Workers' Compensation Self-Insured Groups

KRS tit. XXV, ch. 304, subtit. 50

in effect

KRS 304.50-005 Purpose of subtitle

304.50-005. Purpose of subtitle The purpose of this subtitle is to establish minimum financial standards for workers' compensation self-insured groups to ensure that self-insured groups are providing adequate coverage for member employers' risks and liabilities under KRS Chapter 342 for injured employees of the member employers. Effective: March 1, 2005 History: Created 2005 Ky. Acts ch. 7, sec. 1, effective March 1, 2005.

KRS 304.50-010 Qualification as workers' compensation self-insured group -- Power to contract, sue, and be sued -- Commissioner to promulgate administrative regulations -- Governor may assign regulatory authority -- Limitation on application of KRS Chapter 304. (Effective until July 15, 2027)

304.50-010. Qualification as workers' compensation self-insured group -- Power to contract, sue, and be sued -- Commissioner to promulgate administrative regulations -- Governor may assign regulatory authority -- Limitation on application of KRS Chapter 304. (Effective until July 15, 2027) (1) The commissioner may authorize twenty (20) or more employers with common interests or membership in a bona fide trade association, or two (2) or more governmental entities, to enter into agreements to pool their liabilities under KRS Chapter 342 for the purpose of qualifying as a workers' compensation self-insured group under this subtitle and KRS 342.350. Any heterogeneous self-insured group so authorized may contract and may sue and be sued in the name adopted by the group. (2) The commissioner shall promulgate administrative regulations as necessary to govern admission, certification, and regulation of workers' compensation self- insured groups as authorized by this section and KRS 342.350. The commissioner shall take any and all action necessary to effectuate the provisions of this subtitle. The commissioner shall be responsible for maintaining records obtained or prepared in association with this oversight. (3) The Governor may assign the regulatory authority under this subtitle to another board or agency pursuant to KRS 12.028. (4) Except as specifically provided in this subtitle, no other provision of this chapter shall apply to a workers' compensation self-insured group. Effective: June 25, 2013 History: Amended 2013 Ky. Acts ch. 75, sec. 1, effective June 25, 2013. -- Amended 2010 Ky. Acts ch. 24, sec. 1624, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 2, effective March 1, 2005.

KRS 304.50-015 Definitions for subtitle

304.50-015. Definitions for subtitle As used in this subtitle, unless the context requires otherwise: (1) "Adjuster" means any person required to be licensed as an adjuster under Subtitle 9 of this chapter, who for a fee or compensation investigates or settles claims arising under contracts issued by a workers' compensation self-insured group on behalf of either the group member or the group; (2) "Administrator" means an individual or legal entity engaged by a self-insured group's board of trustees to carry out the policies established by the self-insured group's board of trustees and provide day-to-day management of the self-insured group; (3) "Agent" means an individual or business entity required to be licensed by the Department of Insurance under Subtitle 9 of this chapter, to sell or solicit applications for insurance or to negotiate insurance contracts; (4) "Aggregate excess insurance" means insurance which provides that the excess insurer pays on behalf of or reimburses a self-insurer for its payment of benefits on claims incurred during a policy period in excess of the retention amount to the excess insurer's limit of liability; (5) "Assessment" means a levy made on members of the group to fund deficiencies; (6) "Bona fide trade association" means an association of employers created for a noninsurance trade purpose and which has been operating in the Commonwealth for at least two (2) years prior to its sponsorship of a self-insured group; (7) "Certificate of filing" means the certificate issued to a workers' compensation self- insured group to indicate that it has complied with the provisions of this subtitle which are prerequisites to its operation; (8) "Common interests" means employers that are engaged in similar activities, share common standard industrial classification codes and common risk factors; (9) "Consultant" means an individual, required to be licensed under Subtitle 9 of this chapter, who as an independent contractor in relation to his or her client, for fee or compensation other than from a workers' compensation self-insured group, in any manner advises or purports to advise any person actually or prospectively a member of such a group concerning coverage, advisability, rights, or interests under the contract or relative to the retention, exchange, surrender, or exercise of rights thereunder; (10) "Coverage form" means coverage contract forms, endorsements, applications, indemnity agreements, clauses, riders, and all other documents regarding coverage; (11) "Deficiency" means that the self-insured group's assets are insufficient to enable the group to discharge its legal liabilities and other obligations and maintain the reserves required under this subtitle, or that the group has a negative members' fund balance; (12) "Deficit" means the amount of any deficiency in the self-insured group or group self-insurance fund; (13) "Dividends" means disbursements from surplus funds to group members in accordance with a plan filed with, and approved by, the commissioner; (14) "Earned premium" means the prorated portion of the full, actual premium charged to the group members that is applicable to the group's accounting period or fiscal year; (15) "Employee" means those persons covered under the provisions of KRS 342.640 and those persons voluntarily covered under KRS 342.660; (16) "Employer" means an employer mandatorily subject to and required to comply with the provisions of KRS Chapter 342, and those voluntarily covering excluded employees pursuant to KRS 342.660; (17) "Commissioner" means the commissioner of the Kentucky Department of Insurance; (18) "Fiscal agent" means a person or legal entity, other than a service organization or employees or agents of a service organization, designated by the trustees to receive, invest, and disburse the self-insured group's funds; (19) "Forms" means coverage contract forms, endorsements, applications, indemnity agreements, clauses, riders, articles of association, articles of incorporation, trust agreements or bylaws of the proposed group, and all other documents regarding coverage and membership; (20) "Governmental entities" means cities, counties, urban-county governments, charter county governments, consolidated local governments, school districts, and other political subdivisions of the Commonwealth, and their boards, agencies, authorities, and commissions; (21) "Group members" means employers who have joined a self-insured group; (22) "Group self-insurance fund" means the contractual arrangement whereby twenty (20) or more employers with common interests or two (2) or more governmental entities associate to jointly self-insure their workers' compensation liability; (23) "Insolvent" or "insolvency" means the inability of a self-insured group to pay its outstanding lawful obligations as they mature in the regular course of business, or to hold sufficient assets to prospectively pay all incurred workers' compensation benefits when due; (24) "Insurance producer" means an individual or business entity required to be licensed under Subtitle 9 of this chapter to sell, solicit, or negotiate insurance. "Insurance producer" includes agent, consultant, managing general agent, surplus lines broker, reinsurance intermediary broker and manager, and, for a workers' compensation self-insured group, a third-party administrator; (25) "Person" includes, but is not limited to, any individual, partnership, association, limited liability company, trust, or corporation; (26) "Premium" means the amount of money charged each member of the self-insured group to fund the obligations and expenses of the self-insured group; (27) "Qualified actuary" means an associate or fellow of the Casualty Actuarial Society; (28) "Rate" means the expected value of the future cost of insurance per exposure unit which accounts for the treatment of losses, expenses, and profit prior to any application of individual risk variations based on loss or expense considerations, but does not include minimum premium; (29) "Self-insured group" means a group self-insurance fund; (30) "Self-insurance year" means the annual period of certification of the self-insured group authorized under KRS 304.50-010 and 342.350; (31) "Service organization" means a person or entity that provides services to a self- insured group and includes claims adjustment, safety engineering, statistical compilation, preparation of premium charges, loss and tax reports or other reports required by the commissioner, administration of the self-insured group, marketing services, placement of excess insurance, development of member payroll audits, administration of investments, or legal assistance; (32) "Specific excess insurance" means an insurance policy which insures the amount of a claim from one (1) occurrence involving one (1) or more employees or employers in the same occurrence or incident of exposure in excess of a specified dollar amount to a stated limit; (33) "Supplementary rating information" means any manual or plan of rates, classification, rating schedule, minimum premium, policy fees, rating rules, or any similar information needed to determine the applicable rate or premium. This shall include underwriting rules, but only to the extent necessary to determine the rate or premium that will be applicable to a risk should the self-insured group decide to provide coverage. This does not include guidelines that relate to the selection of those risks that are acceptable to a workers' compensation self-insured group; (34) "Supporting information" means the experience and judgment of the filer and the experience or data of other insurers or organizations relied on by the filer, the interpretation of any other data relied on by the filer, descriptions of methods used in making the rates, and any other information required by the commissioner; (35) "Surplus funds" means the excess of the self-insured group's assets over its liabilities; and (36) "Trustees" means persons elected by the group members or appointed by the board of directors of the sponsoring trade association or association of governmental entities to oversee the administration of the self-insured group. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1625, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 3, effective March 1, 2005.

KRS 304.50-020 Scope of subtitle -- Deadline for compliance -- Extensions

304.50-020. Scope of subtitle -- Deadline for compliance -- Extensions The provisions of this subtitle apply to a group or bona fide trade association of employers subject to the provisions of KRS Chapter 342, which may include employers voluntarily complying with the provisions of KRS Chapter 342, who join together to self- insure against workers' compensation risks. Any workers' compensation self-insured group operating under a certificate of filing as of March 1, 2005, shall have one (1) year from that date to comply with the provisions of this subtitle, to the extent that these provisions differ from prior requirements in KRS Chapter 342 and the administrative regulations promulgated thereunder. Extensions of time may be granted for good cause shown at the discretion of the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1626, effective July 15, 2010. -- Amended 2008 Ky. Acts ch. 183, sec. 1, effective July 15, 2008. -- Created 2005 Ky. Acts ch. 7, sec. 4, effective March 1, 2005.

KRS 304.50-025 Certification by commissioner required to issue binder or certificate of insurance for workers' compensation coverage -- Certificates of filing issued by Department of Workers' Claims remain in effect unless revoked or suspended

304.50-025. Certification by commissioner required to issue binder or certificate of insurance for workers' compensation coverage -- Certificates of filing issued by Department of Workers' Claims remain in effect unless revoked or suspended (1) Except for an activity arising in the creation of a workers' compensation self-insured group, a person or entity shall not issue a binder or certificate of insurance for workers' compensation coverage unless the workers' compensation self-insured group has been certified to do so by the commissioner. A certification issued by the commissioner shall remain in effect until revoked or modified by the commissioner in accordance with KRS 304.50-140. (2) All certificates of filing issued by the commissioner of the Department of Workers' Claims prior to March 1, 2005, shall remain in full force and effect, unless revoked or suspended by the commissioner in accordance with KRS 304.50-140. The commissioner shall issue replacement certificates of filing within thirty (30) days of March 1, 2005. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1627, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 5, effective March 1, 2005.

KRS 304.50-030 Application for certification -- Filing fee -- Contents -- Premiums -- Deadline

304.50-030. Application for certification -- Filing fee -- Contents -- Premiums -- Deadline (1) A proposed workers' compensation self-insured group seeking initial certification shall file with the commissioner an application for a certificate of filing accompanied by a nonrefundable filing fee of six hundred dollars ($600). An application for initial certification as a workers' compensation self-insured group shall be filed on a form approved by the commissioner by: (a) A group of twenty (20) or more employers having common interests or membership in a bona fide trade association. Any group member having more than fifty percent (50%) common ownership shall constitute one (1) group member; or (b) Two (2) or more governmental entities. (2) Each initial application shall set forth or be accompanied by: (a) The self-insured group's name, location of its principal office, date of organization, name and address of each group member, if known at the time of application, or if unknown, a description of the members to be solicited for membership, and identification of its fiscal year; (b) A copy of the articles of association, articles of incorporation, trust agreement, or bylaws of the proposed self-insured group, including a description of the time and method by which premiums shall be determined, assessed, and collected during regular operations and in the event of insolvency of the self- insured group; (c) A copy of any agreements with an administrator, service organization, and fiscal agent, including third-party administrators and consultants; (d) A copy of the agreement between the self-insured group and each member jointly and severally binding the group and each member of the group to comply with the provisions of this subtitle and the decisions of the trustees relating to the operation of the self-insured group; (e) A description of the group members' common interests or a description of the bona fide trade association, including date of organization, articles of incorporation, and a history of the association's activities; (f) The managed care and utilization review plans, if any, established under KRS Chapter 342 for the self-insured group; (g) A copy of each instrument by which the self-insured group or its agent or consultant has made a commitment to pay for a past or future good or service; (h) Identification by name, address, and term of the initial board of trustees, administrator, and service organization together with an attested statement that a pecuniary or personal conflict does not exist between the official duties of the trustees, administrators, and service organizations and the interests of the members; (i) The name of the custodian and the address where the self-insured group's books and records will be kept; (j) Specimen of the proposed policy and certificate of insurance for the specific and aggregate excess coverage, clearly stating any deductible or retention amount; (k) Copies of security deposits and fidelity bonds required under this subtitle; (l) A proposed schedule of projected annual premium rates and any factor or plan by which rates may be modified. Experience modification factors shall be calculated according to the rules of the advisory organization designated by the commissioner in accordance with Subtitle 13 of this chapter; (m) Financial statements for initial group members audited by a certified public accountant, and signed by an owner or officer of each member, demonstrating a combined net worth of not less than ten million dollars ($10,000,000) for the group, except for governmental entities, and the financial condition of each member; (n) A feasibility study prepared by a qualified actuary demonstrating the overall adequacy and soundness of the proposed plan of operation for the self-insured group; and (o) A three (3) year financial projection including income statements, balance sheets, statements of cash flow, and all material assumptions relating to the financial projection for the self-insured group. (3) (a) Except as provided in paragraph (b) of this subsection, the premium of one (1) group member shall not exceed twenty percent (20%) of the estimated total premium for the workers' compensation self-insured group. (b) If the group consists of two (2) or more governmental entities, the premium of one (1) group member shall not exceed sixty percent (60%) of the estimated total premium for the self-insured group. (4) The first year's premium for the initial certification of the self-insured group shall not be less than one million dollars ($1,000,000). Verification shall be presented that twenty-five percent (25%) of the initial estimated premium has been paid and deposited with the self-insured group's fiscal agent. (5) The initial application shall be filed a minimum of ninety (90) days prior to the proposed inception date of the self-insured group. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1628, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 6, effective March 1, 2005.

KRS 304.50-035 Certificate of filing of self-insured group -- Conditions for issuance

304.50-035. Certificate of filing of self-insured group -- Conditions for issuance Certification as a workers' compensation self-insured group shall be granted only if the commissioner finds that the applicant has complied with the provisions of this subtitle, paid the application fee, and met the following conditions: (1) All persons responsible for the conduct of the affairs of the workers' compensation self-insured group are financially stable and experienced in the administration of a workers' compensation self-insured group; (2) The workers' compensation self-insured group is financially responsible and has demonstrated the ability to meet all of its obligations to participants and prospective participants and injured workers as required in KRS Chapter 342. In making this determination, the commissioner may consider: (a) The adequacy of working capital; and (b) The applicant's compliance with all requirements of this subtitle, including but not limited to: 1. The adequacy of the funding mechanisms; 2. The existence and adequacy of appropriate excess insurance; 3. The participating members' financial strength; 4. The stability of the membership; 5. The risks of the industry; 6. The experience of management and all persons responsible for the conduct of the affairs of the workers' compensation self-insured group; and 7. An initial and ongoing minimum surplus funds requirement of not less than one million dollars ($1,000,000), except for a workers' compensation self insured group currently operating under a plan approved by the commissioner pursuant to KRS 304.50-135 or a remedial action plan approved by the predecessor regulatory agency prior to August 3, 2004. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1629, effective July 15, 2010. -- Amended 2008 Ky. Acts ch. 183, sec. 2, effective July 15, 2008. -- Created 2005 Ky. Acts ch. 7, sec. 7, effective March 1, 2005.

KRS 304.50-040 Termination, suspension, or revocation of certificate -- Merger of workers' compensation self-insured groups

304.50-040. Termination, suspension, or revocation of certificate -- Merger of workers' compensation self-insured groups (1) A certificate of filing shall remain in effect until terminated at the request of the self-insured group or suspended or revoked by the commissioner in accordance with the provisions of this subtitle. (2) The commissioner shall not grant the request of a workers' compensation self- insured group to terminate its certificate of filing unless the group has filed with the commissioner a statement describing arrangements that have been made to pay obligations of the group, including both known claims and expenses and incurred but not reported claims and expenses. (3) Subject to the approval of the commissioner, a workers' compensation self-insured group may merge with another workers' compensation self-insured group. As a result of any merger, the resulting workers' compensation self-insured group shall assume in full all obligations of the constituent groups. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1630, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 8, effective March 1, 2005.

KRS 304.50-045 Initial and continuing financial solvency requirements

304.50-045. Initial and continuing financial solvency requirements (1) To obtain and maintain a certificate of filing, a workers' compensation self-insured group shall have sufficient financial strength to pay all benefits for compensation required by KRS Chapter 342 for risks covered by the group, including known claims and expenses and incurred but not reported claims and expenses. (2) (a) The trustees and administrators shall provide a fidelity bond to the commissioner in the amount of not less than three hundred thousand dollars ($300,000), which may be subject to a deductible not exceeding ten thousand dollars ($10,000), for each trustee, each administrator and the administrator's employees. (b) The fiscal agent shall provide a fidelity bond to the trustees of not less than fifty percent (50%) or one million dollars ($1,000,000), whichever is lower, of the funds to be handled by the fiscal agent. This requirement shall be waived if the fiscal agent is a national bank. (c) The service organization shall provide a fidelity bond to the trustees of not less than two (2) times the amount of the revolving fund. (d) In lieu of the bonds required under paragraphs (a), (b), and (c) of this subsection, the trustees may secure a fidelity blanket bond in an amount not less than fifty percent (50%) of the self-insured group's premium or two million dollars ($2,000,000), whichever is lower. The fidelity blanket bond shall include the trustees, the administrator, the service organization, personnel of the service organization, and the fiscal agent, unless the fiscal agent is a national bank. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1631, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 9, effective March 1, 2005.

KRS 304.50-050 Security deposits -- Dividends on and exchange of assets -- Collection by commissioner -- Release -- Commissioner to approve custodian bank or trust company for security deposits -- Qualifications for approval

304.50-050. Security deposits -- Dividends on and exchange of assets -- Collection by commissioner -- Release -- Commissioner to approve custodian bank or trust company for security deposits -- Qualifications for approval (1) The group shall provide security deposits to the commissioner on a form prescribed by the commissioner in an amount not less than two hundred fifty thousand dollars ($250,000), ten percent (10%) of the annual premium, or ten percent (10%) of the reserve requirement as established in the most recent audited statement of financial condition on file with the commissioner, whichever is greater. (2) The trustees may file cash, cash equivalents, or United States Treasuries as security deposit or a bank letter of credit on a form or forms prescribed by the commissioner, in satisfaction of the security deposit requirement. Notwithstanding any other provision of law to the contrary, the deposit required under this section shall be under trust agreements to which depositories, a self-insured group, and the commissioner are parties. The commissioner may at any time inventory assets on deposit for any self-insured group. Assets shall not be removed or deposited in or from the bank or trust company in which the assets are deposited, except upon a written order, approved by the commissioner, of at least two (2) officers authorized for such purpose by the workers' compensation group self-insurance fund's board of directors or other governing body, except that assets may be deposited or removed under the direction and upon the order of a court of competent jurisdiction, and in the presence of the commissioner. Deposit assets shall be valued at market. (3) (a) Unless a fund fails to cure a deficiency, is insolvent, subject to a delinquency proceeding, or is in default as to taxes or other charges due under state law, a group self-insurance fund shall be entitled: 1. To collect and receive interest, dividends, and payments accruing upon assets held on deposit for its account. 2. From time to time, to exchange and substitute for any such assets, other assets eligible for deposits. (b) If the group self-insurance fund fails to cure a deficiency when required, is insolvent, subject to delinquency proceedings, or is in default as to taxes or other charges due to the Commonwealth under law, the commissioner shall collect such interest, dividends, and payments and add them to the group self- insurance fund's deposit. (4) (a) Any required deposit shall be released, in addition to circumstances already provided for in the following instances only: 1. Upon extinguishment of substantially all liabilities of the group self- insurance fund for the security for which the deposit is held; 2. If the deposit is no longer required under this subtitle; or 3. Upon proper order of a court of competent jurisdiction, the deposit shall be released to the receiver, conservator, rehabilitator, or liquidator of the group self-insurance fund. (b) No release of a deposit shall be made except on application to and written order of the commissioner made upon proof satisfactory to the commissioner of the existence of one (1) of the grounds required in paragraph (a) of this subsection. The commissioner shall not have any personal liability for any such release of any deposit or part thereof so ordered by the commissioner in good faith. (5) (a) A proposed custodian bank or trust company for security deposits shall be approved by the commissioner and shall be under a custodial agreement approved by the commissioner. (b) An approved custodian bank or trust company shall possess the following qualifications: 1. The custodian bank or trust company's custodial functions for the self- insured group shall be carried out under its trust department; 2. The custodian bank or trust company shall be audited annually by independent certified public accountants, and the audit report, related financial statements, and report on internal controls shall be available to the self-insured group and the commissioner; 3. The custodian bank or trust company shall be organized under the laws recognizing that the custodied securities are special deposits rather than general deposits, remain the specific property of the self-insured group, and are not subject to any creditor relationship of the custodian bank or trust company; 4. The custodian bank or trust company shall maintain blanket coverage relating to its custodial functions with limits to or exceeding those suggested by the American Bankers Association; 5. The custodian bank or trust company's capital and surplus shall equal or exceed twenty-five million dollars ($25,000,000) unless it is licensed and regulated by the Commonwealth of Kentucky, in which case its capital and surplus shall equal or exceed ten million dollars ($10,000,000); and 6. The custodian bank or trust company has demonstrated sufficient experience in handling custodial accounts. (6) The commissioner shall publish a list of banks or trust companies for the security deposits or letter of credit as proposed by the group self-insurance fund. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1632, effective July 15, 2010. -- Amended 2008 Ky. Acts ch. 183, sec. 3, effective July 15, 2008. -- Created 2005 Ky. Acts ch. 7, sec. 10, effective March 1, 2005.

KRS 304.50-055 Plans for premium payment, assessments, and dividends for workers' compensation self-insured groups -- Approval by commissioner -- Investments -- Financing of payments by governmental entities

304.50-055. Plans for premium payment, assessments, and dividends for workers' compensation self-insured groups -- Approval by commissioner -- Investments -- Financing of payments by governmental entities (1) As used in this section, "nationall y recognized statistical rating organization" or "NRSRO" means a credit rating agency approved by the United States Securities and Exchange Commission to provide assessments of the creditworthiness of financial instruments. (2) A workers' compensation self-insured group shall establish plans for premium payment, determination and collection of assessments, and for declaration and payment of dividends or other disbursements, which shall be filed for prior approval with the commissioner. Any change in the pla ns for premium payment, assessments, or dividends shall be filed for prior approval with the commissioner. Approval of plans for assessments and dividends does not constitute approval of any particular assessment or dividend by the commissioner. (3) Prior to the inception of each group member's self-insurance year, the trustees shall collect from that member at least twenty -five percent (25%) of the estimated premium for the ensuing year, except that in the case of a self -insured group formed by governmental entities twenty-five percent (25%) of the estimated premium for the ensuing year shall be collected no later than thirty (30) days after the beginning of the self-insured group's self-insurance year. The balance of the estimated premium shall be collected in either quarterly or monthly installments as set forth in the enabling documents described in KRS 304.50 -030(2)(b) or 304.50-060(2)(b). Each group member's payroll shall be audited annually and an adjustment to premium shall be made accordingly. (4) A disbursement from a workers' compensation self-insured group fund shall be for a purpose related to the self-insured group. A dividend shall not be approved or paid until at least thirty-six (36) months after the expiration of the self -insurance year and shall be paid from surplus funds not required for payment of claims or other liabilities. The dividends shall be paid or credited to members according to the reasonable classifications the trustees may establish. A dividend shall not be paid which unfairly discriminates between members of the same classifications. A dividend plan shall specify whether past group members are eligible for the dividend. Payment of a dividend under a dividend plan shall not be made unless the self-insured group has notified the commissioner of its intent to make a dividend payment at least thirty (30) days prior to the payment, and the commissioner has not disapproved the payment within that time. (5) The formula to be used for collection of assessments shall be determined by the trustees and approved by the commissioner. Assessments shall be fair and equitable and shall not unfairly discriminate between members of the same classification. (6) A trustee, fiscal agent, or service organization shall not utilize an asset of the self - insured group for a purpose unrelated to workers' compensation. The trustees shall maintain cash or cash equivalent accounts as may be prudently necessary to pay expenses without having to liquidate long-term investments. (7) The trustees may invest funds in: (a) United States Government bonds, United States Treasury notes, Treasury bills, or other direct obligations guaranteed by the full faith and credit of the United States Government or its agencies; (b) Tax exempt and taxable obligations issued by any state or any of its agencies, counties, cities, municipalities, districts, political subdivisions, or other legal authorities within the United States of America with a minimum rating of "BBB" by any NRSRO, except that no less than fifty percent (50%) of the investments made under this paragraph shall be in obligations issued by the Commonwealth, its agencies, or a county, city district, municipality, political subdivision, or other legal authority within the Commonwealth; (c) Investment share accounts in a savings and loan association in the Commonwealth whose deposits are insured by a federal agency; (d) Certificates of deposit if issued by a duly chartered commercial bank; (e) 1. At the time of purchase, equity securities actively traded on the New York or NASDAQ Stock Exchanges or other registered national securities exchanges with no individual equity holding comprising greater than ten percent (10%) of the equity portion of the portfolio reflected on the most recent quarterly or annual statement of financial condition on file with the commissioner. 2. An investment in an individual equity holding shall not represent at the time of purchase more than five percent (5%) of the total market value of the security. 3. At the time of purchase, investments in equity securities shall not exceed twenty percent (20%) of the total market value of the investment portfolio of the self-insured group reflected on the most recent quarterly or annual statement of financial condition on file with the commissioner; (f) Corporate bonds if: 1. The bond is issued, assumed, or guaranteed by a solvent institution created or existing under the laws of the United States, or a state, province, district, or territory; 2. At the time of purchase, the corporate bond investments do not exceed twenty-five percent (25%) of the total market value of the investment portfolio reflected on the most recent quarterly or annual statement of financial condition on file with the commissioner; and 3. The bond has a minimum rating of "BBB" by any NRSRO; (g) At the time of purchase, mutual funds and exchange traded funds if the investments do not exceed twenty percent (20%) of the total market value of the investment portfolio reflected on the most recent quarterly or annual statement of financial condition on file with the commissioner; and (h) Asset-backed securities if: 1. The bond is issued, assumed, or guaranteed by a solvent institution created or existing under the laws o f the United States, or a state, province, district, or territory; 2. The asset-backed security investments do not exceed ten percent (10%) of the total market value of the investment portfolio reflected on the most recent quarterly or annual statement of financial condition on file with the commissioner; and 3. The bond has a minimum rating of "BBB" by any NRSRO. (8) Of the aggregate investments made by the trustees of the self-insured group under this section: (a) Not less than fifty percent (50%) of the total market value of the entire investment portfolio shall be held in cash, cash equivalents, or securities as described in subsection (7)(a) to (d) of this section; and (b) A minimum of five percent (5%) of the total investment portfolio value shall be maintained in cash or cash equivalent accounts or United States Treasury and Federal Agency Securities with a remaining maturity of one (1) year or less. (9) In the event that any security investment authorized by subsection (7) of this section is downgraded below "BBB," the workers' compensation self-insurance group shall divest itself of that investment as prudently as possible without incurring unnecessary losses. (10) The commissioner may permit variation from the requirements of this section for good cause. (11) (a) Governmental entities that: 1. Participate or have participated in a workers' compensation self-insured group authorized by this subtitle; and 2. Are assessed by the workers' compensation self-insured group to cover an accrued deficit; may finance the payment of the assessment over a period not to exceed twenty (20) years. (b) Financing obtained pursuant to paragraph (a) of this subsection may be accomplished by: 1. The issuance of bonds, notes, or other obligations; or 2. A lease, installment payment agreement, or other similar agreement. (c) If the governmental entity fails to make a scheduled payment on the financing obtained pursuant to paragraph (a) of this subsection, any payments due to that governmental entity shall be withheld or intercepted using the process established in KRS 160.160(7). (12) Except as provided in subsection (11) of this section, all other provisions of the Kentucky Revised Statutes applying to any financing obtained by a governmental entity shall apply. Effective: April 14, 2026 History: Amended 2026 Ky. Acts ch. 154, sec. 13, effective April 14, 2026. -- Amended 2024 Ky. Acts ch. 126, sec. 6, effective July 15, 2024. -- Amended 2022 Ky. Acts ch. 62, sec. 2, effective July 14, 2022. -- Amended 2013 Ky. Acts ch. 75, sec. 5, effective June 25, 2013. -- Amended 2010 Ky. Acts ch. 24, sec. 1633, effective July 15, 2010. -- Amended 2008 Ky. Acts ch. 183, sec. 4, effective July 15, 2008. -- Created 2005 Ky. Acts ch. 7, sec. 11, effective March 1, 2005. Legislative Research Commission Note (3/1/2005). 2005 Ky. Acts ch. 7, which creates this section, contains the enrolled text of Senate Bill 86 as amended by a Senate committee substitute. In drafting the committee substitute, an additional subsection was inserted into this section, but a reference to "subsection (5)(a) of this section" in subsection (7) was not changed to reflect this addition. Pursuant to KRS 7.136(1), the reference has been changed to "subsection (6)(a) of this section" in codification.

KRS 304.50-060 Annual reports -- Organizational documents -- Proof of excess insurance coverage -- Statement of financial condition

304.50-060. Annual reports -- Organizational documents -- Proof of excess insurance coverage -- Statement of financial condition (1) The information and reports required by this section shall be filed by the self- insured group with the commissioner on an annual basis. (2) Within one hundred twenty (120) days from the end of the self-insured group's fiscal year, the self-insured group shall file: (a) Copies of all fidelity bonds, security deposits, and letters of credit; (b) Any material change in the administration of the group, including any change in the organizational documents, change in the administrator, or a change in the service organization or fiscal agent; (c) An attested statement relating to conflicts of interest and compliance with KRS 304.50-105; and (d) Any other information the commissioner may require. (3) Within ten (10) days before the expiration of each self-insurance year, the self- insured group shall file proof of: (a) Specific excess insurance coverage for the ensuing year; and (b) Aggregate excess insurance coverage for the ensuing year unless such coverage is exempted or waived under KRS 304.50-120(1). (4) Within one hundred twenty (120) days from the end of the self-insured group's fiscal year, the group shall file the statement of financial condition required by KRS 304.50-110 and any other relevant financial information requested by the commissioner. Within forty-five (45) days from the end of each fiscal quarter, the self-insured group shall file a statement of financial condition along with an acknowledgment signed by the board of trustees or its authorized agent indicating that the statement has been presented to the board and any other relevant financial information requested by the commissioner, including a balance sheet, and income and cash flow statement, on a form prescribed by the commissioner. (5) Upon the request of a group member, a self-insured group shall make available the statement of financial condition required in KRS 304.50-110. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1634, effective July 15, 2010. -- Amended 2008 Ky. Acts ch. 183, sec. 5, effective July 15, 2008. -- Created 2005 Ky. Acts ch. 7, sec. 12, effective March 1, 2005.

KRS 304.50-065 Notification of change in information

304.50-065. Notification of change in information A workers' compensation self-insured group shall notify the commissioner immediately of any material change in the information required to be filed under this subtitle or in the manner of its compliance with KRS Chapter 342. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1635, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 13, effective March 1, 2005.

KRS 304.50-070 Agent of workers' compensation self-insured group -- License required -- Appointment of agent optional

304.50-070. Agent of workers' compensation self-insured group -- License required -- Appointment of agent optional (1) An agent of a workers' compensation self-insured group shall be licensed as an agent with casualty line of authority in accordance with Subtitle 9 of this chapter. (2) Workers' compensation self-insured groups shall not be required to appoint agents. Effective: March 1, 2005 History: Created 2005 Ky. Acts ch. 7, sec. 14, effective March 1, 2005.

KRS 304.50-075 Examination of financial condition, affairs, and management by commissioner

304.50-075. Examination of financial condition, affairs, and management by commissioner The commissioner or his or her designee shall have power to examine the financial condition, affairs, and management of any workers' compensation self-insured group subject to the provisions of this subtitle. He or she shall have free access to all the books, papers, and documents relating to the business of the organization, and may summon witnesses and administer oaths and affirmations in the examination of the directors, trustees, officers, agents, representatives, or employees of any group, or any person in relation to the workers' compensation self-insured group's affairs, transactions, or conditions relating to workers' compensation. The commissioner shall examine each workers' compensation self-insured group not less frequently than every four (4) years. Information and other data obtained through the examination shall be subject to the provisions of KRS 304.2-230 to 304.2-290. All examination expenses shall be borne by the self-insured group being examined. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1636, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 15, effective March 1, 2005.

KRS 304.50-080 Appointment of Secretary of State as attorney to receive legal process

304.50-080. Appointment of Secretary of State as attorney to receive legal process A workers' compensation self-insured group issued a certificate of filing under this subtitle is deemed to have appointed the Secretary of State as its attorney to receive service of legal process issued against it in Kentucky. This appointment shall be irrevocable, shall bind any successor in interest, and shall remain in effect as long as the self-insured group has workers' compensation exposures in this Commonwealth. Effective: March 1, 2005 History: Created 2005 Ky. Acts ch. 7, sec. 16, effective March 1, 2005.

KRS 304.50-085 Operation of group by board of trustees -- Powers and duties -- Prohibited acts -- Power to contract, sue, and be sued -- Contracts for administration of group

304.50-085. Operation of group by board of trustees -- Powers and duties -- Prohibited acts -- Power to contract, sue, and be sued -- Contracts for administration of group (1) Each self-insured group shall be operated by a board of trustees. Except for a self- insured group formed by governmental entities, the board of trustees for each self- insured group shall consist of at least two (2) but not more than twenty (20) persons selected in the manner prescribed in the bylaws of the self-insured group or other laws of the Commonwealth. (2) The board of trustees shall: (a) Be residents of Kentucky or officers of corporations authorized to do business in Kentucky; (b) Administer the operations of the workers' compensation self-insured group ensuring that there is adequate funding to pay compensation required by KRS Chapter 342, that all claims are paid promptly and processed to conclusion, and that all necessary precautions are taken to safeguard the assets of the group; (c) Maintain responsibility for all moneys collected or disbursed from the group; (d) Maintain minutes of its meetings and make the minutes available to the commissioner and group members; (e) Designate an administrator to carry out the policies established by the board of trustees and to provide day-to-day management of the self-insured group; (f) Develop rates and collect premium and assessments; and (g) Invest the self-insured group's funds. (3) The board of trustees shall not: (a) Extend credit to individual group members for payment of premiums or assessments, except in accordance with payment plans filed with the commissioner; (b) Permit the loan of any moneys to or borrow any moneys from the self-insured group or in the name of the group, except that a workers' compensation self- insured group formed by governmental entities may borrow moneys in the name of the group; or (c) Have a direct or indirect pecuniary interest in a service organization. (4) A workers' compensation heterogeneous self-insured group may contract and may sue and be sued in the name adopted by the group. (5) (a) The trustees may contract with a service organization, an administrator, or a fiscal agent to carry out the administration of the workers' compensation self- insured group. (b) A service organization and its employees and agents shall be duly licensed to perform those functions for which a license is required under Kentucky law. (c) A revolving fund of not more than twenty percent (20%) of estimated premiums may be established for use by a service organization for the payment of claims. (6) In its discretion, the workers' compensation self-insured group may refer to its trustees as directors. If this is done, the provisions of this subtitle referring to trustees shall be construed as referring to directors. Effective: June 25, 2013 History: Amended 2013 Ky. Acts ch. 75, sec. 2, effective June 25, 2013. -- Amended 2010 Ky. Acts ch. 24, sec. 1637, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 17, effective March 1, 2005.

KRS 304.50-090 Membership -- Indemnity agreement -- Expulsion, nonrenewal, or cancellation of member by group -- Voluntary withdrawal -- Liability on termination of membership, insolvency, or bankruptcy

304.50-090. Membership -- Indemnity agreement -- Expulsion, nonrenewal, or cancellation of member by group -- Voluntary withdrawal -- Liability on termination of membership, insolvency, or bankruptcy (1) An employer joining a workers' compensation self-insured group after the group has been issued a certificate of filing shall submit an application for membership to the board of trustees or its administrator and enter into an indemnity agreement. Membership shall not take effect earlier than each member's date of application. The application for membership and its approval shall be maintained as permanent records of the board of trustees. The board of trustees shall require each member to execute a joint and several liability agreement, or other annual ratification or affirmation of indemnity, upon each renewal. (2) The self-insured group shall be considered an individual employer for all purposes of taxation and the individual members of the group shall not be exposed to tax liability other than liability existing as a result of the indemnity agreement with the other group members and the self-insured group. (3) At the discretion of the trustees, the self-insured group may include the Kentucky employees of foreign (out-of-state) employers. (4) Individual members of a workers' compensation self-insured group shall be subject to expulsion, nonrenewal, or cancellation by the group by giving the member and the commissioner of the Department of Workers' Claims thirty (30) days advance notice. Such expulsion, nonrenewal, or cancellation shall be executed in accordance with the bylaws of the group and for reasons including but not limited to: (a) Adverse claims experience; (b) Lack of cooperation with safety and loss prevention policies; or (c) Failure to report payroll in accordance with the rules and rating plan of the self-insured group. (5) At least thirty (30) days prior to the due date, the trustees shall notify each group member of all premiums due, including adjustments. Failure by a member to pay the premium or assessments due prior to the due date may result in immediate cancellation from the group by the trustees. Ten (10) days advance notice of such cancellation shall be given to the member and the commissioner of the Department of Workers' Claims. (6) Individual group members may elect to withdraw from the group only upon sixty (60) days written notice to the commissioner of the Department of Workers' Claims and the trustees. (7) The trustees shall report to the commissioner any person who behaves fraudulently as described in Subtitle 47 of this chapter. (8) A workers' compensation self-insured group shall pay all workers' compensation benefits required under KRS Chapter 342 for which each member incurs liability during its period of membership, including assessments. A member who elects to withdraw its membership or is terminated by a group remains liable for workers' compensation liabilities, obligations, and assessments during the terminated or withdrawn group member's period of membership. A group member shall not be relieved of its workers' compensation liabilities incurred, including assessments, during its period of membership, except through payment by the group or the member of these liabilities. (9) The insolvency or bankruptcy of a group member shall not relieve the workers' compensation self-insured group or any group member of liability for the payment of workers' compensation benefits incurred during the insolvent or bankrupt group member's period of membership. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1638, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 18, effective March 1, 2005.

KRS 304.50-095 Eligibility for membership

304.50-095. Eligibility for membership Except for governmental entities, the trustees shall not accept an employer as a member unless the employer has a net worth of at least two (2) times its estimated annual premium, unless the employer pays its full estimated annual premium in advance. The trustees shall not accept an employer as a member unless the employer meets all other qualifications for membership as set forth in the bylaws of the self-insured group. Effective: March 1, 2005 History: Created 2005 Ky. Acts ch. 7, sec. 19, effective March 1, 2005.

KRS 304.50-100 Dissolution of self-insured program -- Approval of plan by commissioner

304.50-100. Dissolution of self-insured program -- Approval of plan by commissioner (1) If a self-insured group decides to dissolve its self-insured program, the trustees shall: (a) File a detailed plan of dissolution with the commissioner for prior approval; (b) Provide sixty (60) days written notice by certified mail to the commissioner and each group member; (c) Pay approved dividends; and (d) Establish arrangements for the continued payment and servicing of all outstanding claims, including incurred but not reported claims. (2) The commissioner shall approve the plan unless the commissioner determines it to be unlawful, unfair, inequitable, or prejudicial to the interests of the members or injured workers, or the plan does not fully discharge all obligations of the group. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1639, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 20, effective March 1, 2005.

KRS 304.50-105 Conflict-of-interest policy

304.50-105. Conflict-of-interest policy The board of trustees of each workers' compensation self-insured group shall establish a formal conflict-of-interest policy or code of conduct applicable to the board of trustees, officers, and employees that includes a description of the system used to monitor compliance with the conflict-of-interest policy or code of conduct. Effective: March 1, 2005 History: Created 2005 Ky. Acts ch. 7, sec. 21, effective March 1, 2005.

KRS 304.50-110 Statement of financial condition -- Contents

304.50-110. Statement of financial condition -- Contents (1) In addition to reports required under KRS 304.50-060, each workers' compensation self-insured group shall file with the commissioner an annual statement of financial condition audited by an independent certified public accountant on or before one hundred and twenty (120) days from the end of the group's fiscal year for the immediately preceding fiscal year. The annual financial statement shall be on a form approved by the commissioner and in accordance with generally accepted accounting principles. (2) The annual financial statement shall include actuarially appropriate reserves for: (a) Known claims and expenses related to such claims; (b) Claims incurred but not reported and any expenses associated such claims; and (c) Unearned premiums, contributions, and assessments. (3) The annual financial statement shall also include an actuarial opinion by a qualified actuary and a supporting reserve study regarding reserves for known claims and expenses associated with such claims. The reserve study shall include documentation sufficient for another actuary practicing in the same field to evaluate the work. The documentation shall describe clearly the sources of data, material assumptions, and methods. (4) The following statements shall be included with the annual financial statement: (a) Balance sheet; (b) Statement of gain or loss from operations; (c) Statement of changes in financial position; and (d) Notes to financial statements required by generally accepted accounting principles, which shall include a narrative explanation of all material transactions and balances of the self-insured group. (5) No person shall make a deceptive statement or fail to correct a misstatement in connection with the solicitation of membership of a self-insured group. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1640, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 22, effective March 1, 2005.

KRS 304.50-115 Filing of rates, supplementary rating information, and coverage forms - - Grounds for disapproval -- Filing fee -- Public inspection of filings

304.50-115. Filing of rates, supplementary rating information, and coverage forms - - Grounds for disapproval -- Filing fee -- Public inspection of filings (1) A workers' compensation self-insured group shall file with the commissioner its rates and supplementary rating information and any changes made to its rates and supplementary information. (a) Within one (1) year of March 1, 2005, each existing workers' compensation self-insured group shall place on file with the commissioner its existing rates and supplementary rating information. (b) The initial rates and supplementary rating information of any workers' compensation self-insured group newly formed after March 1, 2005, shall not become effective until filed with and approved by the commissioner. (c) Any changes made to a workers' compensation self-insured group's rates or supplementary rating information shall be filed pursuant to KRS 304.13-053. (2) A workers' compensation self-insured group shall file with the commissioner its existing coverage forms and any changes made to such forms, in accordance with KRS 304.14-120. (a) Within one (1) year of March 1, 2005, each existing workers' compensation self-insured group shall place on file with the commissioner its existing coverage forms. (b) The initial coverage forms of any workers' compensation self-insured group newly formed after March 1, 2005, shall not be used or delivered until filed with and approved by the commissioner pursuant to KRS 304.14-120. (c) Any changes made to a workers' compensation self-insured group's coverage forms shall be filed in accordance with KRS 304.14-120. (d) The commissioner shall disapprove any coverage form required to be filed under KRS 304.14-120, or withdraw any previous approval of such form, only on one (1) or more of the following grounds: 1. If the coverage form is in any respect in violation of, or does not comply with, this subtitle or KRS Chapter 342. 2. If the coverage form contains or incorporates by reference, where the incorporation is otherwise permissible, any inconsistent, ambiguous, or misleading clauses, or exceptions and conditions which deceptively affect the risk purported to be assumed in the general coverage of the contract. 3. If the coverage form has any title, heading, or other indication of its provisions which is misleading, or is printed in a size of type or manner of reproduction as to make the form substantially illegible. (3) Coverage form and rate filings shall be accompanied by a filing fee as set forth in KRS 304.4-010 and administrative regulations promulgated by the commissioner. Filings shall be open to public inspection at any reasonable time. Copies may be obtained by any person on request and on payment of a fee specified in Subtitle 4 of this chapter. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1641, effective July 15, 2010. -- Amended 2008 Ky. Acts ch. 183, sec. 6, effective July 15, 2008. -- Created 2005 Ky. Acts ch. 7, sec. 23, effective March 1, 2005.

KRS 304.50-120 Aggregate excess insurance -- Standards for waiver and exemption -- Administrative regulations -- Eligibility to write excess liability coverage for group

304.50-120. Aggregate excess insurance -- Standards for waiver and exemption -- Administrative regulations -- Eligibility to write excess liability coverage for group (1) The commissioner shall promulgate administrative regulations setting forth the requirements for aggregate excess insurance and the standards for granting a waiver, but a workers' compensation self-insured group shall not be required to purchase aggregate excess insurance if the group's fund balance is thirty percent (30%) or more of earned premiums. (2) Except for a worker's compensation self-insured group granted a waiver or exempted under subsection (1) of this section, the trustees shall purchase aggregate excess insurance. (3) The trustees shall purchase specific excess insurance coverage with a limit of at least twenty-five million dollars ($25,000,000) per occurrence. (4) To be eligible to write excess liability coverage for a self-insured group, a casualty insurance company shall at all times maintain twenty-five million dollars ($25,000,000) of minimum policyholder surplus. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1642, effective July 15, 2010. -- Amended 2008 Ky. Acts ch. 183, sec. 7, effective July 15, 2008. -- Created 2005 Ky. Acts ch. 7, sec. 24, effective March 1, 2005.

KRS 304.50-125 Discounting authorized -- Requirements -- Approval by commissioner

304.50-125. Discounting authorized -- Requirements -- Approval by commissioner (1) In the computation of the retained liabilities of the self-insured group, reserves for claims or projected reserves for claims may be discounted for their present value if: (a) The discounting is based upon the computation of a qualified actuary; and (b) The computations and supporting documentation are filed annually in writing with the commissioner. (2) Discounting shall be approved by the commissioner unless: (a) The actuary is found to be unqualified by the commissioner; or (b) The computations and supporting documentation presented by the actuary are rejected based on the opinion of the commissioner's qualified actuary. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1643, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 25, effective March 1, 2005.

KRS 304.50-130 Members to receive evidences of coverage -- Contents

304.50-130. Members to receive evidences of coverage -- Contents (1) Each member of a workers' compensation self-insured group shall receive written evidence of coverage by the group. (2) All evidences of coverage issued pursuant to this section shall contain coverage terms, conditions, and exclusions. (3) All evidences of coverage issued pursuant to this section by a self-insured group shall contain the following disclosure in prominent contrasting type: THIS COVERAGE HAS BEEN PLACED WITH A WORKERS' COMPENSATION SELF-INSURED GROUP WHICH IS REGULATED BY THE KENTUCKY DEPARTMENT OF INSURANCE AND HAS RECEIVED A CERTIFICATE OF FILING FROM THE COMMONWEALTH OF KENTUCKY. CLAIMS AGAINST GROUP MEMBERS ARE COVERED BY THE SELF-INSURED GROUP INSURANCE GUARANTY ASSOCIATION, BUT ARE NOT COVERED BY THE KENTUCKY INSURANCE GUARANTY ASSOCIATION. GROUP MEMBERS SHALL BE ASSESSED IN THE EVENT OF INSOLVENCY OF THE WORKERS' COMPENSATION SELF-INSURED GROUP. (4) All evidences of coverage issued pursuant to this section by a workers' compensation self-insured group formed by governmental entities which have joint and several liability shall contain the following disclosure in prominent contrasting type: THIS COVERAGE HAS BEEN PLACED WITH A WORKERS' COMPENSATION SELF-INSURED GROUP WHICH HAS RECEIVED A CERTIFICATE OF FILING FROM THE COMMONWEALTH OF KENTUCKY. CLAIMS AGAINST GROUP MEMBERS ARE NOT COVERED BY THE KENTUCKY INSURANCE GUARANTY ASSOCIATION. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1644, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 26, effective March 1, 2005.

KRS 304.50-135 Procedure upon decrease in fund balance below minimum -- Failure to remedy deficit -- Delinquency proceedings -- Bulk reinsurance

304.50-135. Procedure upon decrease in fund balance below minimum -- Failure to remedy deficit -- Delinquency proceedings -- Bulk reinsurance (1) If a workers' compensation self-insured group has a members' fund balance that is less than the minimum amount required by this subtitle of one million dollars ($1,000,000) and not a negative members' fund balance reported on an annual financial filing or by a report on examination, then within thirty (30) days of the filing or report, the self-insured group shall file with the commissioner a written report that identifies the cause of the decrease in the fund balance, describes a plan for remedying the decrease in the fund balance, and identifies measures to be implemented to avoid similar future decreases in the fund balance. A report filed with the commissioner under this subsection may be approved, disapproved, or modified by the commissioner. A self-insured group may cease operating under a report filed with the commissioner under this subsection after the self-insured group's members' fund balance is one million dollars ($1,000,000) or greater and the commissioner has approved in writing the lifting of the terms of the report. A report filed with the commissioner under this subsection shall be deemed part of the self- insured group's organizational documents for purposes of KRS 304.50-060. (2) A workers' compensation self-insured group shall report any deficiency to the commissioner as soon as it is identified. A deficiency reported on an annual financial filing or by a report on examination shall be deemed a verified deficiency. If a workers' compensation self-insured group has a verified deficiency, the deficit amount shall be made up immediately from the following: (a) Surplus funds from a fund year other than the current fund year after prior notice of the transfer has been given to the commissioner; (b) Implementation of the previously approved assessment plan; or (c) Alternative methods as the commissioner may direct or approve that provide financial security in the form of surety, deposit, letter of credit, guarantee, or other assets or obligation. (3) If a workers' compensation self-insured group fails to remedy a deficit as required in subsection (2) of this section, the commissioner shall order the group to do so. (4) If a workers' compensation self-insured group fails to remedy a deficit or make the required assessment of its members within thirty (30) days after the commissioner orders the group to do so, the group shall be deemed to be in hazardous financial condition and insolvent, under Subtitle 33 of this chapter, and the commissioner may file a petition for delinquency proceedings, as defined in Subtitle 33 of this chapter, in Franklin Circuit Court. (5) The commissioner shall place a workers' compensation self-insured group into delinquency proceedings in accordance with the provisions of Subtitle 33 of this chapter if the workers' compensation self-insured group is in hazardous financial condition, insolvent or about to become insolvent, no longer financially responsible and may reasonably be expected to be unable to meet its obligations to members or prospective members, has failed to remedy a deficiency in a reasonable and timely manner, or any other grounds that are provided in Subtitle 33 of this chapter. A self- insured group shall be placed in delinquency proceedings as an insurer, pursuant to Subtitle 33 of this chapter. (6) The commissioner may approve bulk reinsurance or any other transfer of the book of business if he or she finds that it is in the best interests of the members and their employees. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1645, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 27, effective March 1, 2005.

KRS 304.50-140 Suspension or revocation of certificate of filing -- Civil penalty -- Hearing and appeal -- Notification requirements and exceptions

304.50-140. Suspension or revocation of certificate of filing -- Civil penalty -- Hearing and appeal -- Notification requirements and exceptions (1) After a hearing or upon agreement by the workers' compensation self-insured group, the commissioner may suspend or revoke the certificate of filing of a self-insured group, impose a civil penalty of up to ten thousand dollars ($10,000) per violation, or both if the group: (a) Operates significantly in contravention of its basic organizational document or in a manner contrary to that described in and reasonably inferred from any other information submitted under this subtitle, or administrative regulations relating to this subtitle, unless amendments to the submissions have been filed with and approved by the commissioner or there has been a significant and adverse change in the management of the self-insured group; (b) Or any person at the direction of the group advertises or merchandises its services in an untrue, misrepresentative, misleading, deceptive, or unfair manner, or engages in unfair or deceptive practices as defined in Subtitle 12 of this chapter; (c) Violates the provisions of this subtitle or administrative regulations adopted thereunder; (d) Obtains a certificate of filing by unfair or deceptive means; (e) Misappropriates, converts illegally, withholds, or refuses to pay upon proper demand any moneys that belong to a member, an employee of a member, or a person otherwise entitled to such moneys by the group or its administrator; or (f) Violated or failed to correct a violation of this subtitle or administrative regulations promulgated under this subtitle within a reasonable time period established by the commissioner in administrative regulations. (2) In addition, the commissioner may impose a civil penalty of up to ten thousand dollars ($10,000) per day for continuing violations. (3) The commissioner shall conduct a hearing under this section in accordance with Subtitle 2 of this chapter. The ruling of the commissioner may be appealed to Franklin Circuit Court in accordance with KRS 304.2-370. The commissioner, during the pendency of an appeal or request for a hearing, may utilize the security deposit provided by the self-insured group to make payments of any workers' compensation benefits currently due. (4) If the commissioner revokes a self-insured group's certification, the commissioner shall immediately notify the Kentucky group self-insurance guaranty fund as established in KRS 342.906(2). (5) When a certificate of filing of a self-insured group is suspended, the group shall not, during the period of suspension, enroll any new participants or engage in any advertising or solicitation. (6) If the certificate of filing of a self-insured group is revoked for reasons other than hazardous financial condition, the group shall proceed, immediately following the effective date of the order of revocation, to conclude its affairs and shall conduct no further business, except as may be essential to the orderly conclusion of the affairs of the group. The group shall engage in no further advertising or solicitation. The commissioner may, by written order, prevent further operation of the self-insured group if further operation is not deemed to be in the best interest of the members, and the self-insured group's members will be afforded the greatest practical opportunity to obtain workers' compensation coverage elsewhere. If the commissioner permits further operation, the workers' compensation self-insured group shall continue to collect the premiums and assessments required of its members. (7) The commissioner, in his or her discretion and without advance notice or a hearing, may suspend or revoke the certificate of filing of any workers' compensation self- insured group upon commencement of the following proceedings: (a) Receivership; (b) Conservatorship; (c) Rehabilitation; or (d) Other delinquency proceedings. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1646, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 28, effective March 1, 2005.

KRS 304.50-145 Actions not required by subtitle or administrative regulations

304.50-145. Actions not required by subtitle or administrative regulations Nothing in this subtitle nor any administrative regulation adopted under the authority of this subtitle shall require any workers' compensation self-insured group formed by governmental entities or its members to take any action in violation of the Constitution of the Commonwealth. Nothing in this subtitle nor any administrative regulations promulgated by the executive director shall change the obligation of a workers' compensation self-insured group to comply with KRS Chapter 342. Effective: March 1, 2005 History: Created 2005 Ky. Acts ch. 7, sec. 29, effective March 1, 2005. Legislative Research Commission Note (3/1/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

KRS 304.50-150 Unfair business practices prohibited -- Responses to inquiries from commissioner within 15 days

304.50-150. Unfair business practices prohibited -- Responses to inquiries from commissioner within 15 days (1) A person shall not: (a) Make any deceptive statement or omit material facts in connection with solicitation for membership in a workers' compensation self-insured group; or (b) Guarantee the payment of dividends or use statements or words in, or in connection with, any coverage which imply that the payment of dividends is guaranteed to occur. (2) A workers' compensation self-insured group shall not engage in unfair business practices as defined by KRS Chapter 342, and shall: (a) Respond to an inquiry from the commissioner on matters other than workers' compensation claims within fifteen (15) working days of receipt of such inquiry; and (b) Respond to an inquiry from the commissioner of the Department of Workers' Claims on matters concerning workers' compensation claims within fifteen (15) working days of receipt of such inquiry. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1647, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 30, effective March 1, 2005.

KRS 304.50-155 Statutes applicable to group self-insurance funds

304.50-155. Statutes applicable to group self-insurance funds A group self-insurance fund regulated under this subtitle and administrative regulations promulgated by the commissioner shall be subject to the provisions of this subtitle, Subtitle 12 of this chapter, and KRS 304.2-310 to 304.2-370, 304.20-100, and 304.99- 082, to the extent applicable and not in conflict with the expressed provisions of this subtitle. Effective: July 12, 2012 History: Amended 2012 Ky. Acts ch. 64, sec. 4, effective July 12, 2012. -- Amended 2010 Ky. Acts ch. 48, sec. 10, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 31, effective March 1, 2005. Legislative Research Commission Note (7/15/2010). A reference to the "executive director" of insurance in this section has been changed in codification to the "commissioner" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. This change was made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938.

KRS 304.50-160 Annual report of commissioner

304.50-160. Annual report of commissioner Annually on or before the fifteenth day of December, the commissioner shall make a report to the Governor and the Interim Joint Committees of Banking and Insurance and Economic Development and Workforce Investment on the status of workers' compensation self-insured groups. Effective: June 29, 2021 History: Amended 2021 Ky. Acts ch. 124, sec. 3, effective June 29, 2021. -- Amended 2010 Ky. Acts ch. 24, sec. 1648, effective July 15, 2010. -- Created 2005 Ky. Acts ch. 7, sec. 32, effective March 1, 2005.

Source: Kentucky Legislative Research Commission (legislature.ky.gov)URL: https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=38770Fetched: 10/20/2026