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Chapter 8. Office of the Director
Subchapter 2. Administration of Self-Insurance Plans
Article 13. Group Self Insurance

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§15475.3. Investment of Funds.


(a) Subject to the limitations set forth in Section 15475.2, the Board of Trustees of a group self insurer may invest excess funds not immediately needed for the payment of the group insurer's liabilities in any of the following:

  (1) United States Treasury Bills, Notes, and Bonds for which the full faith and credit of the United States are pledged for the payment of interest and principal.  


  (2) Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government sponsored enterprises.  


  (3) Certificates of Deposit that are FDIC or NCUA insured or collateralized by the issuing institution. Investments in eligible certificates of deposit shall have a maximum maturity of two years, and shall not exceed 15% of the total portfolio as measured at the date of purchase.  


  (4) Money market accounts and savings accounts offered by financial institutions whose deposits are insured by a federal agency. Such deposit accounts in financial institutions shall be limited to offices or branches of the financial institutions located in the State of California. Should the amount deposited in any single account exceed the federally insured amount for any one account, the financial institution shall also meet the credit rating requirements as set forth in Section 15215(e).  


  (5) Bonds, notes, warrants, or other evidence of indebtedness of any local agency or State agency within the United States of America, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the State or local agency, or by the department, board, agency, or authority of the State or local agency, provided the credit worthiness of the security meets the same requirements of securities posted with the Director as security deposit in Section 15213(a)(1).  


(b) In addition to investments made pursuant to subsections (a)(1) through (a)(2) of this section, but only if invested through the services of a registered investment advisor, the Board of Trustees of a private group self insurer may invest excess funds not immediately needed for the payment of group liabilities in any of the following:

  (1) Prime Bankers' Acceptances of the 50 largest global banks.  


  (2) Commercial Paper rated A1/P1/F1 by a nationally recognized statistical rating organization. Investments in eligible commercial paper shall have a maximum maturity of 270 days or less, and shall not exceed 25% of the total portfolio as measured at the date of purchase.  


  (3) Medium-term notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Investments in eligible medium-term notes shall be rated "A" or better by a nationally recognized statistical rating organization, shall not exceed 30% of the total portfolio as measured at the date of purchase, and shall have a maximum remaining maturity not to exceed 10 years.  


  (4) Preferred stock issued by any solvent American institution registered as provided by the Securities and Exchange Act of 1934 (15 U.S.C. 78a-78kk); preferred stock shall not exceed 10% of the total portfolio as measured at the date of purchase.  


  (5) Bond Funds regulated by the Securities and Exchange Commission, and rated AA or better by a nationally recognized statistical rating organization.  


  (6) The maximum percentage of a self insured group's portfolio that may be invested in equities securities is thirty percent (30%). In the event the investment in equity securities exceeds 30% of the group self insurer's portfolio, the group shall re-balance the portfolio in order to comply with this section.  


(c) The Board of Trustees, whether through its registered investment advisor or not, shall not participate in "short selling" (a sale of a security not owned by the seller; a technique used to take advantage of an anticipated decline in price or to protect a profit), or "margin transactions" (purchase of a security on credit after a margin has been deposited).

(d) The Board of Trustees shall not invest in any of the following assets:

  (1) Commodities or Futures Contracts;  


  (2) Investment in stock not listed on an exchange or sold to the public;  


  (3) Stock options;  


  (4) Limited partnerships.  


(e) With the exception of United States Treasury Bills, Notes and Bonds, and United States government agency or government sponsored enterprise obligations, the maximum percentage of the group self-insurer's portfolio that may be invested in a single issuer or single mortgage-related security is 5%.

(f) The weighted average portfolio maturity may not exceed five years.


     Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 3700, 3701, 3701.5, 3702.1, 3702.2 and 3702.10, Labor Code.  


 HISTORY 
   
1. New section filed 3-2-2009; operative 3-2-2009 pursuant to  GovernmentCode section 11343.4 (Register 2009, No. 10).

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