Ala. Admin. Code r. 480-5-3-.07
Current through Register Vol. 43, No. 1, October 31, 2024
Section 480-5-3-.07 - Formation Of Funds(1) A proposed Fund shall file with the Director its application for a certificate of approval accompanied by a non-refundable filing fee in the amount of $2,000, which shall be deposited into the Workers' Compensation Administrative Trust Fund, at least 120 days prior to the proposed Fund's requested inception date. The application shall include the proposed Fund's name, location of its principal office, date of organization, name and address of each Participant, and such other information as the Director may require, together with the following: (a) A comprehensive written document which clearly describes the Sponsoring Association's common interest and demonstrates that the Fund is being managed for the benefit of the Participants;(b) Proof that the proposed Fund's Sponsoring Association has been in existence in Alabama for at least five (5) years and is qualified under Section 501(c) (6) or other tax-exempt provision of the Internal Revenue Code;(c) A copy of the Articles of Incorporation and Bylaws of the proposed Sponsoring Association;(d) A copy of the Bylaws and other governance documents of the proposed Fund;(e) A list of the names and addresses of the Fund's initial Board of Trustees and the name and address of the Participant with which each is affiliated;(f) The name, address, and qualifications of the individual Alabama resident designated and appointed as the Fund Administrator;(g) Any contract or agreement to be entered into by the Fund with the Administrator describing the services to be performed and the compensation to be paid;(h) A fidelity bond on the Fund Administrator payable to the Board of Trustees in an amount sufficient to protect the Fund's assets against misappropriation or misuse;(i) A contract with an approved Service Company which specifies the services to be performed and the amount of compensation to be paid or the method by which compensation is to be determined if not expressed in a certain amount;(j) The name and address of the Alabama resident designated and appointed as the Fund's registered agent for service of process in this state;(k) The name and address of the Fund's CPA;(l) The name and address of the Fund's actuary;(m) The name and address of the attorney representing the Fund;(n) The address in the State of Alabama where the books and records of the Fund shall be maintained at all times;(o) A copy of the fully executed Participant Application for each inception Participant of the Fund. Attached to such application shall be a current year audited financial statement for the Participant;(p) Copies of fully executed Participation Agreements from each proposed Fund Participant. Subject to the Director's approval, a Fund may add additional provisions to the Participation Agreement;(q) A confirmation of the required Specific Excess Insurance in a form and amount acceptable to the Director;(r) The written plan adopted by the Fund to govern underwriting matters and loss control;(s) Security Deposit in a form and amount prescribed by the Director, but not less than $200,000; and, in addition, proof of deposit with the Fund by each initial Participant of funds in an amount equal to at least twenty-five percent (25%) of that Participant's first year's estimated annual Net Contribution at inception. The deposit shall be considered a part of the first year's contribution payment of each Participant and shall be in an aggregate amount not less than $1,000,000;(t) A market impact analysis that demonstrates that there is an unserved or underserved segment of the market that the new Fund will target and that the segment is large enough to assure the viability of the new Fund. If the new Fund targets an underserved segment, it shall demonstrate its ability to provide more and/or better quality services to the Participants than are offered by the Fund or Funds currently serving that segment;(u) A pro forma of each contract and any other form the Fund intends to issue or use;(v) The workers' compensation contributions paid and incurred loss history for each initial Participant for the latest three (3) complete years preceding the date the Fund is to commence operations;(w) Substantive five (5) year projection of anticipated losses and annual contributions;(x) A current audited financial statement in a form approved by the Director showing that the combined net worth of the inception Participants is not less than five million dollars ($5,000,000) ;(y) A projection of administrative expenses for the first year's operation as an amount and as a percentage of the total estimated annual contribution;(z) A rating plan or schedule of job classification rates for the prospective Fund Year that is approved by an actuary; and(aa) A copy of the written description of the dividend, refund, retrospective or contribution return plan.(2) Upon receipt of an application, the Director shall give public notice thereof. The Director shall solicit written comments for a period of thirty (3 0) days. Upon the request of a member of the public the Director shall schedule a public hearing on the application. The Director shall give appropriate consideration to the public comments made both written and oral. Upon finding that the proposed Fund has met all of the requirements of these Rules, the Director may issue a Certificate of Approval setting forth the date the Fund may begin operation in this state, which privilege shall extend until revoked or canceled. Upon finding that the applicant has not satisfactorily met all requirements of these Rules the Director shall issue an order refusing to grant approval and such order shall set forth the reasons for such refusal.Ala. Admin. Code r. 480-5-3-.07
New Rule: Filed October 9, 1997; effective November 13, 1997. Amended: Filed July 30, 2012; effective September 3, 2012.Author: Wilbon S. Spates, Chief, Workers' Compensation Division
Statutory Authority:Code of Ala. 1975, § 25-2-2(6).