Section R20-5-728. Insufficient Assets or Funds of a Pool; Plans of Abatement; Notice of Bankruptcy

A.      A pool shall immediately provide written notice to the Com- mission if collected premiums and earned investment income for a fiscal year are insufficient to pay benefits under the Ari- zona Workers’ Compensation Act for all reported workers’ compensation claims and expenses for the year. When a pool provides notice to the Commission of the deficiency, the pool shall also provide a written proposal to achieve 100% funding. The proposal may include the following:

1.        Use of premiums collected in other fiscal years, but not necessary for payment of claims or expenses in the year collected;

2.        Use of investment earnings associated with other fiscal years, but not necessary for payment of claims or expenses in the year in which associated; or

3.        Assessment of members.

B.       The Commission shall review the proposal submitted under subsection (A) and approve the proposal within 10 days if the Commission determines that the proposal will abate the defi- ciency. A pool shall implement the plan no later than 30 days after the date the Commission approves the plan and shall achieve 100% funding within one year after the date the Com- mission approves the plan. Failure to implement the plan is cause for revocation of the pool’s certificate of authority under R20-5-739.

C.      If, as a result of an audit or examination by either a pool or the Commission, it appears that the assets of a pool are insuffi- cient to enable the pool to discharge the pool’s responsibilities under the Arizona Workers’ Compensation Act and this Arti- cle, the Commission shall notify the administrator and the board of the deficiency and issue an order to abate the defi- ciency.

D.      The Commission has authority to include in its order of abate- ment issued under subsection (C) a provision that a pool shall not add new members to the pool until the deficiency is abated.

E.       Failure to comply with an order of abatement within 60 days after the order is issued constitutes cause for revocation of a pool’s certificate of authority under R20-5-739.

F.       A pool shall provide immediate written notice to the Commis- sion of any bankruptcy filing by the pool.

Historical Note

Adopted effective September 9, 1998 (Supp. 98-3).

R20-5-729.     Arizona Office; Recordkeeping; Records Avail-		3.     Retrospective plan:
able for Review		a.     A plan that provides for a relationship between the
A.    A pool shall maintain an office in Arizona.		premium for tax purposes, the experience modifica-
B.    A pool shall ensure that all financial reports and minutes are		tion rate developed to reflect the loss payment and
signed by an authorized representative of the pool.		incurred  loss  experience  of  an  insured,  and  the
C.    A pool shall make board meeting minutes, reports or other		actual incurred losses for the tax year;
documents concerning payroll, audits, investments, experience		b.     Plan is calculated annually and premium is not sub-
rating, or other information concerning the pool available to		ject to further adjustment during the tax year;
the Commission upon request.		c.     The net taxable premium is calculated as follows:
D.    A pool shall retain records relating to the formation and opera-		(payroll x applicable rate x experience modification
tion of the pool. The pool’s current board shall know the cur-		rate x basic premium factor) + (losses for current
rent location of the records.		year + adjusted losses for premium year x conver-
E.    Records of a pool are the property of the pool. If records of a		sion factor) x tax multiplier; and
pool are in the control or custody of a third party, the third		d.     The net taxable premium is subject to a maximum
party shall immediately surrender the records to a pool, upon		and minimum premium level depending on which
request by the pool.		one of the four rating insurance option plans speci-
Historical Note		fied in the rating system filed by the rating organiza-
Adopted effective September 9, 1998 (Supp. 98-3).		tion is used by the State Compensation Fund under
		A.R.S. Title 20, Chapter 2, Article 4;
R20-5-730.     Order  for  Additional  Financial  Information;	B.	A pool shall not select a retrospective plan unless the pool
Examination of Accounts and Records by Commission		meets the following criteria:
If the Commission questions a pool’s financial ability to pay work-		1.     The pool has an annual net taxable premium exceeding
ers’ compensation claims under the Arizona Workers’ Compensa-		$100,000; and
tion Act, the Commission may order the pool to provide additional		2.     The pool submits and calculates four years of data con-
financial information from the pool’s auditor or may order an inde-		cerning  paid  loss  determinations  and  incurred  loss
pendent financial examination of the pool.		reserved for each workers’ compensation claim which
Historical Note		information shall be used to calculate an experience mod-
Adopted effective September 9, 1998 (Supp. 98-3).		ification factor for the pool. The oldest three years of data
		is used to calculate the rate and the current year data is
R20-5-731.     Assignment  of  Claims  Under  A.R.S.  §  23-966;		used to calculate the tax.
Obligation of Member to Reimburse the Commission	C.	A pool shall submit to the Commission information required
The Commission shall assign all workers’ compensation claims of a		on the following forms no later than February 15 of each year:
pool to the State Compensation Fund under A.R.S. § 23-966 in the		1.     Self-insured Payroll Report, and
event that a pool files for bankruptcy or a pool is unable to process		2.     Self-insured Injury Report.
or pay benefits as required under the Arizona Workers’ Compensa-	D.	Payment of quarterly tax.
tion Act. In the event that the Commission assigns workers’ com-		1.     The  Commission  shall  calculate  quarterly  taxes  owed
pensation claims to the State Compensation Fund under A.R.S. §		under A.R.S. § 23-961(H) or A.R.S. § 23-1065(A) in one
23-966,  the  Commission  shall  have  a  right  of  reimbursement		of the following ways:
against any member of a pool for the amount paid by the State		a.     25% of the tax calculated for the previous year and
Compensation Fund for the member’s claims and losses, including		adjusted for changes in the tax rate; or
reasonable administrative costs, to the extent that such claims and		b.     Calculation based on actual payroll and premiums
losses are not covered by the pool’s bonds or assets.		collected for each quarter.
Historical Note		2.     A pool shall file a completed and signed Self-insurers’
Adopted effective September 9, 1998 (Supp. 98-3).		Quarterly Tax Payment Form with each quarterly tax pay-
		ment.
R20-5-732.     Calculation and Payment of Taxes under A.R.S. §		3.     Quarterly payments are due April 30, July 31, October
23-961 and A.R.S. § 23-1065		31, and January 31, for the periods ending March 31,
A.    Subject to subsection (B), the Commission shall determine the		June 31, September 30, and December 31, respectively.
taxes to be paid under A.R.S. § 23-961(G) and A.R.S. § 23-		4.     Quarterly  tax  payments  may  be  adjusted  because  of
1065(A) by calculating a pool’s premiums using one of the fol-		changes in the annual tax rate.
lowing insurance plans selected by a pool:	E.	After receipt of the information required under A.R.S. § 23-
1.     Fixed premium plan:		961  and  this  Article,  the  Commission  shall  determine  the
a.     A plan in which neither losses nor incurred loss		annual  taxes  owed  by  a  pool. The  Commission  shall  also
reserves are used to calculate a premium;		determine whether the pool has underpaid or overpaid the
b.     A discount is allowed for premium size; and		annual taxes required to be paid by the pool. If the quarterly
c.     The taxable premium is calculated as follows: Pay-		tax payments paid by a pool are less than the actual tax calcu-
roll x applicable rate - premium discount.		lated for the year, then the pool shall pay the difference on or
2.     Guaranteed cost plan:		before March 31 of the calendar year in which the taxes are
a.     A plan that provides for a direct relationship, on an		due. If a pool has overpaid its annual taxes, then the Commis-
annual basis, of the premium for tax purposes and		sion shall refund the amount as described in A.R.S. § 23-
the experience modification rate developed to reflect		961(I). A pool shall pay to the Industrial Commission the
the loss payments and incurred loss experience of an		pool’s annual tax on or before March 31 based on premiums
insured;		calculated for the preceding calendar year and adjusted for
b.     The taxable premium is calculated as follows: (Pay-		quarterly taxes previously paid.
roll x applicable rate x experience modification rate)

- premium discount.

F. In addition to the penalty described under A.R.S. § 23-961(J), failure to pay annual or quarterly taxes as required is cause for revocation of a pool’s certificate of authority.

Historical Note

Adopted effective September 9, 1998 (Supp. 98-3).