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.

(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 s hall 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 t he

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.