Current through Register Vol. 46, No. 12, March 20, 2024
(a) The following types of records shall be
prepared by each company or fleet in allocating salaries to companies, expense
groups and primary lines of business:
Allocation of salaries
Recapitulation of salaries
Detail of allocation bases
(b) The "allocation of salaries" and the
"recapitulation of salaries" shall be prepared:
(1) for the 12 months of the current calendar
year, or
(2) for 12 months ending
not earlier than September 30 of the current year, in which case the ratios
established shall be applied to the total salaries for the 12 months of the
current calendar year. The method of "(2)" shall not be followed if operations
during the period used were materially different from operations during the
period to which the ratios are to be applied. All amounts included in the
operating expense classification "salaries," for the period used in preparing
the "allocation of salaries" and the "recapitulation of salaries" shall be
accounted for on such records.
(c) Forms of the records are shown
hereinafter. The forms may be of any convenient size, and may be entered in
ink, type, or by other mechanical means, provided the entries are legible. If
the organization or method of operation of any company is such as to make
desirable changes in the forms such as a rearrangement of the columns, or a
separation of the forms into two or more parts, such changes may be made,
provided the substituted forms do not, in any respect, show less information
than called for on the forms shown herein, and do not result in confusing the
presentation of salary allocation.
(d) Such records shall be maintained in good
order and shall at all times be readily available for examination.
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(e) Allocation of salaries form.
(1) The form, allocation of salaries, is
shown on the preceding page. To aid in the understanding of the form, specimen
entries have been made thereon and, as further aids to understanding, each
column is explained in the following paragraphs:
Column 1:List each similarly employed unit within each
departmental or other division in the organization. By similarly employed is
meant employed in essentially the same or similar activities in or for the same
departmental or other division. The personnel shall be divided into as many
units as necessary to show each type of work done by each departmental or other
division in the organization. Employees whose duties are not solely related to
the work performed by one unit, such as some in supervisory positions, shall be
listed separately by title or job classification.
Column 2:Gross salaries applicable to each unit shown in
column 1.
Columns 3, 4 and 5:These columns are for use when the
salaries classification is affected by allocations made to other
companies.
Columns 3, 4 and 5:A separate line is to be used for the
allocation to each company or group of companies. When intercompany allocations
are not made, or when quota share percentages can be applied to fleet totals,
columns 3, 4 and 5 need not be used.
Columns 3, 4 and 5:Designating numbers shall be entered in
column 4 for the methods used in intercompany allocations.
Column 6:Designating numbers shall be entered in this
column for the methods used in allocating salaries to expense groups.
Columns 7 to 10:The amounts assigned to each expense group
shall be in accordance with the method shown in column 6. At the side of each
expense group column (except the column "investment expenses") is shown a
narrow column captioned "line dist.", wherein shall be entered designating
numbers for the methods to be followed in distributing salaries to primary
lines of business.
(2) Pool
and quota share reinsurance. When quota share reinsurance is in effect and when
salaries may be allocated in strict accordance with the quota share
percentages, the amounts shown in the allocation of salaries form may be those
subject to quota share. Quota share percentages may, in such cases, be applied
to the totals either on the allocation of salaries or the recapitulation of
salaries.
(3) Branch and field.
Branch office salaries shall be shown separately in the allocation of salaries
and in the recapitulation of salaries. In combining branch employees into
similarly employed units, it shall be permissible to consider as a unit all
similarly employed personnel in all branch offices having similar functions,
and handling approximately the same relative volume of each line of
business.
(4) Salary reimbursements
to other companies. Due to expense sharing with another company, outside of the
company or fleet, debits may appear in the salary accounts for reimbursements
to outside companies. Such payments are to be shown under separate caption in
the allocation of salaries. Where such payments amount to less than 10 percent
of gross salaries paid by the company to its own employees, the amounts shown
on the allocation of salaries may be distributed as an overhead on all other
salary distributions. If more than 10 percent, the distribution shall be
obtained from the other company.
(5) Salaries not specifically reimbursable.
When the employees of a company devote time to the affairs of another company,
and the reimbursements therefor are handled in accordance with the
instructions, expenses for account of another or income from special services
(see section
105.25[b]-[c]
of this Title), the salaries for each similarly employed unit applicable to
work done for such other company shall be shown separately on the allocation of
salaries (in columns 3 to 10 incl.).
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(f) Recapitulation of salaries
form.
(1) When all distributions called for
on the allocation of salaries form have been completed, the recapitulation of
salaries shall be made. For each company to which salaries have been allocated
on the allocation of salaries form, the amount shown in each expense group
column shall be combined by the line distribution codes shown in the "line
dist." columns. The totals thus obtained shall be entered on the recapitulation
of salaries form and allocated to primary lines of business in accordance with
the line distribution codes.
(2)
The forms, recapitulation of salaries, are three separate forms, one for loss
adjustment expenses, another for acquisition, field supervision and collection
expenses, and another for general expenses. For purposes of illustration, the
specimen entries, applicable to Company A, made on the allocation of salaries
form have been continued on the recapitulation of salaries form. Note that, for
Company A, the figures in the expense group columns on the allocation of
salaries form have been combined by "line dist." codes, entered on the
recapitulation of salaries form, and then spread to primary lines of business
based on the "line dist." codes.
(g) Detail of allocation bases form.
(1) The bases of allocation used on the
allocation of salaries form shall be fully described on the detail of
allocation bases form. There shall be a separate sheet for each basis and the
sheets shall be kept in consecutive numerical order, available at all times for
examination.
(2) When the basis of
allocation cannot be fully described on the form, subsidiary worksheets,
compilations and data shall be either attached to the form or filed separately
and readily available.
(3) The
detail of allocation bases form and all subsidiary worksheets, compilations and
data shall be clear and legible; shall show the sources, detail and dates of
all figures used; shall disclose the names of persons or groups responsible for
all compilations, data, calculations, studies, estimates, judgment factors,
weighting, etc., and the dates thereof; and, in general shall include complete
explanations of all figures used and decisions made.
Note: The detail of allocation bases form need not be
prepared each year, but with appropriate changes in supporting worksheets,
etc., may remain current as long as the bases are in effect.
(4) Four illustrations of the detail of
allocation bases form are shown on the pages which follow. The allocation bases
No. 1, 101, 105 and 501 shown on the allocation of salaries form have been
carried into the forms and specimen explanations given.
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