
				accepted auditing standards (GAAS) as prescribed by the American Institute of
				Certified Public Accountants. The statements presented must include a Statement
				of Financial Position, a Statement of Operations and a Statement of Cash Flows,
				including all footnotes and disclosures which are an integral part of the
				financial statements. The financial statements must be prepared according to
				generally accepted accounting principles (GAAP) unless another basis has been
				approved in advance by the Superintendent.
6.
Board.
The Workers'
				Compensation Board as created by section 151 of the Act including a designee of
				the Board.
7.
Confidence
				Level
. As applied to a reserve, a fund, or a prospective funding level,
				a confidence level means the probability that the actual level of loss and loss
				adjustment expense costs will be less than or equal to the reserve, fund, or
				prospective funding level. The required loss and loss adjustment expense values
				corresponding to a confidence level must be determined by a Qualified
				Actuary.
8.
Consolidating
				Schedule.
A schedule that supplies the underlying detail to support a
				consolidated financial statement. Such schedule shall separately show each
				entity included in the consolidated financial statements, including the parent
				on an unconsolidated basis, and shall reconcile to the consolidated audited
				financial statements. Entities other than U.S. or Canadian corporations may be
				aggregated for presentation purposes. The schedule should clearly show the
				self-insured companies, their relationship to the overall corporate structure,
				and corresponding detail through each parental level to the ultimate
				consolidating level.
9.
Deposit Value
. The market value, at the time of initial deposit
				and at any subsequent valuation date, of acceptable securities which are
				deposited with the Treasurer of Maine in support of a self-insurance
				program.
10.
Foreign
				Parent
. A corporation formed under the laws of any country other than
				the United States.
11.
Fund.
Those monies maintained in an actuarially determined fully
				funded trust or a deposit held by the Treasurer of State.
12.
Funding Schedule.
The
				schedule of required deposits to meet the funding requirements of an
				actuarially determined fully funded trust.
13.
Governing Body.
A group of
				directors, officers, or trustees that direct the administration of a group
				self-insurance program.
14.
Indemnity Agreement
. A written agreement in a form prescribed by
				the Superintendent between the group self-insurer's governing body and each
				member of the group self-insurer which: specifies that the group is established
				for the purpose of securing payment of workers' compensation benefits to
				employees of the group members; binds the parties to the terms and requirements
				of the bylaws of the group; and jointly and severally binds the group and each
				member to comply with the provisions of the Act.
15.
Intrastate Experience Modification
				Rating
. The adjustment to manual premium as determined in accordance
				with the experience rating plan approved for the designated workers'
				compensation advisory organization using only the exposure and losses only from
				the State of Maine.
16.
Industry.
A subset of economic entities with common or related
				business purposes, usually determined by Standard Industrial Classification
				(SIC) codes.
17.
Loss
				Development.
The change in the value of loss data relating to a given
				coverage period from one valuation date to another.
18.
Manual Premium.
Premium
				determined by multiplying annualized payroll segregated into the proper
				workers' compensation job classifications by the rates approved by the
				Superintendent. For a self-insurer for which a rate has not been approved,
				manual premium is the advisory loss cost rate filed by the principal workers'
				compensation advisory organization multiplied by 1.20.
19.
Net Earnings
. Net income
				(loss) after all operating and nonoperating items, including income taxes and
				preferred dividends, as presented in the audited financial statements for the
				respective years.
20.
Normal
				Premium.
Standard premium less any applicable premium discount
				determined in accordance with this rule.
21.
Parent Corporation.
A
				corporation that has direct ownership of a majority voting interest of the
				subsidiary employer.
22.
Plan
				Year.
A period of coverage no more than twelve (12) months in
				duration.
23.
Plan Year
				Surplus or Deficit.
The difference between the trust fund balance and
				the funding level required by statute or this Rule.
24.
Public Employer
. The State,
				the University of Maine System, counties, cities and towns.
25.
Qualified Actuary
. A member
				of the American Academy of Actuaries who is either a Fellow of the Casualty
				Actuarial Society or an Associate of the Casualty Actuarial Society with five
				(5) or more years of experience, and who has no other business relationship
				with the client which would cause a potential or actual conflict of
				interest.
26.
Rating
				Plan.
The rates by payroll classification and rating adjustments used to
				fund the trust maintained by a group to secure its obligations under the
				Act.
27.
Reinsurance.
An insurance contract covering workers' compensation exposures in excess of
				risk retained by a self-insurer.
28.
Reviewed Financial
				Statement
. Financial statements which have been examined by an
				independent Certified Public Accountant in accordance with statements on
				standards for accounting and review services issued by the American Institute
				of Certified Public Accountants. Statements presented must include a Statement
				of Financial Position, a Statement of Operations, and a Statement of Cash Flows
				including footnotes and disclosures which are an integral part of the financial
				Statements.
29.
Safety
				Margin.
The difference between the loss and loss expenses at the
				required confidence level and the expected loss and loss expense
				level.
30.
Self-Insurer
. An employer or a group of employers which operate an
				ongoing self-insurance program as well as a former self-insurer that still has
				undischarged liabilities. A group self-insurer is a group of employers approved
				to operate a plan of self-insurance pursuant to the terms of joint and several
				liability evidenced by an indemnity agreement executed by the parties. In the
				case of a group, the term "self-insurer" can indicate the entire group, as well
				as the individual members.
31.
Service Company
. A business which has contracted with a
				self-insurer for the purpose of providing any underwriting, claims adjusting,
				loss control, safety engineering, administrative services, or payroll auditing
				services to an approved self-insurance program. The term "Service Agent" is
				synonymous with the term "Service Company" as used in this rule.
32.
Standard Premium.
Manual
				premium modified by the intrastate experience modification rating factor
				determined in accordance with the experience rating plan filed by the
				designated workers' compensation advisory organization.
33.
Successor Employer.
An
				employer that succeeds a self-insured employer, that assumes 100% of the
				self-insured workers' compensation liabilities of the self-insured employer,
				and which maintains substantially the same business operations of the
				self-insured employer.
34.
Superintendent
. The State of Maine Superintendent of
				Insurance.
35.
Tangible Net
				Worth
. Equity less assets that have no physical existence and depend on
				expected future benefits for their ascribed value.
36.
Trust Document.
A written
				agreement between a group self-insurer's duly authorized governing body or an
				individual self-insurer and a trustee bank in a form prescribed by the
				Superintendent which specifies the respective rights and duties of the parties
				to the contract.
37.
Trustee
				Bank
. A state or national bank located in Maine and subject to
				regulation by the Federal Deposit Insurance Corporation (FDIC) or the Maine
				Superintendent of Banking, or other trust company meeting applicable State or
				Federal qualifications and approved in advance by the Superintendent, that
				serves in a fiduciary capacity pursuant to a trust document prescribed by the
				Superintendent to oversee funds placed in trust for the benefit of claimants
				under the Act.
38.
Working
				Capital.
The excess of current assets over current liabilities in
				accordance with generally accepted accounting principles.