Chapter 8. Office of the Director
Subchapter 2. Administration of Self-Insurance Plans
Article 3.1. Alternative Composite Deposits

§ 15220.3. Alternative Composite Deposits.

(a) The Security Fund shall secure the aggregate security deposit amount required, in whole or part, for all eligible private self insured employers in the alternative composite deposit program, utilizing any one or combination of security instruments listed in Labor Code Section 3701 and/or Section 3701.8 and as provided for in subsection (b) of this section.

(b) These security instruments may include, but not be limited to, letters of credit, surety bonds, approved securities, and cash subject to the regulatory requirements for each contained in Article 3 (commencing with Section 15210) of this subchapter 2. It may also include, but not be limited to, insurance coverage, such as specific or aggregate excess policies, or special excess workers' compensation policies; or other financial instruments, such as commercial paper or reinsurance contracts; or the Security Fund's own secured or unsecured indebtedness; or financial guarantees, including the Security Fund's own guarantee backed by cash or securities.

(c) The Security Fund shall submit a written proposal as required in subsection (d) each year that the Security Fund proposes to replace individual security deposits with an aggregate composite deposit.

(d) Each formal written proposal for an alternative composite deposit to the Manager shall include:

(1) A complete description of the proposed composite deposit including what portions are cash and non-cash; any retentions, deductibles, or co-payments that are contemplated in each layer, if any; and any insurance or reinsurance being utilized as part of the proposal;

(2) A list of all proposed self insured employers to be covered; their amount of coverage; their applicable credit rating or equivalent credit rating as determined by Section 15220.1 of this subchapter 2; and the credit rating agency utilized to determine the credit rating;

(3) Specification of the call order, if any, of the instruments proposed to be posted as part of the alternative composite deposit.

(4) A proposed starting date for the proposed alternative composite deposit that is at least 30 days after the date of the official written proposal to the Manager.

(e) The Manager shall advise the Director of all written proposals submitted by the Security Fund for an alternative composite deposit and the details of the proposal.

(f) The Manager shall review and approve or reject the alternative composite deposit proposal in whole or part and shall advise the Security Fund of the decision within 30 days. If approved, the Security Fund shall have 30 days to post the alternative composite deposit instruments(s) with the Director, unless the Security Fund's approved proposal sets forth some other acceptable timetable for delivery of the instrument(s).

(g) The Manager shall not release security deposits posted by individual self insured employers pursuant to Labor Code Section 3701 until after the alternative composite deposit permitted by Labor Code Section 3701.8 is fully posted.

(h) The Security Fund may subsequently propose additions, extensions, replacements, substitutions, or other changes to the initial alternative composite deposit posted with the Manager, in whole or part, in the same manner as set forth in this section. Approval and posting of any changes in the alternative composite deposit shall comply with the provisions of this section.

(i) The Security Fund may provide its own guarantee for any portion of the alternative composite deposit in the form of a retention, a deductible, or its own guarantee, provided the guaranteed amount is secured by segregated cash or securities posted with the Director as set forth in Section 15220.8.

(j) At the time the Security Fund submits the written proposal each year as required by subsection (d), it shall list the self-insurers that it proposes to include in whole or in part in the composite deposit. Notwithstanding Section 15210.1(b) of these regulations, each self-insurer listed for inclusion shall have 60 days from the date of notification of the increase or until July 1 of that year, whichever is sooner, to post any indicated increase in security deposit, and that increase shall be either included in the composite deposit proposed by the Security Fund or separately posted, as required.

Note: Authority cited: Sections 3701.8 and 3702.10, Labor Code. Reference: Section 3701.8, Labor Code.

HISTORY

1. New 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.

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 subsection (b) and new subsection (j) 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 subsection (b) and new subsection (j) 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).