N.J. Admin. Code § 11:15-1.7

Current through Register Vol. 56, No. 21, November 4, 2024

Section 11:15-1.7 - Trustees: qualifications, powers, duties, and prohibitions

(a) Each group shall be operated by not fewer than five trustees whom the members of a group shall elect for stated terms of office. At least two-thirds of the trustees shall be employees, officers, directors, or trustees of members of the group. Except in the case of bona fide hospital associations, or organizations affiliated therewith, as determined by the Commissioner, the group's administrator, service company, or any owner, officer, or employee of, or any other person affiliated with, such administrator or service company shall not serve as trustees of the group. In the case of bona fide hospital associations, the preceding sentence shall apply only to any compensated employee of such association, or organization affiliated therewith, who is not also an officer, director, or trustee of a hospital. All trustees shall be residents of this State or officers of corporations authorized to do business in this State. The trustees of each group shall ensure that all claims are paid promptly and take all necessary precautions to safeguard the assets of the group, including all of the following:

1. The trustees shall:

i. Maintain responsibility for all monies collected or disbursed from the group and allocate all monies to a claims fund account and an administrative fund account. At least 70% of the net contributions shall be allocated on the books of the group for the sole purpose of paying claims, allocated claims expenses, reinsurance or excess insurance, and special fund contributions. This shall be called the claims fund account. The remaining net contributions shall be allocated on the books of the group for the payment of taxes, general regulatory fees and assessments, and administrative costs. This shall be called the administrative fund account. The Commissioner may approve an administrative fund account of more than 30% and a claims fund account of less than 70% only if the group shows to the Commissioner's satisfaction that:

(1) More than 30% is needed for an effective safety and loss control program; or

(2) The group's aggregate excess insurance attaches at less than 70%. The Commissioner may require that the accounts be segregated.

ii. Maintain minutes of their meetings and make such minutes available to the Commissioner;

iii. Designate an administrator to carry out the provisions of the indemnity or trust agreement and the operating rules of the group. The authority of the administrator shall be set forth in such indemnity or trust agreement or operating rules or in the minutes of the trustees;

iv. Retain an independent certified public accountant and an independent actuary to prepare the required statements of financial condition.

2. The trustees shall not:

i. Extend credit to individual members for payment of a contribution, except pursuant to payment plans approved by the Commissioner;

ii. Borrow any monies from the group or in the name of the group, except in the ordinary course of business, without first advising the Commissioner of the nature and purpose of the loan and obtaining prior approval from the Commissioner.

N.J. Admin. Code § 11:15-1.7

Amended by R.2005 d.112, effective 4/4/2005.
See: 36 New Jersey Register 4625(a), 37 New Jersey Register 1075(a).
In (a), substituted "organizations' for "organization" preceding "affiliated therewith" in the third sentence of the introductory paragraph.