(215 ILCS 5/Art. V.75 heading)
Group Workers’ Compensation
(215 ILCS 5/107a.01)
Sec. 107a.01.
Short title.
This Article may be cited as the Workers’
Compensation Pool
Law.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.02)
Sec. 107a.02.
Scope.
This Article applies to all qualified group workers’
compensation
pools.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.03)
Sec. 107a.03.
Purpose.
The purpose of this Article is to permit 2 or more
employers with
homogeneous risk characteristics or that are members of a bona fide
professional, commercial,
industrial, or trade association, with homogenous risk characteristics to pool
their workers’
compensation and employer’s liability exposures under this Article.
The State of Illinois, a unit of local government or school district, or
association or instrumentality thereof, or an intergovernmental risk management
association, self-insurance pool or self-administered health and accident
cooperative or pool shall not be deemed an “employer” or “pool” for the purpose
of this
Article.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.04)
Sec. 107a.04.
Organization under the Illinois Insurance Code.
(a) After December 31, 2000, group workers’ compensation pools shall for the
purpose of
this Article, and this Article only, be considered as though they were
assessable domestic mutual
insurance companies and subject to the following:
- (1) Article XII 1/2, Article XIII, Article XIII 1/2, Article XXIV; and
- (2) Sections 126.2, 126.4, 126.7, 132, 132.1 through 132.7, 133, 134, 137, 139, 140, 141.1, 141.2, 142, 143, 143c, 147, 148, 149, 154.5, 154.6, 154.7, 154.8, 155.01, 155.04, 173.1, 173.2, 173.3, 173.4, 173.5, 174, 174.1, 175, 176, 178, 179b, 378, 379.1, 408, 408.3, 449, 456, 457, and 458, subsections A, B, C, and E of Section 126.5, subsection A of Section 126.6, and subsections (1) and (7) of Section 412 of this Code.
(b) If there is a conflict between any Section of this Article and any
other Section of this
Code, then the provisions of this Article shall apply.
(c) No other provision of this Code shall be applicable to any qualified
workers’
compensation group workers’ compensation pool except as provided in this
Article.
(d) A certificate of authority that is in effect on the effective date of
this amendatory Act of the 91st General Assembly and that was issued pursuant
to Section 4a of the Workers’ Compensation Act or Section 4a of the Workers’
Occupational Diseases Act to a group self-insurer
shall remain in effect under this Article. Such group self-insurer
shall then be deemed to be a qualified group workers’ compensation pool and
shall be
subject to this Article.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.05)
Sec. 107a.05.
Definitions and interchangeable terms.
(a) Unless otherwise provided, the following definitions shall apply:
“Authorized insurer” means an insurer licensed in this State to
transact business as described
in Clauses (c) and (d) of Class 2 of Section 4 of this Code.
“Calendar Quarter” means the 3-month periods ending March 31, June 30,
September 30,
and December 31.
“Director” means the Director of Insurance.
“Engaged actively in the business” means a bona fide business concern having
conducted
commerce, trade, or industry in this State for a specified period of time. Any
and all records relating
to this requirement shall be open to inspection by the Director or his designee
during normal
business hours.
“Gross annual payroll” means payroll for the preceding fiscal year.
“Independent actuarial opinion” means an opinion expressed by a member of the
American
Academy of Actuaries or Casualty Actuarial Society.
“Independent CPA” means an independent certified public accountant or
independent
certified public accounting firm in good standing and licensed to practice by
the Department of
Professional
Regulation.
“Pool” means a qualified group workers’ compensation pool as authorized by
this Article.
“Qualified group workers’ compensation pool” means a group workers’
compensation pool
that has received a certificate of authority pursuant to this Article.
(b) For purposes of incorporating the provisions of this Code designated in
paragraphs (1)
and (2) of subsection (a) of Section 107a.04 into this Article, the following
terms shall be
interchangeable:
“Contribution” shall be considered premium.
“Pooling agreement” shall be considered a policy of insurance.
“Trustees of a group workers’ compensation pool” shall be considered as
though they were
directors of a domestic mutual insurance company.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.06)
Sec. 107a.06.
Pool administration.
(a) An application for Certificate of Authority to establish a pool must
include the
documentation and information regarding its administrator, pooling agreement,
plan of operation,
and membership required by this Section.
(b) Administrators must disclose all of the following:
- (1) Biography of the risk manager on forms prescribed by the Director.
- (2) If a corporation, biographies of all officers and directors.
- (3) The size of staff and other information, such as the kinds of staff positions, location of administrative offices and the nature of any electronic data processing equipment, if any, available for servicing the pool, to demonstrate that the administrator has the resources to administer the program disclosed pursuant to subsection (d).
- (4) The most recent financial statement of the administrator. If a publicly held company, a copy of the last 10-K filed with the Securities and Exchange Commission.
- (5) The compensation contract of the administrator.
- (6) The bylaws of the pool and articles of incorporation, if any.
- (7) Any agreement that subcontracts any of the administrator’s duties or responsibilities.
(c) A pooling agreement must contain all of the following:
- (1) A description of the services to be provided by the administrator.
- (2) The manner in which costs are to be apportioned by the administrator.
- (3) The initial premium deposit.
- (4) The assessment provision.
- (5) The termination provisions and minimum term of membership, which minimum term of membership shall not be less than one year.
- (6) The duration of liability for additional assessments following termination of membership, which shall be for a period of not less than 3 years.
- (7) The prerequisites for membership.
- (8) A provision stating that a claim shall be paid by the pool, regardless of the size of the claim, and that the pool shall be reimbursed by the employer for any amounts required to be paid by the employer under the agreement.
- (9) A provision stating that the terms of termination after the first year of pool membership shall be dictated by the pooling agreement.
- (10) If a pooling agreement requires a member to submit written notice in order for the member to withdraw from a qualified pool, then the period in which the member must provide the written notice cannot be greater than 90 days.
(d) Plans of operation must disclose all of the following:
- (1) A listing of initial members.
- (2) The aggregate loss history of initial members for each of the last 3 years.
- (3) The amount of the net retention of the pool and a list of reinsurers.
- (4) The names of all entities that will provide services for the pool and copies of proposed contracts in connection those services.
- (5) The safety and loss control programs to be provided or required.
(e) The application must contain information about initial members specified
on forms
prescribed by the Director.
(f) The application must contain the combined loss experience for the group
for
the last 3 years and
any other financial data required by the Director.
(g) A pool administrator’s original books and records relating to the
operations of the pool
shall at all times be located within the State of Illinois.
(h) Any change of the pooling agreement, bylaws, plan of operation,
reinsurance
agreements, or membership shall be delivered to the Director within 30 days
after the amendment
or change.
(i) A pool trustee must be an employee, officer, director, or owner of a
pool member.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.07)
Sec. 107a.07.
Standards for issuing and maintaining pool certificates of
authority.
(a) The Department shall consider
the following in
evaluating the financial strength of the pool:
- (1) The number of employees covered by the pool.
- (2) The particular industries in which the participants are engaged.
- (3) The combined net worth of pool participants.
- (4) Any excess insurance purchased from authorized insurers.
- (5) The gross annual payroll of members, which must be at least $10,000,000 for active pools not in runoff.
(b) The pool administrator must either contract with a licensed service
company or have
sufficient resources, such as those set forth in item (3) of subsection (b) of
Section 107a.06, to
administer the proposed pool.
(c) The Department must determine whether the pool can ensure that
individual pool
members are in compliance with Section 107a.08.
(Source: P.A. 96-965, eff. 7-2-10.)
(215 ILCS 5/107a.08)
Sec. 107a.08.
Provisions applicable to members of a group workers’
compensation pool.
(a) All members of a group workers’ compensation pool must have homogeneous
risk
characteristics as provided in Section 107a.03.
(b) In determining whether members exhibit homogeneous risk characteristics,
the Director
shall consider any or all of the following characteristics:
- (1) The loss frequency inherent in the occupational framework of group members.
- (2) The loss severity inherent in the occupational framework of group members.
- (3) The occupational disease potential inherent in the occupational framework of group members.
- (4) The occupational tasks of member employees.
- (5) Any other relevant fact the group members present to the Director that has reference to the classification of similar risks (e.g. SIC codes).
(c) Eligibility as a pool participant shall be based upon having a minimum
of:
- (1) 20 employees and $250,000 gross annual payroll; or
- (2) 10 employees and $125,000 gross annual payroll for participants who have engaged actively in business for a minimum of 3 years; or
- (3) 5 employees and $62,500 gross annual payroll for participants who have actively engaged in business for a minimum of 5 years.
(d) Exceptions to the minimum eligibility requirements of this Section may
be
allowed by any pool whenever the following conditions are met:
- (1) the participant has been actively engaged in business for a minimum period of 5 consecutive years in Illinois; and
- (2) the participant agrees to make all of its financial records available to the Director for reasonable inspection during the period of membership; and
- (3) the pool administrator certifies to the Director that he examined the financial records of the pool participant prior to the participant’s admission to the pool and found the participant to be solvent and financially stable.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.09)
Sec. 107a.09.
Service companies for group workers’ compensation pools.
(a) No association, corporation, partnership, sole proprietorship, trust, or
other business
entity shall provide services in the design, establishment, or administration
of a group workers’
compensation pool unless it is licensed to do so by the Department. An
applicant for a license shall
state in writing the type of activities it seeks authorization to engage in and
the type of services it
seeks authorization to provide. The license shall be granted only when the
Director is satisfied that
the entity possesses the necessary organization, background, character,
expertise, and
financial integrity to
supply the services sought to be offered. The Department may issue a license
subject to restrictions
or limitations, including restrictions or limitations on the type of services
that may be supplied or
the activities in which the entity may engage. A license issued under this
Section shall be valid for
2 years.
(b) To assure that administrators are financially solvent, that pools are
administered in a fair
and capable fashion, and that administrators are able to process claims and pay
benefits in a prompt,
fair, and equitable manner, entities licensed to engage in those activities
under this Section are
subject to supervision and examination by the Department.
(c) The Department may adopt rules for the purposes of this Article. The
rules shall (i)
establish reporting requirements for administrators for group workers’
compensation pools,
including experience
reporting requirements consistent with those established under this Code for
insurers; (ii) establish
bonding requirements or other provisions assuring the financial integrity of
entities administering
group self-insurance; and (iii) establish other reasonable requirements to
further the purposes of this
Article.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.10)
Sec. 107a.10.
Bond requirements.
(a) An administrator shall obtain and maintain in force fidelity bonds on
employees, officers,
or positions in an amount not less than the amount set forth in the column
“Minimum Amount of
Bond”, based on the amount of assets administered on behalf of pools by the
administrator (as
determined from year to year) stated in the annual statement of the
pools as filed with the
Department. All such bonds shall be written with at least a one-year discovery
period and, if written
with less than a 3-year discovery period, shall contain a provision that no
cancellation or termination
of the bond, whether by or at the request of the insured or by the underwriter,
shall take effect before
the expiration of 90 days after written notice of the cancellation or
termination has been filed with
the Department unless an earlier date of cancellation or termination is
approved by the Department.
(b) The bonds shall include all employees, officers, or positions for the
following perils,
which may be covered under separate policies:
- (1) dishonesty of employees and officers;
- (2) robbery, burglary, larceny, theft, false pretense, hold-up, misplacement, mysterious disappearance, and damage or destruction while property is in any bank, any recognized place of safe deposit, or in transit; and
- (3) forgery or alteration.
(c) The bond shall be written by an insurer licensed to transact business in
the State of
Illinois.
(d) Schedule of assets in relationship to amount of bond:
| TOTAL ASSETS | MINIMUM AMOUNT OF BOND |
| $500,000 or less………. | $20,000 plus 6% of total |
| assets | |
| more than $ 500,000 and | |
| not more than $1,000,000….. | $50,000 plus 4% of assets |
| over $500,000 | |
| more than $1,000,000 and | |
| not more than $3,000,000….. | $70,000 plus 3% of assets |
| over $1,000,000 | |
| more than $3,000,000 and | |
| not more than $5,000,000….. | $130,000 plus 2% of assets |
| over $3,000,000 | |
| more than $5,000,000 and | |
| not more than $10,000,000….. | $170,000 plus 1.5% of assets |
| over $5,000,000 | |
| more than $10,000,000……. | $245,000 plus 0.75% of assets |
| more than $10,000,000 |
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.11)
Sec. 107a.11.
Admissible assets.
(a) Admitted assets include amounts permitted under Section 107a.12
as modified by only
the following:
- (1) Direct obligations of the United States of America for the payment of money or obligations for the payment of money that are guaranteed as to the payment of principal and interest by the United States of America.
- (2) Direct obligations for the payment of money issued by an agency or instrumentality of the United States of America or obligations for the payment of money that are guaranteed as to payment of principal and interest by an agency or instrumentality of the United States of America.
- (3) Bonds or securities that are issued by any state of the United States and that are secured by the full faith and credit of that state.
- (4) Certificates of deposit, time deposits, or demand deposits in a bank in the State of Illinois that has deposits insured by the Federal Deposit Insurance Corporation.
- (5) Saving certificates issued by any savings and loan association in the State of Illinois that has deposits insured by the Federal Deposit Insurance Corporation.
- (6) Direct, unconditional obligations of a solvent business corporation for the payment of money on the following conditions:
- (A) the corporation is incorporated under the laws of the United States of America or any state of the United States of America;
- (B) the corporation has a tangible net worth of not less than $500,000 and the obligations have been awarded a “1” or “2” rating by the Securities Valuation Office of the National Association of Insurance Commissioners;
- (C) the corporation is not affiliated with any member of the pool;
- (D) no such obligation of the corporation has been in default as to principal or interest during the 5 years preceding the date of investment, however, the corporation need not have had obligations outstanding during that period and need not have been in existence for that period, and obligations acquired under this Section may be newly issued;
- (E) a pool may not invest more than 33 1/3% of its assets under this item (6); and
- (F) a pool may not invest under this Section more than 5% of its assets in the obligations of any one corporation.
- (7) Obligations of any political subdivision of any state of the United States of America for the payment of money on the following conditions:
- (A) the obligations are payable from ad valorem taxes;
- (B) the political subdivision is not in default in the payment of principal or interest on any of its direct, general obligations;
- (C) no investment may be made under this Section in obligations that are secured only by special assessments for local improvements;
- (D) a pool may not invest under this Section more than 4% of its assets in direct, general obligations issued by any one political subdivision; and
- (E) a pool may not invest more than 50% of its assets under this item (7).
- (8) Mutual funds:
- (A) government money market mutual funds that meet the conditions of paragraphs (c)(2), (c)(3), and (c)(4) of 17 C.F.R. 270.2a-7, revised as of April 1, 1992, that have been rated in one of the 2 highest rating categories by an independent rating agency recognized by the National Association of Insurance Commissioners, and that invest in obligations issued, guaranteed, or insured by the United States or Canada or any agency or instrumentality of the United States or Canada.
- (B) fixed income bond mutual funds that meet the conditions of paragraphs (c)(2), (c)(3), and (c)(4) of 17 C.F.R. 270.2a-7, revised as of April 1, 1992, and that have been rated in one of the 2 highest rating categories by an independent rating agency recognized by the National Association of Insurance Commissioners, however, a pool may not invest in fixed income bond mutual funds more than the greater of $100,000 or 10% of its total assets in any one fund.
- (9) Not more than 5% of a pool’s admitted assets may be assessment receivables. In order to be an admitted asset, an assessment receivable cannot be more than 60 days past due.
- (10) Not more than 10% of a pool’s admitted assets may be reinsurance receivables. In order to be an admitted asset, a reinsurance receivable cannot be more than 90 days past due.
(b) Amounts recoverable from authorized reinsurers on unpaid losses may be
deducted from
the reserves required by Section 4 of the Workers’ Compensation Act.
(c) All securities eligible for registration shall be registered in the name
of the pool and all
securities shall be maintained in a State or National Bank having trust powers
and located within this
State.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.12)
Sec. 107a.12. Annual statement.
(a) A pool authorized to do business in this State shall file with the
Director by March
1st in each year 2 copies of its financial statement for the year ending
December 31st
immediately preceding on forms prescribed by the Director, which shall conform
substantially to
the form of statement adopted by the National Association of Insurance
Commissioners. Unless
the Director provides otherwise, the annual statement is to be prepared in
accordance with the
annual statement instructions and the Accounting Practices and Procedures
Manual adopted by
the National Association of Insurance Commissioners. The Director may
promulgate rules for
determining which portions of the annual statement instructions and Accounting
Practices and
Procedures Manual adopted by the National Association of Insurance
Commissioners are
germane for the purpose of ascertaining the condition and affairs of a pool.
(b) The Director shall have authority to extend the time for filing any
statement by any
pool for reasons that he considers good and sufficient. The admitted assets
shall be shown in the
statement at the actual values as of the last day of the preceding year, in
accordance with Section
126.7 of this Code. The statement shall be verified by oaths of a majority of
the trustees
or directors of the
pool. In addition, when the Director considers it to be necessary and
appropriate for the
protection of policyholders, creditors, shareholders, or claimants, the
Director may require the
pool to file, within 60 days after mailing to the pool a notice that a
supplemental summary
statement is required, a supplemental summary statement, as of the last day of
any calendar
month occurring during the 100 days next preceding the mailing of the notice,
designated by him
or her on forms prescribed and furnished by the Director. The Director may
require supplemental
summary statements to be certified by an independent actuary deemed competent
by the Director
or by an independent certified public accountant.
(c) On or before June 1 of each year, a pool shall file with the Director an
audited financial
statement reporting the financial condition of the pool as of the end of the
most recent calendar year
and changes in the surplus funds for the year then ending. The annual audited
financial report shall
include the following:
- (1) a report of an independent certified public accountant;
- (2) a balance sheet reporting assets, as defined in this Article, liabilities, and surplus funds;
- (3) a statement of gain and loss from operations;
- (4) a statement of changes in financial position;
- (5) a statement of changes in surplus funds; and
- (6) the notes to financial statements.
(d) The Director shall require a pool to file an independent actuarial
opinion
as to the
sufficiency of the loss and loss adjustment expense reserves. This opinion
shall be due on March 1 of
each year.
(Source: P.A. 102-135, eff. 1-1-22.)
(215 ILCS 5/107a.13)
Sec. 107a.13.
Group Workers’ Compensation Pool Insolvency Fund.
(a) All qualified group workers’ compensation pools shall pay a sum equal to
0.5% of
all
compensation and medical service payments made under either the Workers’
Compensation Act or the
Workers’
Occupational Diseases Act during the 6 months immediately preceding the date of
payment, into
the Group Workers’ Compensation Pool Insolvency Fund, the successor fund to the
Group Self-Insurers’ Insolvency Fund. On the effective
date of this amendatory Act of the 91st General Assembly, all moneys in the
Group Self-Insurers’ Insolvency Fund shall be transferred into the Group
Workers’ Compensation Pool Insolvency Fund.
(b) The State Treasurer is ex-officio custodian of the Group Workers’
Compensation Pool
Insolvency Fund. Moneys in the Fund shall be deposited the same as are State
funds and any interest
accruing on moneys in the Fund shall be added to the Fund every 6 months. The
Fund shall be
subject to audit the same as State funds and accounts and shall be protected by
the general bond
given by the State Treasurer. The Fund shall be considered always appropriated
for the purposes of
compensating employees who are eligible to receive benefits from their
employers pursuant to the
provisions of the Workers’ Compensation Act or Workers’ Occupational Diseases
Act when their
employer is a member of a qualified group workers’ compensation pool and the
qualified group
workers’ compensation
pool has become unable to pay compensation and medical service payments due to
financial insolvency either
prior to or following
the date of award. Moneys in the Fund may be used to compensate any type of
injury or occupational
disease that is compensable under either the Workers’ Compensation Act or the
Workers’
Occupational Diseases Act. The State Treasurer shall be joined with the
qualified group
workers’
compensation pool as party respondent in any claim or application for
adjustment of claim filed
against a qualified group workers’ compensation pool whenever the compensation
and
medical services
provided pursuant to this Article may be unpaid by reason of default of an
insolvent qualified group workers’
compensation pool.
(c) Payment shall be made out of the Group Workers’ Compensation Pool
Insolvency Fund
only upon order of the Director and only after the penal sum of the fidelity
bond and securities, if any, has
been exhausted. It shall be the obligation of a qualified group workers’
compensation
pool or its successor to
make arrangements to repay the Group Workers’ Compensation Pool Insolvency Fund
for all
moneys paid out in its behalf. The Director is authorized to make arrangements
with the qualified group
workers’ compensation pool as to terms of repayment. The obligations of
qualified group
workers’
compensation pools to make contributions to the Group Workers’ Compensation
Pool Insolvency
Fund shall be waived on any January 1 or July 1, if the Fund has a positive
balance of at least
$2,000,000 on the date one month prior to the date of payment.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.14)
Sec. 107a.14.
Group workers’ compensation pools assessment provisions.
(a) When the Director determines by means of audit, annual certified
statement, actuarial
opinion, or otherwise that the assets possessed by a pool are less than the
reserves required together
with any other unpaid liabilities, he or she shall order the pool trustees
to assess the individual
pool participants in an amount not less than necessary to correct the
deficiency. This Section is not
intended to restrict or preclude the trustees from time to time levying
assessments or increasing
premium deposits in accordance with the pooling agreement.
(b) When the Director determines that the compensation and medical services
provided
pursuant to this Article may be unpaid by reason of the default of an insolvent
qualified group workers’
compensation pool and the penal sum of the fidelity bond and the securities
provided by the qualified group
workers’ compensation pool are about to become exhausted, the Director shall
declare the qualified group
workers’ compensation pool to be in default and first levy upon and collect
from the individual
employer members of the qualified group workers’ compensation pool in default
an
assessment to assure
prompt payment of compensation and medical services. No assessment of any
individual employer
member of the qualified group workers’ compensation pool made pursuant to this
subsection
shall exceed
25% of the average annual contribution paid by that employer over the previous
3-year period;
however, if the Group Workers’ Compensation Pool Insolvency Fund is then for
any reason
financially unable to assure prompt payment of compensation and medical
services, the employer
member may be assessed without limitation. If and only if (i) the Group
Workers’ Compensation
Pool Insolvency Fund has a positive balance of less than $1,000,000, (ii) the
Director has declared
a qualified group workers’ compensation pool to be in default, and (iii) the
Group Workers’ Compensation
Pool Insolvency Fund is financially unable to pay all employees whose
compensation and medical
services have been approved, the Director shall levy upon and collect from all
qualified group workers’
compensation pools an assessment to provide the balance necessary to assure
prompt payment of
approved compensation and medical services. If an insurance carrier
becomes liable for
workers’ compensation and occupational diseases payments under the terms of the
policy covering
the qualified group workers’ compensation pool, the carrier shall make
appropriate payments and
payments from the Fund shall cease. Payments from the Fund shall resume only
when the
insurance carrier’s liability is exhausted.
(Source: P.A. 91-757, eff. 1-1-01.)
(215 ILCS 5/107a.15)
Sec. 107a.15.
Authority of Director.
(a) If the Director determines that a group workers’
compensation pool is not in compliance with this Article, the Director
shall
require the pool to eliminate the condition causing the noncompliance within a
specified time
from the date the notice of the Director’s requirement is mailed or delivered
to the pool.
(b) If a pool fails to comply with the Director’s requirement, the pool
shall be deemed
to be in a hazardous financial condition, and the Director may take one or more
of the actions
authorized by law as to pools in hazardous financial condition.
(Source: P.A. 91-757, eff. 1-1-01.)