§ 125.10. Funding by public employers.
(a) A self-insured public employer shall establish and maintain a dedicated asset account to provide a source of funds for the payment of benefits and other obligations and expenses relating to its self-insurance program. This section does not apply to a runoff self-insured public employer whose average annual payout of benefits on self-insurance claims over its last 3 completed fiscal years, net of workers’ compensation excess insurance recoveries, is less than the current Statewide average weekly wage multiplied by 100.
(b) For a new self-insured public employer and for an active self-insured public employer that has been self-insured for less than 3 consecutive years, the required asset level of the dedicated asset account established under subsection (a) is calculated as follows:
(1) An amount greater than or equal to 20% of the public employer’s modified manual premium calculated in accordance with § 125.202 (relating to definitions) or the minimum funding amount, whichever is greater.
(2) Discounted by the percentage outlined under § 125.9(l) (relating to security requirements) for the self-insurer’s highest current long-term credit or debt rating, if any.
(3) The dedicated asset account must equal the above prescribed asset level no later than 30 days before the effective date of the public employer’s initial permit and may not be reduced below this asset level for the first 3 years of self-insurance.
(c) For an active self-insured public employer that has been self-insured for more than 3 consecutive years but less than 7 consecutive years, the required asset level of the dedicated asset account established under subsection (a) is calculated as follows:
(1) An amount greater than or equal to the greater of the following:
(i) The self-insurer’s greatest annual fiscal year payout of benefits since its initial approval to self-insure, net of workers’ compensation excess insurance recoveries, plus 20% of that annual payment amount.
(ii) The minimum funding amount.
(2) Discounted by the percentage outlined under § 125.9(l) for the self-insurer’s highest current long-term credit or debt rating, if any.
(3) The dedicated asset account must be equal to or exceed the prescribed asset level 120 days before the beginning of the self-insurer’s next fiscal year or by a later date if requested by the applicant and approved by the Bureau.
(4) Prior to issuing a permit under § 125.6(c) (relating to decision on application), the Bureau will require that the asset level of a self-insurer’s dedicated asset account under paragraphs (1) and (2) be based on an adjustment to the self-insurer’s greatest annual benefit payout amount to correct any material underpayment of benefits the Bureau believes is the result of the self-insurer’s failure to pay compensation for which it is liable during the evaluation period.
(d) For an active self-insured public employer that has been self-insured for 7 or more consecutive years, the required asset level of the dedicated asset account established under subsection (a) is calculated as follows:
(1) An amount greater than or equal to the greater of the following:
(i) The self-insurer’s average annual payout of benefits over its three most recent completed fiscal years, net of workers’ compensation excess insurance recoveries, plus 20% of that average payment amount.
(ii) The minimum funding amount.
(2) Discounted by the percentage outlined under § 125.9(l) for the self-insurer’s highest current long-term credit or debt rating, if any.
(3) If the asset level of the self-insurer’s dedicated asset account is below the required level under paragraphs (1) and (2) as of September 11, 2010, the required asset level of the account established under subsection (a) is calculated as follows:
(i) The amount required to be in the dedicated asset account under paragraphs (1) and (2) for the current year.
(ii) Minus the difference between the amount required to be in the dedicated asset account under paragraphs (1) and (2) as of September 11, 2010, and the actual asset value of the dedicated asset account as of September 11, 2010.
(4) The dedicated asset account must equal or exceed the prescribed asset level 120 days before the beginning of the self-insurer’s next fiscal year or by a later date if requested by the applicant and approved by the Bureau.
(5) Prior to issuing a permit under § 125.6(c), the Bureau will require that the asset level of a self-insurer’s dedicated asset account under paragraphs (1) and (2) be based on an adjustment to the self-insurer’s average annual payout of benefits to correct any material underpayment of benefits the Bureau believes is the result of the self-insurer’s failure to pay compensation for which it is liable during the evaluation period.
(e) For a runoff self-insured public employer, the asset level of the dedicated asset account established under subsection (a) is that outlined under subsection (d), except that the minimum funding amount does not apply.
(f) If a self-insured public employer does not possess an investment grade long-term credit or debt rating, the Bureau may require that the asset level of its dedicated asset account established under subsection (a) be greater than that outlined under subsection (b), (c) or (d), in any amount which the Bureau determines will guaranty that the self-insurer will have sufficient funding to meet its claims payments and other obligations and expenses relating to its self-insurance program as they come due over the self-insurer’s next fiscal year.
Authority The provisions of this § 125.10 amended under sections 305(a) and 435(a) of the Workers’ Compensation Act (77 P. S. § § 501 and 991(a)) and section 2205 of The Administrative Code of 1929 (71 P. S. § 565).
Source The provisions of this § 125.10 amended September 10, 2010, effective September 11, 2010, 40 Pa.B. 5147. Immediately preceding text appears at serial page (250132).
Cross References This section cited in 34 Pa. Code § 125.6 (relating to decision on application).
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