803 KAR 30:010. Special fund assessments

Link to law: http://www.lrc.ky.gov/kar/803/030/010.htm
Published: 2015

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      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.)