KRS 342.908: Default or insolvency of fund member -- Assumption of obligations by

fund -- Assessments to finance funds -- Limitation on income distributions --

Effect of payment on liability to fund for reimbursement -- Rules for special

fund assessments for calendar years 2027 and 2028. (Effective July 15, 2026)

(1) The commissioner shall notify a guaranty fund if the commissioner has knowledge

that any member of the guaranty fund has failed to timely pay workers'

compensation benefits required by this chapt er or if a court of competent

jurisdiction has declared the member to be bankrupt or insolvent.

(2) In the event of issuance of a certificate of default, the commissioner shall call all

security and transfer it to the appropriate guaranty fund created purs uant to this

section. The commissioner shall also immediately notify, by certified mail, the

guaranty fund and order the guaranty fund to assume the workers' compensation

obligations of the member required in this chapter. The guaranty fund shall

commence payment of these obligations within fourteen (14) days of receipt of

notification and order of the commissioner. Payment shall be made to claimants

whose entitlement to benefits can be ascertained by the guaranty fund with or

without proceedings before the Department of Workers' Claims or a court of

competent jurisdiction. Upon assumption of the obligations of a member by a

guaranty fund, the guaranty fund shall have the right to immediate possession of

any security, and the custodian, surety, or issuer of any irrevocable letter of credit

shall turn over the security, proceeds of the surety bond, or letter of credit to the

guaranty fund, together with the interest that has accrued since the date of the

member's insolvency. The guaranty fund may administer pa yment of benefits or it

may retain a third party to do so.

(3) Notwithstanding any other provision of law, any cash, securities, irrevocable letters

of credit, specific excess or aggregate excess insurance proceeds, or any other

security deposited or posted in accordance with this section shall be used first, when

due, to pay workers' compensation claims. After the security has been exhausted,

the payment of workers' compensation claims from member assessments may be

made. Where the guaranty fund member-assessment account is used to pay workers'

compensation claims on an emergency or an interim basis, pending receipt by the

guaranty fund of security which is due but not yet received, the member -assessment

account shall be reimbursed for payment from the secu rity when it is received, and

the priorities stated above shall thereafter apply.

(4) (a) To the extent necessary to secure funds for the initial establishment of each

guaranty fund member -assessment account, the board of directors of each

guaranty fund created pursuant to this section shall levy assessments based on

the premium of each individual self -insured employer, as defined and

calculated pursuant to KRS 342.0011(28), for members of the Kentucky

individual self -insurers guaranty fund and for the Kent ucky coal employers

self-insurance guaranty fund, and KRS 342.0011(24) for the Kentucky group

self-insurance guaranty fund, but no such assessments shall ever exceed, in

the aggregate, from all members of a single guaranty fund, an amount in

excess of one million dollars ($1,000,000) at any given time.

(b) The assessments shall be made at a maximum annual assessment of:

1. One-half of one percent (0.5%) of the premium for each member of the

Kentucky individual self -insurance guaranty fund as defined and

calculated pursuant to KRS 342.0011(28);

2. Two percent (2%) of the premium for each member of the Kentucky

coal employers guaranty fund as defined and calculated pursuant to KRS

342.0011(28); and

3. Three-fourths of one percent (0.75%) of the premium for each member

of the Kentucky group self -insurance guaranty fund as defined and

calculated pursuant to KRS 342.0011(24).

(5) The initial assessment for each guaranty fund created pursuant to this section shall

be for an amount equal to five hundred thousand dollars ($500,000), to be levied

and collected within a one (1) year period. There shall be no reassessments against

any member unless the current balance of such guaranty fund created pursuant this

section is i nsufficient after deducting the amount paid for or reserved for

outstanding claims and for administrative and other costs in managing the guaranty

fund at which point the board of directors shall raise assessments sufficient to bring

the minimum amount of the guaranty fund to five hundred thousand dollars

($500,000) or such other amount not to exceed, in any event, one million dollars

($1,000,000) based upon a maximum annual assessment for each guaranty fund.

(6) A guaranty fund created pursuant to this sec tion shall pay no dividends, rebates,

interest, or otherwise distribute income from the guaranty fund to any of its

members, unless the guaranty fund has the assets prescribed in subsection (5) of this

section and the distributions are approved by the commissioner.

(7) The commissioner shall be provided with any relevant information by the employer,

any excess insurer, any third party administrator, or any issuer of any irrevocable

letter of credit, issuer of any surety bond, or custodian of any security ne cessary for

the commissioner to carry out the commissioner's obligations under this chapter,

and the commissioner shall provide this information to the guaranty fund as

necessary to carry out its obligations.

(8) The payment of benefits by a guaranty fund does not release any person or entity

from any liability to the individual guaranty fund for full reimbursement.

(9) (a) As used in this subsection:

1. "Annual special fund assessment" means the assessment imposed upon a

member fund pursuant to KRS 342.122(1)(b);

2. "Division" means the Division of Workers' Compensation Funds in the

Department of Workers' Claims;

3. "Group fund" means the Kentucky group self-insurance fund established

pursuant to KRS 342.906(2); and

4. "Member fund" means a member or former member of the Kentucky

group self -insurance fund that is assessed under subsection (4) of this

section on or after January 1, 2026, for liabilities incurred while a

member.

(b) Notwithstanding any provision of KRS 342.122 to the contrary, or any other

provision of this chapter or other law, for calendar years beginning January 1,

2027, and January 1, 2028:

1. The amount of the annual special fund assessment imposed upon a

member fund shall be retained by the member fund and paid to the

credit of the group fund for the purpose of satisfying the group fund's

outstanding workers' compensation claims; and

2. A member fund shall pay the amounts of its annual special fund

assessment to the group fund on the schedule set forth in KRS

342.122(2)(a) and (b) and shal l provide the division with notice of the

assessments paid.

(c) This subsection shall not apply to any special fund assessment for any

calendar year beginning after December 31, 2028.