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Chapter 8. Office of the Director
Subchapter 2. Administration of Self-Insurance Plans
Article 3. Security Deposit Requirements

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15220. Participation in Alternative Composite Deposits.


(a) All private self insured employers, active or revoked, shall be annually determined by the Manager to be either eligible or non-eligible for participation in the alternative composite deposit program. Participation shall be as a fully participating self insured employer or as a partially participating self insured employer as provided in subsection (c)(1).

(b) All non-eligible self insurers shall be deemed "excluded". The following self insured employers shall be excluded from the alternative composite deposit program:

  (1) Any new private sector self insured employer during their first three full years of self insurance. An employer shall be considered a new self insured employer if, when it applied to become self insured, it did not possess an active Certificate of Consent to Self Insure issued pursuant to Labor Code Section 3700(b) for itself or for its parent, a subsidiary, or an affiliate employer.  


  (2) Any former private self insured employer that possesses a revoked Certificate of Consent to Self-Insure and is no longer required to submit a Self-Insurer's Annual Report pursuant to Section 15251 of this subchapter 2 because all known claims costs have been reported and all known claims are closed.  


  (3) Any former private self insured employer that possesses a revoked Certificate of Consent to Self Insure and is required to post no more than the minimum security deposit amount pursuant to Labor Code Section 3701(b).  


  (4) Any current or former private self insured employer to the extent it has sold off all or any portion of its workers' compensation liabilities under a special excess workers compensation insurance policy to an admitted carrier and has continued to post security deposit to secure such sold off liabilities for 3 years from the policy issuance date.  


  (5) All private group self insurers of workers' compensation liabilities as provided for in Article 13 of this subchapter 2.  


  (6) Any private self insured employer to the extent that it transfers any or all of its existing self insured workers' compensation liabilities to either: (A) a fully insured employer, such as in the merger, reorganization, sale or spin off of a division or subsidiary; or, (B) a carrier through a contractual sell off that is not a special excess workers' compensation insurance policy pursuant to Labor Code Section 3702.8(c) and (d).  


  (7) Any current or former private self insured employer that has defaulted on the payment of its self insured workers' compensation liabilities and whose liabilities have been turned over to the Security Fund by the Director.  


  (8) Any current or former private self insured employer that has failed to post the full amount of security deposit required by Section 15210 for more than 60 consecutive days.  


  (9) Any former private self insured employer that has posted a surety bond that contains no provision to release the carrier's liabilities under the surety bond.  


  (10) Any private self insured employer that does not meet the minimum credit rating criteria for participation in the alternative composite deposit contained in subsection (d)(3).  


  (11) Any current or former private legally self insured employer that is a member of a public sector healthcare joint powers authority pursuant to Government Code Section 6527.  


  (12) Any self insured employer that has been specifically excluded by written request of the Security Fund. Notwithstanding other requirements of this section, the Security Fund may submit a written request to the Manager that any private self-insured employer otherwise excluded from participation in the alternative composite deposit program be included, and the Manager, upon such written request, may grant the request; the written request shall identify the private self-insured employer and shall state the reasons that such private self-insured employer should be included in the alternative composite deposit.  


(c) All private self insured employers determined by the Manager to be eligible shall be required to participate in the alternative composite deposit program.

  (1) The Manager shall identify each eligible participant as one of the following:  


  (A) Fully participating employer, or  


  (B) Partially participating employer.  


(d) To qualify as a fully participating private self insured employer, the employer shall meet all the following requirements:

  (1) The employer is not excluded by subsection (b) of this regulation;  


  (2) The self insured employer meets the minimum financial requirements in its last published annual financial report as provided in Section 15203.2;  


  (3) The employer possesses an acceptable credit rating on the date of the Security Fund's written alternative composite deposit proposal. An acceptable credit rating shall be any "A" or any "B" rating or equivalent as determined by section 15220.1, in either of the following publications:  


  (A) Moody's Investor Service Corporate Finance monthly subscription rating guide entitled "Moody's Global Rating Guide", or  


  (B) Standard & Poor's Credit Market Services monthly subscription rating guide entitled "Global Ratings Handbook".  


  In the event that ratings have been determined pursuant to both subsection (d)(3)(A) and (B), and the ratings differ, the most recently published rating shall be utilized.  


(e) The following self insured employers shall qualify as partially participating members of the alternative composite deposit program:

  (1) The employer is not excluded by subsection (b) of this regulation;  


  (2) The employer meets the qualifications of subsection (d) but has been identified as a partially participating self insured employer by action of the Manager for cause. Cause may include, but is not limited to, failure to provide a parental agreement of assumption and guarantee; failure to file a complete and timely Self Insurer's Annual Report; failure to post the required security deposit by the required date; failure to report all claim liabilities or to estimate claims liabilities pursuant to Section 15300 of these regulations as determined in a routine audit or special audit; and/or, failure to post alternate deposit for new subsidiaries or affiliates of the self insurer after the end of the cycle for the previous year's alternate composite deposit.  


(f) Excluded self insured employers shall not be eligible for any portion of their security deposit to be covered by the alternative composite deposit. The excluded private self insurer shall continue to secure its workers' compensation liabilities as required in Article 3 and to pay assessments as provided in Article 4 of this subchapter 2.

(g) Any private self insured employer that is eligible only as a partially participating member or is excluded to participate in the alternative composite deposit shall post the balance of the amount of required security deposit with the Director pursuant to Labor Code Section 3701 and Article 3 of this subchapter 2.

(h) For cause, the Manager may downgrade an eligible private self insured employer from:

  (1) fully participating employer to partially participating employer as provided in subsection (e)(2); or  


  (2) from partially participating employer to excluded.  


  Cause may include, but is not limited to, failure to submit the Self Insurers' Annual Report and/or failure to estimate future claim liabilities on the Self Insurers' Annual Report fully pursuant to Section 15300 as determined in an audit; inclusion of claim liabilities of subsidiaries or affiliates in their self insurance program that have not been granted a Certificate to Self Insure by the Director; failure to post a security deposit pursuant to Labor Code Section 3701 and these regulations; failure to meet the financial requirements for self insurance pursuant to Section 15203.1; failure to submit an Assumption and Guarantee Agreement pursuant to Section 15203.1; and/or, failure to pay any assessments, fees, and/or penalties pursuant to Labor Code Section 3702.9, this article, and/or Articles 4 or 9 of this subchapter 2.  



     Note: Authority cited: Sections 3701, 3701.8 and 3702.10, Labor Code. Reference: Sections 3701 and 3701.8, Labor Code; and Section 6527, Government Code.  

 HISTORY 
   
1. New article 3.1 (sections 15220-15220.8) and section filed 5-30-2003 as an emergency; operative 5-30-2003 (Register 2003, No. 22). A Certificate of Compliance must be transmitted to OAL by 9-29-2003 or emergency language will be repealed by operation of law on the following day. For prior history of sections 15220-15221, see Register 93, No. 2.

2. Certificate of Compliance as to 5-30-2003 order transmitted to OAL 9-29-2003 and filed 11-12-2003 (Register 2003, No. 46).

3. Amendment of subsections (b)(12) and (d)(3)(B) and amendment of Note filed 7-6-2004 as an emergency; operative 7-6-2004 (Register 2004, No. 28). A Certificate of Compliance must be transmitted to OAL by 11-3-2004 or emergency language will be repealed by operation of law on the following day.

4. Amendment of subsections (b)(12) and (d)(3)(B) and amendment of Note refiled 11-3-2004 as an emergency; operative 11-3-2004 (Register 2004, No. 45). A Certificate of Compliance must be transmitted to OAL by 3-3-2005 or emergency language will be repealed by operation of law on the following day.

5. Certificate of Compliance as to 11-3-2004 order transmitted to OAL 1-26-2005 and filed 3-8-2005 (Register 2005, No. 10).

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