803 KAR 30:010. Special fund assessments.
RELATES TO: KRS 131.340, 342.0011,
342.122, 342.1221, 342.1222, 342.1223(2)(g), 342.1231, 342.1223, 342.340,
342.650, 30 U.S.C. 901-945, 33 U.S.C. 901-980
STATUTORY AUTHORITY: KRS 342.1223(3)(f)
NECESSITY, FUNCTION, AND CONFORMITY: KRS
342.1223(3)(f) authorizes the Kentucky Workers' Compensation Funding Commission
to promulgate administrative regulations. This administrative regulation
provides the procedures and forms to be used to report and remit special fund
assessments.
Section 1. Definitions. (1)
"Actual physical receipt by the KWCFC" means:
(a) Actual physical
delivery to the office of the Funding Commission; or
(b) Electronic
filing of the Quarterly Premiums Report, accompanied by:
1. Electronic fund
transfer of an assessment due to the KWCFC account; or
2. Physical
delivery of payment to the office of the Funding Commission.
(2)
"Board" means, unless otherwise specified, the board of directors of
the Kentucky Workers' Compensation Funding Commission.
(3) "Engaged
in severance or processing of coal" is defined by KRS 342.0011(23)(b).
(4) "Insurance
carrier" is defined by KRS 342.0011(22).
(5) "Insurance
company" means a company authorized to do business in the Commonwealth
writing workers' compensation insurance coverage and includes the Employers
Mutual Insurance Authority.
(6) "Insurance
policy", for an insurance company or group self-insurer, is defined by KRS
342.0011(26).
(7)
"KWCFC" or "Funding Commission" means the Kentucky Workers'
Compensation Funding Commission.
(8)
"Premium", for each employer carrying his own risk pursuant to KRS
342.340(1), is defined by KRS 342.0011(28).
(9)
"Premium", for every group of self-insurers, is defined by KRS
342.0011(24).
(10)
"Premium", for insurance companies, is defined by KRS
342.0011(25)(c).
(11) "Premiums
received":
(a) For group
self-insurers, including group self-insurers electing to report premiums and
have special fund assessments computed in the same manner as insurance
companies, means all assessments levied on its members by a group or
contributed to it by the members, including premiums charged off or deferred;
(b) For insurance
companies, is defined by KRS 342.0011(25)(a).
(12) "Return
premiums", for insurance companies, is defined by KRS 342.0011(25)(d).
(13)
"Self-insurance year", for a group self-insurer, is defined by KRS
342.0011(27).
(14)
"Severance or processing of coal" is defined by KRS 342.0011(23)(a).
(15) "SIC code"
is defined by KRS 342.0011(29).
(16) "Special
fund assessment" means the assessment established in KRS 342.122.
Section 2. Special Fund Assessment. (1)
Special fund assessment shall be imposed upon all premiums, including any
premiums for coverage under the Black Lung Compensation Insurance Fund, 30
U.S.C. Sec., 901-945, for an insurance policy providing Kentucky workers' compensation
coverage, except special fund assessments shall not be imposed upon premiums
for the following:
(a) Excess, reinsurance, or coverage
under the Black Lung Compensation Insurance Fund, 30 U.S.C. Sec. 901-945, for
group or individual self-insurers;
(b) Contracts between insurance carriers
and reinsurers;
(c) Longshore and Harbor Workers'
Compensation Act, 33 U.S.C. Sec. 901-980 coverage; and
(d) Coverage solely for persons for whom
a rule of liability for injury or death is provided by the laws of the United
States.
(2) For an insurance policy with
provisions for deductibles effective on or after January 1, 1995, the premium
upon which a special fund assessment is imposed for insurance companies shall
not include schedule rating modifications, debits, or credits.
(3) Insurance companies shall report and
pay assessments every calendar quarter on premiums received for the quarter reported
at the rate in effect on the effective date of the policy.
(4)(a) Insurance companies shall remit
special fund assessments or take credit for returned special fund assessments
on premiums received or return premiums at the rate in effect on the effective
date of the policy, regardless of the date the premium is actually received or
returned.
(b) Additional premiums received for
policies with effective dates prior to November 1, 1987 shall be assessed at
the rates of 23.30 percent for all employers and 40.00 percent additional for
employers engaged in severance or processing of coal.
(5)(a) Group self-insurers shall report
and pay special fund assessments every calendar quarter on premiums received or
return premiums at the rate in effect on the effective date of the group
self-insurance year for which the premium was received or returned, regardless
of the date the premium is actually levied, received, or returned.
(b) A premium shall include any member
assessments or contributions used to purchase excess insurance, reinsurance, or
Black Lung coverage.
(6) Special fund assessment shall be
imposed upon additional premiums received by group self-insurers for
self-insurance years effective prior to October 26, 1987 at the rates of 23.30
percent for all employers and 40.00 percent additional for employers engaged in
severance or processing of coal.
(7) Group self-insurers shall take credit
for the return of special fund assessments at the rate in effect on the
effective date of the group self-insurance year for which premiums are
returned.
(8) Group self-insurers may elect to
report their premiums and have their special fund assessments computed in the
same manner as insurance companies, in accordance with KRS 342.122(4).
(a) Election by an existing group
self-insurer to report in the same manner as an insurance company shall be made
in writing to the Kentucky Workers' Compensation Funding Commission.
(b) Election by newly formed group
self-insurers to report in the same manner as an insurance company shall be
made in writing to the Kentucky Workers' Compensation Funding Commission within
sixty (60) days following the effective date of the group's initial
self-insurance year.
(c) Failure of a group self-insurer to
elect in writing to report in the same manner as an insurance company in
accordance with paragraphs (a) and (b) of this subsection shall constitute an
election to report and pay special fund assessments as a group self-insurer in
accordance with subsections (5), (6), and (7) of this section.
(d) The election made in accordance with
paragraph (a), (b), or (c) of this subsection may not be rescinded for at least
ten (10) years,, in accordance with the provisions of KRS 342.122(4).
(e) Group self-insurers electing to
report premiums and have special fund assessments computed in the same manner
as insurance companies shall report and pay assessments every calendar quarter
on premiums received for the quarter reported at the rate in effect on the
annual effective date of the individual member's policy year.
(f)1. Group self-insurers electing to
report premiums and have special fund assessments computed in the same manner
as insurance companies shall remit special fund assessments or take credit for
returned special fund assessments on premiums received or return premiums at
the rate in effect on the effective date of the individual member's policy
year, regardless of the date the premium is actually received or returned.
2. Additional premiums received for
policy years with effective dates prior to November 1, 1987 shall be assessed
at the rates of 23.30 percent for all employers and 40.00 percent additional
for employers engaged in severance or processing of coal.
(9)(a) Employers self-insuring Kentucky
workers' compensation liability under the provisions of KRS 342.340 shall pay
special fund assessments on the premium calculated by the executive director of
the Office of Workers' Claims in accordance with KRS 342.0011(28).
(b) One-fourth (1/4) of the total annual
calculated premium shall be reported and the special fund assessments shall be
paid to the KWCFC each calendar quarter.
(10) The premium calculated by the Executive
Director of the Office of Workers' Claims for individual self-insurers shall be
assessed at the rates in effect on January 1 of the calendar year for which the
premium is calculated.
(11)(a) Special fund assessments shall be
paid quarterly, in accordance with KRS 342.122(2).
(b) If the assessment due date falls on a
weekend (Saturday or Sunday), assessments due and payable, if not postmarked in
accordance with KRS 342.122(2), shall be sent to the KWCFC in advance so as to
be received by the KWCFC no later than close of business, on the first business
day immediately following the weekend due date.
(12)(a) If an insurance carrier collects
from an insured a special fund assessment at a rate in excess of that established
by KRS 342.122 and this administrative regulation, or collects for any reason
from an insured an amount in excess of that established by KRS 342.122 and this
administrative regulation, the insurance carrier shall refund the excess to the
insured.
(b) If, after good faith efforts, the
excess cannot be returned to the insured, the excess shall be remitted to the KWCFC.
(c) An insurance carrier shall not retain
special fund assessments in excess of those established by KRS 342.122 and this
administrative regulation.
Section 3. Penalty and Interest. The
KWCFC Board or its designee may waive part or all of the penalty, but not the
interest, in accordance with KRS 342.1221.
Section 4. Refunds. (1) Insurance carriers
may take credit for the return of special fund assessments on their quarterly
premiums reports, if:
(a) The credit is taken by the insurance
carrier within four (4) years of the date the insurance carrier returns the
assessment to the employer; and
(b) The assessment is returned to the
employer in addition to the returned premium.
(2)(a) Taxpayers may submit a claim in
writing for a refund of special fund assessments not taken as a credit on the
quarterly premiums report.
(b) The taxpayer shall submit with the
claim all documents required to support the claim.
(3) All refunds, including those made in
accordance with subsection (2) of this section, shall be subject to audit by
the Funding Commission.
Section 5. Audits; General. (1) In
accordance with KRS 342.1223(2)(g), the Kentucky Workers’ Compensation Funding
Commission shall conduct audits independently or in cooperation with the
Department of Labor or the Finance and Administration Cabinet of all entities
subject to the special fund assessments established by KRS 342.122.
(2)(a) Until the initial audit has been
completed, all records supporting reported premiums and special fund
assessments, including refunds and credits, shall be maintained by the taxpayer.
(b) After completion of the initial audit,
supporting documentation and records shall be maintained for five (5) years
from the date of the last Funding Commission audit or (5) years from the date
that the premium and assessment was reported or refund or credit was taken,
whichever is later.
Section 6. Audits; Insurance Companies.
(1) Upon request, insurance companies shall provide the Funding Commission with
data files containing complete policy level detail information for every policy
containing workers' compensation coverage in Kentucky with transactions during
the audit period, including:
(a) Writing company's indicator;
(b) Policy number;
(c) Insured's name;
(d) Transaction code;
(e) Accounting date (YY/MM/DD);
(f) Policy effective date (YY/MM/DD);
(g) Invoice date (YY/MM/DD);
(h) Premium;
(i) Special fund assessment; and
(j) Total (premium and special fund
assessment).
(2) Insurance companies shall make
available to the Funding Commission's auditors the following items:
(a) Copies of quarterly premiums reports
for audit period with backup documentation;
(b) All documentation required to
reconcile the sum of each four (4) calendar quarters to the respective Page 14
totals on the Annual Reports to the Kentucky Office of Insurance;
(c) A listing of Kentucky policies containing
written premium written off as a bad debt;
(d) A listing of policies written by an
association for which the insurance company is providing Kentucky workers'
compensation coverage;
(e) A complete list of sample policies
requested by Funding Commission;
(f) A complete list of deductible
policies written nationwide. This list shall contain at a minimum the policy
number, insured's name, and policy effective date;
(g) A complete listing of deductible
policies written with Kentucky coverage whose policy effective date is equal to
or later than 5/6/93 but not later than 12/31/93. This list shall contain
either Kentucky calculated premium, deductible credit, and net deductible
premium, or a list of Kentucky claims reimbursed under the deductible plan along
with the associated administrative costs;
(h) A complete listing of deductible
policies written with Kentucky coverage with policy effective dates on or after
1/1/94. This list shall contain Kentucky's standard premium, deductible credit,
net deductible premium, any schedule rating credit, as well as all other
identifying information allowing a quarterly recalculation and reconciliation;
and
(i) All other information necessary to
support reported premiums and special fund assessments.
(3) For insurance policies effective
prior to October 26, 1987, the Funding Commission shall be furnished with:
(a) A schedule identifying the assessment
rates applied to these policies;
(b) The dates upon which these rates were
first entered into the policy or premium management system;
(c) The dates upon which these rates
became active in the policy or premium management system; and
(d) A copy of the Kentucky Workers'
Compensation Tax and Assessment Excess Collections Report as originally filed
with KWCFC.
(4) The Funding Commission shall utilize one
(1) or more of the following procedures in the completion of audits:
(a) Detailed examination of records by
policy;
(b) Use of audit sampling techniques;
(c) Verification and reconciliation to
NAIC reports; and
(d) Other procedures necessary because of
the unique nature of the entity being audited.
(5) Upon the completion of an audit the
Funding Commission shall not reaudit a period unless:
(a) The Funding Commission receives
information giving rise to an adjustment of the written premium previously
reported to NAIC upon which the Funding Commission had relied; or
(b) The Funding Commission receives
information indicating the presence of fraud or other similar circumstance.
Section 7. Audits; Group Self-insurers. (1)
Upon request, group self-insurers shall provide the Funding Commission with
data files containing complete policy or member level detail information for
all transactions during the audit period, including:
(a) Group self-insurer's indicator;
(b) Policy or member number;
(c) Insured's name;
(d) Transaction code;
(e) Accounting date (YY/MM/DD);
(f) Member's effective date (YY/MM/DD);
(g) Effective date of self-insurance
year;
(h) Invoice date (YY/MM/DD);
(i) Premium;
(j) Special fund assessment; and
(k) Total (premium and assessment).
(2) Group self-insurers shall make
available to the Funding Commission's auditors the following items:
(a) Copies of quarterly premiums reports
for each audit period with backup documentation;
(b) All documentation required to
reconcile the sum of each four (4) calendar quarters to reports filed with the Office
of Workers' Claims;
(c) A listing of members to whom coverage
was extended for which premium has been written off as a bad debt, along with
an explanation of how these bad debts were handled in the reports to the Office
of Workers' Claims;
(d) A complete list of sample policies or
agreements requested by the Funding Commission; and
(e) All other documents necessary to
support reported premiums and assessments.
(3) For insurance years effective prior
to October 26, 1987, the Funding Commission shall be furnished:
(a) A schedule identifying the assessment
rates applied to these self-insurance years;
(b) The dates upon which these rates were
first entered into the policy or premium management system; and
(c) The dates upon which these rates
became active in the policy or premium management system.
(4) The Funding Commission shall utilize one
(1) or more of the following procedures in the completion of audits:
(a) Detailed examination of records by
policy or members' account;
(b) Detailed examination of members'
agreements;
(c) Use of audit sampling techniques;
(d) Verification and reconciliation to Office
of Workers' Claims' reports;
(e) Other procedures necessary because of
the unique nature of the entity being audited.
(5) Upon the completion of an audit the
Funding Commission shall not reaudit a period unless:
(a) The Funding Commission receives
information giving rise to an adjustment of the written premium previously
reported to the Office of Workers' Claims upon which the Funding Commission had
relied; or
(b) The Funding Commission receives
information indicating the presence of fraud or other similar circumstance.
Section 8. Audits; Individual
Self-insurers. (1) Upon request, self-insurers shall provide the Funding
Commission with the following:
(a) Loss experience reports;
(b) Payroll records;
(c) Kentucky UI-3;
(d) Federal Form 941 "Employer’s
Quarterly Federal Tax Return";
(e) Federal Form 940 "Employer’s
Annual Federal Unemployment Tax Return"; and
(f) Other information necessary because
of the unique nature of the entity being audited.
(2) The Funding Commission shall utilize one
(1) or more of the following procedures in completion of audits:
(a) Detailed examination of all required
records;
(b) Use of audit sampling techniques; and
(c) Other procedures necessary because of
the unique nature of the entity being audited.
Section 9. Audits; Protest and
Resolution. (1) The Funding Commission shall send to the taxpayer a notice of
any assessment assessed by the Funding Commission.
(a) The assessment shall be final if not
protested in writing to the Funding Commission within thirty (30) days from the
date of notice.
(b) The protest shall be accompanied by a
supporting statement setting forth the grounds upon which the protest is made.
(c)1. Upon written request, the Funding
Commission shall extend the time for filing the supporting statement if it is
determined that the delay is necessary and unavoidable.
2. The refusal of an extension may be
reviewed in the same manner as a protested assessment.
(2) After a timely protest has been
filed, the taxpayer may request a conference with the Funding Commission staff.
(a) The request shall be granted in
writing stating the date and time set for the conference.
(b) The taxpayer may appear in person or
by representative.
(c) Further conferences may be held by
mutual agreement.
(3) For those issues not resolved during
the conferences described in subsection (2) of this section, the taxpayer may
request a conference with the Funding Commission’s Board of Directors.
(a) The request shall be granted in
writing stating the date and time set for the conference.
(b) The taxpayer may appear in person or
by representative.
(4) After considering the taxpayer’s
protest, including any matters presented at the final conference, the Funding
Commission shall issue a final ruling on any matter still in controversy, which
shall be mailed to the taxpayer. The ruling shall state:
(a) That it is the final ruling of the
Funding Commission and shall generally state the issues in controversy;
(b) The Funding Commission’s position;
and
(c) The procedure for appeal to the
Kentucky Board of Tax Appeals, in accordance with KRS 131.340 and 802 KAR 1:010.
(5)(a) The taxpayer may request in
writing a final ruling any time after filing a timely protest and supporting
statement.
(b) If a final ruling is requested, the
Funding Commission shall issue the ruling within thirty (30) days from the date
the request is received by the Funding Commission.
(6) After a final ruling has been issued,
the taxpayer may appeal to the Kentucky Board of Tax Appeals pursuant to the
provisions of KRS 131.340.
Section 10. Reports. (1) Insurance
companies, group self-insurers and individual self-insurers shall file a
Quarterly Premiums Report accompanied by the assessment due and payable for
each calendar quarter.
(a) The quarterly premiums report and
assessment due and payable shall be received in the office of the KWCFC no
later than thirty (30) days following the end of the calendar quarter.
(b) Receipt of the Quarterly Premiums
Report and assessment due and payable shall be considered timely through actual
physical receipt by the KWCFC or by postmark of the U.S. Postal Service.
(2) Insurance companies shall file Form
KWCFC-01 (Quarterly Premiums Report).
(3) Employers carrying their own risk
shall file Form KWCFC-02 (Quarterly Premiums Report).
(4) Group self-insurers shall file Form
KWCFC-03 (Quarterly Premiums Report).
(5)(a) Every insurance company providing
workers compensation insurance in Kentucky shall submit to the KWCFC an Annual
Audit and Collections Report for each calendar year no later than April 30th
following the end of the calendar year.
(b) These reports shall be submitted to
the KWCFC on electronic diskettes and shall contain the information in the file
content format in accordance with the Annual Audit and Collections Report instructions
incorporated by reference in Form KWCFC-05 (Annual Audit and Collections
Report, Data Reporting Instructions Insurance Companies).
(6)(a) Every group self-insurer providing
workers compensation insurance in Kentucky shall submit to the KWCFC an Annual
Audit and Collections Report for each calendar year no later than April 30th
following the end of the calendar year.
(b) These reports shall be submitted to
the KWCFC and shall contain the information in the file content format in
accordance with the Annual Audit and Collections Report instruction
incorporated by reference in Form KWCFC-06 (Annual Audit and Collections
Report, Data Reporting Instructions Group Self Insurer).
(7)(a) Every individual self-insurer
providing workers compensation insurance in Kentucky shall submit to the KWCFC
an Annual Audit and Collections Report for each calendar year no later than
April 30th following the end of the calendar year.
(b) These reports shall be submitted to
the KWCFC and shall contain the information in the file content format in accordance
with the Annual Audit and Collections Report instructions incorporated by reference
in Form KWCFC-07 (Annual Audit and Collections Report, Data Reporting
Instructions Individual Self Insurer).
(8) An insurance company or group
self-insurer that does not write, receive, or return any Kentucky workers'
compensation insurance premium during the calendar year shall complete and
return Form KWCFC-04 (Nonwriter Statement) to the Kentucky Workers' Compensation
Funding Commission, 42 Millcreek Park, P.O. Box 1220, Frankfort, Kentucky 40602
no later than April 30th following the end of the calendar year.
Section 11. Incorporation by Reference. (1)
The following material is incorporated by reference:
(a) "KWCFC-01
(Quarterly Premiums Report), (03/2010)";
(b) "KWCFC-02
(Quarterly Premiums Report), (03/2010)";
(c) "KWCFC-03
(Quarterly Premiums Report), (03/2010)";
(d) "KWCFC-04
(Nonwriter Statement), (03/2010)";
(e) "KWCFC-05
(Annual Audit and Collections Report, Data Reporting Instructions Insurance Companies),
(03/2010)";
(f) "KWCFC-06
(Annual Audit and Collections Report, Data Reporting Instructions Group Self
Insurer), (03/2010)"; and
(g) "KWCFC-07
(Annual Audit and Collections Report, Individual Self-Insurer),
(03/2010)".
(2) This material
may be inspected, copied, or obtained, subject to applicable copyright law, at
the Kentucky Workers’ Compensation Funding Commission, #42 Millcreek Park, P.O.
Box 1128, Frankfort, Kentucky 40602-1128, Monday through Friday, 8 a.m. to 4:30
p.m. This material is also available at the Kentucky Workers Compensation
Funding Commission Web site http://www.kwcfc.ky.gov/. (22 Ky.R. 826; Am.
1308; eff. 12-19-95; TAm eff. 8-9-2007; 36 Ky.R. 2238; 37 Ky.R. 61; eff.
8-6-2010.)
