Ala. Admin. Code r. 480-5-3-.09

Current through Register Vol. 42, No. 11, August 30, 2024

Section 480-5-3-.09 - Departmental Intervention

The Director may involve the trustees in a Fund's day to day management if he/she determines that a Fund is in violation of the Law, these Rules, or is potentially impaired and that the Administrator is unwilling or unable to correct the deficiencies. This rule contemplates the need for the Department to have guidelines under which it may intervene in the management of a Fund in order to ensure its viability or, in the event this is not achievable, provide for its orderly dissolution. Four levels of intervention are described, each with a triggering mechanism and a resolution process. Circumstances, in the discretion of the Director, may require acceleration of the process. Specifically, the Director may choose to initiate intervention at Phase II.

(a) Phase I - (Probation). If the Director determines that any violation of these Rules, the Law, or perceived financial impairment cannot be remedied in a timely manner through normal discourse with the Administrator, the Director will call for a meeting with the Fund's Trustees to informally discuss his concerns. All parties will seek to reach consensus on the extent of any violations or financial impairments and on remedial actions to be taken.

(b) Phase II - (Remediation). If the Director determines that implementation of Phase I has not satisfied his concerns, or that violations or impairments are so acute as to warrant immediate documentation he may require the Trustees to submit a written remediation plan. The written plan will be negotiated between the Director and the Trustees and will include specific objectives with verifiable and measurable outcomes. The implementation timeline for meeting the objectives of the written plan will be mutually agreed upon and in the event of no agreement the Director will establish time deadlines.

(c) Phase III - (Supervision). If written objectives are not achieved in a timely manner, the Director will appoint an employee of the Department to make and/or approve all management and financial decisions of the Fund. The Director's appointee will make all reasonable efforts to resolve all violations and impairments. The principle goal will be ensuring the Fund's existence as a going concern and returning the managerial decision making function to the Trustees. The Director will notify each Fund Participant that the Fund providing its workers' compensation coverage is under Departmental supervision. The notice will contain a brief description of problems leading to this action and an outline of the Department's plans to rehabilitate the Fund. A copy of this notice must be provided to all the individuals or companies that market to prospective Fund Participants. This list of marketing persons will be supplied to the Department by the Fund at such time the Fund is placed in supervision. The Director will determine within one year whether the Fund's rehabilitation is successful. The Director may limit a Fund from writing any new business for a period of time until the supervision is successfully completed. Any Fund which cannot be successfully rehabilitated within one year will be dissolved unless a plan of merger is approved by the Director.

(d) Phase IV - (Revocation). If the Director determines that violation or impairments have not been remedied by operation of this Rule, or that the Fund is insolvent, he may revoke the Fund's self-insurance privilege. The Director shall give written notice of such revocation to the Fund and its Service Company. The Fund shall have thirty (30) days from the mailing of the notice to request a hearing on the revocation. Failure to request a hearing within the prescribed time shall result in the revocation becoming effective sixty (60) days from the mailing of the original notice. In no event shall a revocation become effective prior to the date that a hearing (if a hearing is requested) is scheduled. Such notice shall be served personally or by certified or registered mail to the Fund Administrator and to the Fund Trustees. In the event of the insolvency of a Fund, the Director will declare the Fund insolvent and invoke joint and several liability and assess Fund Participants by Fund year such amounts as are necessary to satisfy the liabilities of the Fund. After all the liabilities are satisfied, the Director will order the Trustees to return any unencumbered funds to each Participant in the same proportion as each has been assessed.

(e) An administrative action taken by the Department for violation of the Law or these Rules may be appealed by the aggrieved party to the Circuit Court of Montgomery County, Alabama, within thirty (30) days of the effective date of the administrative action.

Author: Wilbon S. Spates, Chief, Workers' Compensation Division

Ala. Admin. Code r. 480-5-3-.09

New Rule: Filed October 9, 1997; effective November 13, 1997.

Statutory Authority:Code of Ala. 1975, § 25-2-2(6).