§ 22:458.1 — Association-sponsored self-insured trust

Louisiana § 22:458.1

• Jurisdiction: Louisiana
• Title 22: Insurance

Text

§458.1. Association-sponsored self-insured trust
A. A trade or professional association that effects, maintains, and operates a
self-insured trust for the benefit of its members and their employees, meets all the
requirements of this Section, and complies with all other provisions of this Subpart except
R.S. 22:454 and 458 shall be deemed exempt from the provisions of R.S. 22:454 and 458.
A self-insured trust operated under the provisions of this Section shall be designated an
association-sponsored self-insured trust.
B. For the purposes of this Section, "association" means an active trade or
professional association which satisfies all of the following:
(1) Meets either of the following criteria:
(a) Is a tax exempt organization approved by the Internal Revenue Service under the
provisions of 26 U.S.C. §501.
(b) Is a nonprofit corporation organized under Chapter 2 of Title 12 of the Louisiana
Revised Statutes of 1950.
(2) Provides services to its membership so that the primary function of the trade or
professional association is not the sponsorship, operation, or management of a fund, or
related employee safety program, or other related activities. The association shall have, for
a period of at least ten years prior to the date of application, satisfied all of the following
requirements:
(a) Held regular meetings of the board on no less than an annual basis.
(b) Produced a newsletter, on no less than an annual basis, which was mailed, via
United States mail or sent by electronic mail, to each member.
(3) Is chartered and domiciled in the state of Louisiana and has been in existence
since January of 1950.
(4) Is comprised of professionals that possess licenses issued by an authority of the
state in order to conduct the business of the profession. An association whose membership
includes members of the profession who no longer possess licenses because they have retired
shall be deemed to have satisfied this requirement if the total number of retired members
comprises no more than twenty percent of the association's overall membership.
C. An association-sponsored self-insured trust shall deposit with the commissioner
a safekeeping or trust receipt from a bank doing business within the state or from a savings
and loan association chartered to do business in this state indicating that the self-insurer has
deposited cash or bonds of the United States, the state of Louisiana, or any political
subdivision of the state, of the par value of not less than the greater of either one of the
following items:
(1) One hundred thousand dollars.
(2)(a) Thirty percent of the self-insurer's outstanding Louisiana-related reserve
liabilities. For the purposes of this Subsection, reserve liabilities shall be computed with
proper regard for the following items:
(i) Known claims paid and outstanding.
(ii) A history of incurred but not reported claims.
(iii) Claims handling expenses.
(iv) Unearned premium.
(v) An estimate for bad debts.
(vi) A trend factor.
(vii) A margin for error.
(b) All securities deposited pursuant to this Subsection shall be held in trust for the
benefit and protection of and as security for all policyholders of the self-insurer making such
deposit.
D. An association-sponsored self-insured trust shall:
(1) Maintain at all times during the first year of operations unimpaired net assets of
not less than one hundred thousand dollars. The net assets required to be maintained
pursuant to this Section shall be in the form of cash, cash equivalents, or bonds or evidences
of indebtedness which are direct general obligations or which are secured or guaranteed as
to principal and interest by the government of the United States, or any state of the United
States.
(2) Have applications from not less than two employers and plan to provide similar
benefits for not less than one hundred participating employees.
(3) Maintain contribution rates for participation under the arrangement that equal or
exceed a funding level established by a report prepared by an actuarial firm.
E.(1) The employers in the self-insurance plan shall be members of an association
as defined in this Section.
(2) Each employer member participating in the association-sponsored self-insurance
plan shall sign an indemnity agreement that is also signed by representatives of the
association and the trust. The agreement shall contain acknowledgment by all parties of their
assumption of liabilities as set forth in this Section.
(3) The association sponsoring the trust shall be responsible for unpaid claims
liability of the trust. Employer members participating in the self-insurance plan shall be in
solido guarantors of liabilities of the trust not satisfied by the association.
(4) A board of trustees shall serve as fund managers on behalf of participants.
Trustees shall be plan participants. Trustees shall be elected by participating employers or
by association members who are plan participants. No participating employer may be
represented by more than one trustee. A minimum of three and a maximum of ten trustees
may be elected. Trustees may not receive compensation but may be reimbursed for actual
expenses incurred in connection with duties as trustee.
(5) Trustees shall be bonded in an amount not less than one hundred thousand dollars
from a licensed surety company.
(6) Investment of plan funds is subject to the same restrictions which are applicable
to insurers under this Title.
F.(1) In the event that an association-sponsored self-insured trust is insolvent, then
in addition to any other provision of law or regulation, the department shall require that the
trust file in writing within sixty days a plan signed by the board of trustees. For purposes of
this Subpart, an insolvency shall be defined as the condition existing when the trust's
liabilities before member distribution payable or dividend payable are greater than the trust's
assets determined in accordance with generally accepted accounting principles as delineated
in the trust's financial statement audited by an independent certified public accountant. For
the purpose of determining insolvency, assets shall not include intangible property, such as
patents, trade names, or goodwill. The plan submitted by the trust to eliminate the
insolvency shall set forth in detail the means by which the trust intends to eliminate the
insolvency which may include payments by the association, assessments of the members
participating in the trust's self-insurance plan, or a combination thereof. The trust shall also
include the timetable for the implementation of the plan and requirements for reporting to
the department. The department shall review the plan submitted by the trust and notify the
trust of the plan's approval or disapproval within thirty days of the department's receipt of the
plan.
(2) Upon determination by the department that a plan submitted by the trust is
disapproved or that a trust is not implementing a plan in accordance with the terms of the
plan, it shall so notify the trust in writing of such determination.
(3) Should a trust fail to file a plan to eliminate an insolvency as required pursuant
to this Section, or should the department notify a trust that such plan has been disapproved
or that the trust is not implementing the plan according to the plan, the department shall have
the following powers and authority in addition to any other powers and authority granted
under law:
(a) The department may order the trust to immediately levy an assessment upon the
association, the members of the trust, or both, sufficient to eliminate the insolvency.
(b) Should the trust fail or refuse to levy the assessment, the department may, in the
name of the trust, levy such assessment upon the association, the members of the trust, or
both, sufficient to eliminate the insolvency.
G. Association-sponsored self-insured trusts are not members of either the Louisiana
Insurance Guaranty Association or the Louisiana Life and Health Insurance Guaranty
Association, nor shall either be liable for any claims or increments of claims made against
any association-sponsored self-insured trust.

Legislative History

Acts 2015, No. 455, §1.