Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a)
Each group self insurer shall have a Board of Trustees that is responsible for
all operations of the group self insurer.
(b) Each trustee on the Board of Trustees
shall be elected by the group members or, if each group member has a seat on
the Board of Trustees, the trustee may be appointed by the group members. At
least two-thirds of the trustees shall be employees or officers of the group
members. No service provider, director, officer, or employee of a service
provider, or person with a direct or indirect management or financial interest
in a service provider of the group self insurer shall serve as a voting member
of the Board of Trustees of the group self insurer. The Group Administrator may
be a non-voting member of the Board of Trustees but shall not vote on any
matters before the Board. Service providers of the group self insurer include,
but are not limited to, all service providers described in Section
15475.1 of these
regulations.
(c) The duties of the
Board of Trustees shall include the responsibility to approve or deny the
request of any proposed member to join the group self insurer, subject to
subsequent application and approval of the proposed group self insurer member
by the Director of Industrial Relations.
(d) The Board of Trustees shall take all
necessary precautions to protect the assets of the group self insurer,
including all of the following:
(1) Designate
a "Group Administrator" to administer the financial affairs and normal
day-to-day operations of the group self insurer and ensure that there are no
conflicts of interest or potential conflicts of interest involving the Board of
Trustees, the Group Administrator, or any service providers utilized by the
group self insurer, as provided by Section
15475.1;
The group administrator shall not be an owner, operator
or employee of any member of the group self insurer or of the third party
administrator handling the claims of the group self insurer.
(2) Obtain fidelity coverage in an amount
determined by the Board of Trustees to be sufficient to ensure the integrity of
affiliate group member or group funds handled by the Trustees and employees of
the group self insurer, and obtain errors and omissions insurance coverage
sufficient to protect its interests. Evidence of such bond shall be provided to
the Chief upon request. The Group Administrator shall obtain and maintain
fidelity insurance sufficient to cover funds handled for the group self insurer
and errors and omissions insurance coverage sufficient to protect the group
self insurer's and its members' interests.
(3) Contract with a third party claims
administrator to work directly for the Board of Trustees to administer in
California the workers' compensation claims of the group self insurer and
require the third party claims administrator to carry fidelity insurance naming
the group self insurer as beneficiary that is sufficient to protect the funds
handled, and to carry errors and omissions insurance naming the group self
insurer as beneficiary that is sufficient to protect against errors and
omissions made in the claims handled.
(4) Manage disbursements for the payment of
expenses of handling claims, administrative expenses, posting of security
deposit, and other expenses necessary for operating the group self
insurer;
(5) Appoint a financial
institution and establish necessary accounts in California to handle the fiscal
needs of the group self insurer and adopt a board resolution authorizing
signature authority for each account;
(6) Immediately after the December 31 close
of each reporting year, obtain an annual audit of the financial accounts and
records of the each group self insurer by an independent, certified public
accountant. The Group Administrator may not serve as the independent certified
public accountant for the private group self insurer.
(7) Contract with an actuary that meets the
requirements of Section
15481, subdivisions (a)(3) and (4)
to conduct an annual actuarial review of the group self insurer's claims and
produce a written actuarial study that projects ultimate liabilities of the
group self insurer by program year at the undiscounted expected actuarial
confidence level also commonly known as the undiscounted 'actuarial central
estimate', inclusive of incurred but not reported (IBNR) liabilities, Allocated
loss adjustment expense (ALAE), and unallocated loss adjustment expense (ULAE)
to ensure that all claims and associated costs are recognized;
(8) Ensure that contributions are collected
for each program year as required by Section
15484, subdivision (e).
(9) Ensure that funds collected from group
members shall not be used for any purpose not directly related to the payment
of compensation liabilities of the group self insurer, posting of security
deposit, payment of assessments and penalties as a group self insurer or the
reasonable expenses of operation of the group self insurer. Excess moneys not
needed for current operation of the group self insurer may be invested by the
Board of Trustees, at its discretion, only as provided by Section
15475.3 of these
regulations.
(10) Hold meetings no
less frequently than annually to adopt a budget for the upcoming year, approve
contribution rates, and review the investment portfolio for compliance with
these regulations;
(11) Ensure that
the Group Administrator immediately reports to the Chief, in writing, any
information that indicates the private group self insurer is no longer in
compliance with statutory or regulatory requirements of the workers'
compensation self insurance program or of any instance wherein the group self
insurer terminates an affiliate group self insurer's group membership for
cause.
(e) If
specifically authorized in the group self insurer's bylaws, the Board of
Trustees may delegate specific functions to the Group Administrator of the
private group self insurer, including, but not limited to:
(1) Contracting with one or more third party
claims administrators for handling of claims;
(2) Calculating the annual contribution rates
to or other means of cost sharing to be charged each group member;
(3) Investing funds subject to Section
15475.3 of these regulations and
any restrictions adopted by the Board of Trustees in addition to those
contained in subsection (d);
(4)
Reviewing and accepting applications from prospective members to the group self
insurer and advising the Board if the prospective members do not fully meet the
underwriting criteria for group membership;
(5) Executing the Agreements of Assumption
and Guarantee For Group Members and the Indemnity Agreement on behalf of the
group self insurer;
(6)
Establishing accounts in California financial institutions and accounting
procedures for controlling funds and ensuring accurate financial reporting with
the financial institutions selected by the Board of
Trustees.
1. New
section filed 6-30-94; operative 6-30-94 (Register 94, No. 26).
2.
Amendment filed 3-2-2009; operative 3-2-2009 pursuant to Government Code
section 11343.4 (Register 2009, No. 10).
3. Amendment of subsections
(d)(2), (d)(7)-(8) and (d)(11) filed 12-31-2012 as an emergency; operative
1-1-2013 pursuant to Government Code section 11346.1(d) (Register 2013, No. 1).
A Certificate of Compliance must be transmitted to OAL by 7-1-2013 or emergency
language will be repealed by operation of law on the following
day.
4. Certificate of Compliance as to 1-1-2013 order, including
additional nonsubstantive amendments to subsection (d)(8), transmitted to OAL
7-1-2013 and filed 8-13-2013 (Register 2013, No.
33).
Note: Authority cited: Sections
54,
55 and 3702.10, Labor Code.
Reference: Sections
3700, 3700.1,
3701, 3701.5, 3702.1, 3702.2 and
3702.10, Labor Code.
