KRS 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 re quired 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 fi le 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 fun d 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 s elf-

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 financia l

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' compensati on 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 finan cially 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 t he best interests of the members and their

employees.