Florida Regulations 69O-190.064

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§ 69O-190.064 Trustees' Responsibilities.

(1) The board of trustees shall have complete authority over and shall retain ultimate control of the assets of the fund and shall be responsible for all operations of the fund.

(2) The trustees shall have the authority to approve applications for membership in the fund. The trustees may delegate this authority to the administrator.

(3) The composition of the board of trustees shall be as follows:

(a) A majority of the board shall be owners, officers, directors, partners or employees of one or more members of the fund. (b) A trustee, or relative of the trustee, shall not be an owner, officer, director, partner or employee of the fund's service company. This does not apply to employment of a relative of the trustee in which the relative's duties are of a clerical, or non-managerial nature. Non-managerial being a position which cannot affect the financial standing of a self-insurer, or the benefits to which an injured employee is entitled under Chapter 440, Florida Statutes.

(4) The trustees shall act in a prudent and responsible manner in safeguarding the assests of the fund. The trustees may designate a fiscal agent to oversee, invest and disburse the fund's assets on a day-to-day basis. The trustees may designate an administrator to handle the management of the fund on a day-to-day basis. The administrator may also be delegated the responsibilities of a fiscal agent.

(5) The administrator, fiscal agent or any other individual with authority to disburse funds shall furnish a fidelity bond or insurance policy payable to the trustees in an amount sufficient to protect the fund's assets against misappropriation or misuse. The amount of the bond shall an amount equal to not less than 10 percent of the funds handled annually and issued in the name of the fund covering its trustees, employees, administrator, or other individuals managing or handling the funds or assets of the fund. In no case may such bond be less than $1,000 or more than $500,000, except that the division may for good cause prescribe an amount in excess of $500,000, subject to the 10-percent limitation of the preceding sentence.

(6) The fiscal agent, or administrator, or service company shall be subject to the following conditions:

(a) A fiscal agent or administrator shall be an employee of or under contract to the fund. (b) The administrator may provide some or all of the services required by the rules. (c) In delegating authority to the administrator, fiscal agent or service company, the trustees shall insure that no conflict of interest exists between the interests of the fund and that of the administrator, fiscal agent, or service company. In the event that fiscal authority is delegated, the trustees shall insure that adequate division of responsibility exists and that satisfactory internal fiscal controls are established to safeguard the fund's assets. (d) If the administrator provides claims adjusting services to the fund, the trustees shall not delegate any fiscal authority to the administrator except for control of the claims revolving fund. (e) If the administrator or its representative, or any officer, director, partner, or management of the service company has a business or financial relationship with a business providing goods or services to the fund, then: 1. Such relationship shall be disclosed by the administrator or service company in writing to the trustees and to the audit committee, and 2. All business transactions between the fund and the business providing goods or services shall be conducted so that said business or financial relationship will not influence the outcome of the transactions, and 3. The trustees shall exercise all reasonable precautions so that the business providing goods or services is not unjustly enriched due to the business or financial relationship with the administrator or service company. (f) Upon receipt of notification as required by subparagraph (e)1. above, the minutes of the next Trustee's meeting shall reflect the discussion of the notification and the action taken by the trustees. The fund shall also maintain a file of the written notices for review by the division. (g) The trustees shall establish an audit committee subject to the following conditions: 1. The committee shall be independent of the control of the administrator and the service company and shall report directly to the trustees. 2. The committee shall be responsible on a continuing basis for determining that the fund has instituted and is complying with satisfactory internal fiscal controls in order to protect the fund's assets. 3. The committee shall investigate all potential conflicts of interest involving the administrator or service company. It shall report in writing to the trustees all cases of actual conflict of interest. 4. The committee shall work closely with the fund's certified public accountants to verify the accuracy and completeness of the fund's financial records and reports. 5. The management of the fund, the administrator, or officer, stockholder, owner, management of the service company shall not be represented on the committee. 6. The committee shall make at least one written report to the trustees per year detailing its activities and findings. 7. All committee reports shall be reviewed by the trustees and such reviews shall be noted in the minutes of the meeting at which the review was discussed. 8. All written reports by the committee shall be made available for review by authorized representatives of the Office as part of the audit of the fund.

(7) The trustees may establish a revolving fund for the use of the service company for the payment of claims and related expenses, subject to the following:

(a) The service company shall furnish a fidelity bond or insurance policy covering its officers and employees, payable to the trustees of the fund in an amount sufficient to protect all monies placed in the revolving fund. The amount shall be no less than the one months average receipts deposited into the revolving fund. Average receipts shall be the total deposits made during the previous fund year divided by twelve (12). (b) If the bond or policy required pursuant to subsection 69O-190.064(5), F.A.C., also covers the monies in the revolving fund, a separate bond or policy shall not be required from the service company.

(8) All fidelity bonds or insurance policies required by subsection 69O-190.064(5) and paragraph 69O-190.064(7)(a), F.A.C., may provide for a deductible of not more than $5,000.

(9) The trustees shall maintain up-to-date, accurate, and complete records of the fund's finances. The accounts and records of the fund shall be audited at least annually and at any other time necessary to determine the financial condition of the fund.

(10) The trustees shall obtain audits of the fund and disclose the financial condition of the fund as indicated below.

(a) Audits shall be made by a certified public accountant. Audits may also be made by authorized representatives of the Office. (b) The Office shall prescribe a standard report of financial condition to be used by all self-insurers funds pursuant to Rule 69O-190.059, F.A.C. (c) The Office reserves the right to prescribe the types of audits to be performed to determine fund solvency. (d) The reserves for losses and loss development shall be reviewed annually pursuant to Rule 69O-190.059, F.A.C., to determine the adequacy of these reserves. (e) Copies of all audits and financial reports required pursuant to Rule 69O-190.059, F.A.C., and prepared by personnel other than Office personnel shall be filed with the Office pursuant to Rule 69O-190.059, F.A.C.

(11) Subject to the terms and conditions indicated below, the trustees may establish a penalty rate to produce premium in excess of standard premium for any class of employers with unfavorable loss experience.

(a) The trustees shall submit to the Office a justification for the application of the penalty rate as well as a description of how it will be applied. (b) Approval by the Office shall be required prior to implementation of the penalty rate. (c) Employers subject to a penalty rate shall be notified in writing prior to the effective date of the penalty rate.

(12) The trustees, fiscal agent, or administrator shall not utilize any of the money collected as premium from members for any purpose other than those specifically authorized by these rules or the fund's indemnity agreement.

(13) The trustees shall be prohibited from borrowing money from the fund or in the name of the fund without obtaining prior approval from the Office. Approval shall be granted only if:

(a) The loan is for a productive purpose, (b) It is consistent with the fund's purpose, and (c) It does not impair the financial solvency of the fund.

(14) The trustees shall be authorized to invest the fund's assets only in the manner prescribed by Rule 69O-190.071, F.A.C.

(15) The safety of any investment shall be the responsibility of the trustees.

(16) The trustees shall be prohibited from making any type of investment as authorized by these rules with the intent to trade, dispose or sell the security in any manner other than redeeming it at maturity. Therefore, it shall be the responsibility of the trustees to purchase securities in such denominations and with dates of maturity to ensure that these securities shall be redeemable at the same time and in the same amounts as the self-insurers fund's current and long-term liabilities.

(17) The trustees of each authorized self-insurers fund shall cause to be adopted a set of by-laws or shall enter into a trust agreement which shall govern the operation of the fund. These by-laws or trust agreement shall contain, but not be limited to the following subjects:

(a) Qualifications for self-insurers fund membership including underwriting considerations. (b) The method for selecting the trustees, including the term of office. (c) The method of amending the by-laws. (d) Employer's Liability Limit provided by the self-insurers fund. (e) The amount of the trustees' remuneration which is in excess of actual expenses incurred.

(18) In addition to the above by-laws, the trustees shall adopt written policies on the following subjects, such policies shall be recorded in the minutes of the meeting at which they were adopted and shall be binding on the administrator and service company:

(a) Investment of surplus monies and claims reserves in accordance with Chapter 440, F.S., and Chapter 69O-190, F.A.C. (b) Frequency and extent of loss control and safety engineering service to members. (c) The size of the revolving claims fund. (d) A schedule for payment and collection of premiums including a definition of delinquent premium. (e) Cancellation procedures, including cancellation for non-payment of premium and cancellation for excessive losses. (f) Delineation of authority granted to the administrator or fiscal agent. (g) Delineation of authority granted to the service company. (h) A penalty program for surcharging members with excessive losses. (i) Procedures for handling disputes regarding premium paid by members. (j) Dividend policies including underwriting criteria.

(19) The trustees shall review at least annually the following items for the purpose of determining whether these areas of concern are being adequately provided for and the findings of such review shall be recorded in the minutes of the meeting at which they were discussed:

(a) Service company performance. (b) Loss control and safety engineering. (c) Investment policies. (d) Collection of bad debt. (e) Cancellation procedures. (f) Initial member review. (g) Administrator performance. (h) Dividend policies.

(20) All self-insurers shall file copies of the current by-laws or trust agreement and required written policies with the Office. Any changes in the by-laws, trust agreement or written policies shall be filed with the Office no later than ten (10) days after their taking effect. The Office reserves the right to order the self-insurers fund to rescind or revoke any by-law or policy if it is in violation of these rules or the Law.

(21) The board of trustees of a self-insurers fund shall meet from time to time as needed to conduct the business of the fund. However, the trustees shall meet at least four (4) times per fund year and written minutes of each meeting shall be kept. The minutes shall be signed and dated by the chairman or secretary of the board of trustees. Such minutes shall be open to inspection by the Office.

Specific Authority 624.4621 FS. Law Implemented 624.4621 FS. History-New 10-1-82, Amended 12-25-84, Formerly 38F-5.64, Amended 3-11-87, 12-19-93, Formerly 38F-5.064, 4-190.064.