§1909. Fiduciary accounts and duties








1. 
 
Administrators shall hold in a fiduciary capacity all contributions and premiums
received or collected on behalf of a plan sponsor or insurer, except service fees
owed to the administrator pursuant to the written agreement between the plan sponsor,
insurer, health care service plan or health maintenance organization and the administrator.
These funds may not be used as general operating funds of the administrator. All
contributions and premiums received or collected by the administrator from residents
of this State that the administrator holds more than 30 days or deposits into an account
that is not under the control of the plan sponsor, health care service plan, health
maintenance organization or insurer, must be placed in a special fiduciary account,
designated as an ATF. All resident and quasi-resident licensees required to maintain
an ATF under this section shall maintain the ATF with one or more financial institutions
located within the State and subject to jurisdiction of the courts of this State.
Funds belonging to 2 or more plans may be held in the same ATF, provided the administrator's
records clearly indicate the funds belonging to each plan. Checks drawn on the ATF
must indicate on the face of the checks that the checks are drawn on the administrator's
ATF.


[
1989, c. 846, Pt. D, §2 (NEW);
1989, c. 846, Pt. E, §4 (AFF)
.]








2. 
 
The administrator may make the following disbursements from the ATF:





A. Contributions and premiums due insurers or other persons providing life, accident
and health, or workers' compensation coverage for a plan; [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]











B. Return contributions and premiums to a plan or covered individual; [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]











C. Commissions or administrative fees due to the administrator when earned under a
written agreement; and [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]











D. Transfers into the CASA of the administrator. [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]








[
1989, c. 846, Pt. D, §2 (NEW);
1989, c. 846, Pt. E, §4 (AFF)
.]








3. 
 
For each plan for which an ATF is required, the balance in the ATF must at all times
be the amount deposited plus accrued interest, if any, less authorized disbursements.
If the balance at the financial institution, with respect to the ATF, is less than
the amount deposited plus accrued interest, if any, less authorized disbursements,
the administrator is presumed, for purposes of license revocation or suspension, to
have misappropriated funds and to have acted in a financially irresponsible manner.


[
1989, c. 846, Pt. D, §2 (NEW);
1989, c. 846, Pt. E, §4 (AFF)
.]








4. 
 
Before establishing an ATF that is interest bearing or income producing, the administrator
shall disclose the nature of the account to the plan sponsor, health care service
plan, health maintenance organization or insurer on whose behalf the funds are to
be held. The administrator shall secure written consent and authorization from the
plan sponsor, health care service plan, health maintenance organization or insurer
for the investment of the money and disposition of the interest or earnings. An administrator
may not make any investment that assumes a risk other than the risk that the obligor
might not pay the principal when due. The administrator may not use specialized techniques
or strategies that incur additional risks to generate higher returns or to extend
maturities. Such techniques include, but are not limited to, the use of financial
futures or options, buying on margins and pledging of ATF balances.


[
1989, c. 846, Pt. D, §2 (NEW);
1989, c. 846, Pt. E, §4 (AFF)
.]








5. 
 
Administrators may place ATF funds in interest bearing or income producing investments
and retain the interest or income on the funds, provided the administrator obtains
the prior written authorization of the plan sponsors, health care service plans, health
maintenance organizations or insurers on whose behalf the funds are to be held. In
addition to savings and checking accounts, an administrator may invest in the following:





A. Direct obligations of the United States or government agency securities with maturities
of not more than one year; [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]











B. Certificates of deposit, with a maturity of not more than one year, issued by financial
institutions insured by the Federal Deposit Insurance Corporation (FDIC) or Federal
Savings and Loan Insurance Corporation (FSLIC), provided any such deposit does not
exceed the maximum level of insurance protection provided to certificates of deposit
held by those institutions; [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]











C. Repurchase agreements with financial institutions or government securities dealers
recognized as primary dealers by the Federal Reserve System provided:



(1) The value of the repurchase agreement is collateralized with assets that are
allowable investments for ATF funds;






(2) The collateral has a market value, at the time the repurchase agreement is entered
into, at least equal to the value of the repurchase agreement; and






(3) The repurchase agreement does not exceed 30 days; [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]














D. Commercial paper, provided the commercial paper is rated at least P-1 by Moody's
Investors Service, Inc. or at least A-1 by Standard & Poor's Corporation; or [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]











E. Money market funds, provided the money market fund invests exclusively in assets
that are allowable investments pursuant to paragraphs A to D for ATF funds. [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]








Each investment transaction must be made in the name of the administrator's ATF.
The administrator shall maintain evidence of any such investments. Each investment
transaction must flow through the administrator's ATF.


[
1989, c. 846, Pt. D, §2 (NEW);
1989, c. 846, Pt. E, §4 (AFF)
.]








6. 
 
The administrator shall hold in a fiduciary capacity all money that the administrator
receives to pay claims and claim adjustment expenses. All resident and quasi-resident
licensees shall place all such money for claims and claim adjustment expenses for
residents of this State, whether received from a plan sponsor, health care service
plan, health maintenance organization or insurer or from the administrator's ATF,
in a special fiduciary account in a financial institution located in this State.
The account must be designated a CASA. Funds belonging to 2 or more plans may be
held in the same CASA, provided the administrator's records clearly indicate the funds
belonging to each plan. Checks drawn on the CASA must indicate on the face of the
checks that the checks are drawn on the administrator's CASA.


[
1989, c. 846, Pt. D, §2 (NEW);
1989, c. 846, Pt. E, §4 (AFF)
.]








7. 
 
No deposit may be made into a CASA and no disbursement may be made from a CASA except
for claims and claim adjustment expenses. For each plan for which a CASA is required,
the balance in the CASA must at all times be the amount deposited less claims and
claims adjustment expenses paid. If the CASA balance is less than that amount, the
administrator shall be presumed, for purposes of license revocation or suspension,
to have misappropriated funds and to have acted in a financially irresponsible manner.


[
1989, c. 846, Pt. D, §2 (NEW);
1989, c. 846, Pt. E, §4 (AFF)
.]








8. 
 
Administrators shall maintain detailed books and records that reflect all transactions
involving the receipt and disbursement of:





A. Contributions and premiums received on behalf of a plan sponsor, health care service
plan, health maintenance organization or insurer; and [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]











B. Claims and claim adjustment expenses received and paid on behalf of a plan sponsor,
health care service plan, health maintenance organization or insurer. [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]








[
1989, c. 846, Pt. D, §2 (NEW);
1989, c. 846, Pt. E, §4 (AFF)
.]








9. 
 
The detailed preparation, journalizing and posting of books and records required
by subsection 8 must be maintained on a timely basis and all journal entries for receipts
and disbursements must be supported by evidential matter that must be referenced in
the journal entry so that receipts and disbursements may be traced for verification.
Administrators shall prepare and maintain monthly financial institution account reconciliations
of any ATF and CASA established by the administrator. Reconciliation of accounts
is timely if accomplished not more than 45 days after the end of the month in which
the transaction occurred. The reconciliation must include, at a minimum, the following:





A. The source and amount of any money received and deposited by the administrator,
and the date of receipt and deposit; [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]











B. The date each disbursement was made, the person to whom the disbursement was made
and a written explanation of any difference between the amount disbursed and the amount
billed or authorized; and [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]











C. A description of the disbursement in sufficient detail to identify the source document
substantiating the purpose of the disbursement. [1989, c. 846, Pt. D, §2 (NEW); 1989, c. 846, Pt. E, §4 (AFF).]








[
1989, c. 846, Pt. D, §2 (NEW);
1989, c. 846, Pt. E, §4 (AFF)
.]








10. 
 
Failure to accurately maintain the required books and records in a timely manner
is deemed to be untrustworthy, hazardous or injurious to participants in the plan
or the public and financially irresponsible.


[
1989, c. 846, Pt. D, §2 (NEW);
1989, c. 846, Pt. E, §4 (AFF)
.]





SECTION HISTORY

1989, c. 846, §§D2,E4 (NEW).