Section R20-5-218. Retrospective Rating Plan: Definition; Formula; Eligibility

A.      Retrospective rating plan means a plan providing for the rela- tionship between the premium for tax purposes, the experience modification factor developed to reflect the loss payment and incurred loss experience of the self-insured employer, and the actual incurred losses for the tax year. This plan is to be calcu- lated annually and the premiums shall not be subject to further adjustment during the tax year.

B.       The formula for calculating the retrospective rating plan is as follows: [Payroll x Applicable Rate x Experience Modification Factor x Basic Premium Factor + (losses current year + adjusted losses previous year) x loss conversion factor)] x Tax Multiplier = Net Taxable Premium (NTP). The NTP is subject to a maximum and minimum premium level depending on which one of the four rating option plans specified in the rating

systems filed by the rating organization used by the State Compensation Fund pursuant to A.R.S. Title 20, Chapter 2, Article 4 is used.

C.      Only those self-insurers who satisfy all of the following requirements shall be eligible to use the retrospective rating plan:

1.        The submission of data concerning paid loss determina- tions and incurred loss reserved for each worker’s com- pensation claimant. The information is used to calculate an experience modification factor for the self-insurer. Four years of loss data must be formulated. The oldest three years of data is used to calculate the rate and the most current year’s data is used in the actual tax calcula- tion.

2.        An annual net taxable premium exceeding $100,000.

Historical Note

Former Rule XVIII. Section repealed, new Section adopted effective July 6, 1993 (Supp. 93-3). R20-5-218 recodified from R4-13-218 (Supp. 95-1).