OAR 436-050-0185: Qualifications for Deposit Exemption for Self-Insured Cities, Counties, School Districts, and Qualified Self-Insured Employer Groups, Application Procedures, Conditions and Requirements, Revocation and Requalification

(1) Requirements to qualify for deposit exemption. A self-insured city, county, school district, or self-insured employer group that is a municipal or public corporation under ORS 297.405 may apply to be exempt from the security deposit requirements of ORS 656.407(2), subject to the following: (a) The city, county, school district, or qualified self-insured employer group must have been in compliance with ORS 656.407(2) and OAR 436-050-0180 as an independently self-insured employer or self-insured employer group for the three consecutive years immediately before applying for the exemption. For the purposes of this subsection, “independently self-insured employer” does not include an employer member of a self-insured employer group; and (b) The city, county, school district, or qualified self-insured employer group must have in effect a workers’ compensation loss reserve account that is actuarially sound and that is adequately funded, as determined by the annual audit under ORS 297.405 to 297.740, to pay all compensation to injured workers and amounts due the director under ORS chapter 656. The workers’ compensation loss reserve account must also be dedicated to, and expended only for, payment of compensation and amounts due the director by the city, county, school district, or qualified self-insured employer group under ORS chapter 656. (2) Application for security deposit exemption. To apply for exemption from ORS 656.407(2), the city, county, school district, or qualified self-insured employer group must submit a written application to the director no later than 45 days before the desired effective date. (a) The application must include the following supporting documentation: (A) A copy of the city’s, county’s, school district's, or qualified self-insured employer group’s most recent annual audit as filed with the Secretary of State under ORS 297.405 to 297.740 that identifies the funded amount in the workers’ compensation loss reserve account, if this information was not included in the most recent financial report filed by the city, county, school district, or qualified self-insured employer group under OAR 436-050-0175(1); (B) A copy of the city’s, county’s, school district's, or qualified self-insured employer group’s approved budget documents for internal service funds as of the employer's current fiscal year. The documents must state the budgeted amount for the workers’ compensation loss reserve account; (C) A copy of a resolution or ordinance passed by the city’s, county’s, school district's, or qualified self-insured employer group’s governing body that establishes an actuarially sound and adequately funded workers’ compensation loss reserve account. The resolution or ordinance must provide that the loss reserve account is dedicated to, and must only be expended for, the payment of compensation and amounts due the director under ORS chapter 656. The resolution or ordinance must also provide that the director has first lien and priority rights to the full amount of the workers’ compensation loss reserve account required to pay the present discounted value of all present and future claims under ORS chapter 656; (D) A statement that includes: (i) The amount of the city's, county's, school district's, or qualified self-insured employer group's current reserves for present and future liabilities; (ii) The funded amount in its workers’ compensation loss reserve account; (iii) The procedures, methods, and criteria used in the process of determining the funded amount its workers’ compensation loss reserve account must maintain, including procedures for determining the amount for injuries incurred but not reported (IBNR); and (iv) The city’s, county’s, school district’s, or qualified self-insured employer group’s certification that its workers’ compensation loss reserve account is actuarially sound and adequately funded. (E) Upon the director's request, an actuarial study that demonstrates the city's, county's, school district's, or qualified self-insured employer group's workers' compensation loss reserve account is actuarially sound and adequately funded. The actuarial study must include an IBNR estimate. (b) Within 45 days of receipt of all application materials required under this section, the director will review the application and supporting documentation and notify the city, county, school district, or qualified self-insured employer group that the request for exemption is approved or denied. (A) If denied, the notice will provide the reasons for the denial, any requirements for reconsideration, and the right to administrative review as provided by OAR 436-050-0008. (B) If approved, the notice will include: (i) The effective date of exemption; (ii) Authorization for cancellation of any surety bond or ISLOC held as security under ORS 656.407(2) and OAR 436-050-0180; and (iii) Procedures for release of any government securities or time deposits held as security under ORS 656.407(2) and OAR 436-050-0180. (3) Inadequately funded loss reserve accounts. If the director has probable cause to believe a city's, county's, school district's, or qualified self-insured employer group's workers’ compensation loss reserve account is inadequately funded, the director may order the city, county, school district, or qualified self-insured employer group to increase the amount of the account and to provide documentation of the increase. The city, county, school district, or qualified self-insured employer group must comply within 30 days of the director’s order. Probable cause to believe a workers’ compensation loss reserve account is not actuarially sound includes, but is not limited to : (a) T he annual audited financial statement under ORS 297.405 to 297.740 not containing a statement by the auditor that the workers’ compensation loss reserve account is adequately funded, or containing a disclaimer regarding the auditor’s qualifications or ability to determine adequacy of the loss reserve account ; or (b) For cities, counties, school districts, or qualified self-insured employer groups required by the director to conduct an actuarial study under OAR 436-050-0175(3)(d) or (2)(a)(E) of this rule, the actuarial study not containing a statement by the actuary that the loss reserve account is actuarially sound, or containing a disclaimer regarding the actuary’s qualifications or ability to determine the adequacy of the reserves for current or future liabilities. (4) Cancellation of self-insurance certification or loss reserve. A city, county, school district, or qualified self-insured employer group that has been exempted from ORS 656.407(2) and desires to cancel its self-insurance certification or elects to discontinue maintaining an actuarially sound and adequately funded workers’ compensation loss reserve account must: (a) Submit a written request to the director at least 60 days before: (A) The desired cancellation date of the self-insured certification; or (B) The effective date of discontinuation of the qualifying workers’ compensation loss reserve account. (b) If the city, county, school district, or qualified self-insured employer group desires to cancel its self-insurance certification: (A) The request under section (a) must comply with OAR 436-050-0200; and (B) Before the effective date of cancellation the city, county, school district, or qualified self-insured employer group must provide a security deposit, as required by the director, in an amount determined under OAR 436-050-0180 and ORS 656.443. (c) If the city, county, school district, or qualified self-insured employer group elects to discontinue maintaining an actuarially sound and adequately funded workers’ compensation loss reserve account: (A) Before the effective date of discontinuation of the qualifying workers’ compensation loss reserve account, the city, county, school district, or qualified self-insured employer group must provide a security deposit as required by the director under ORS 656.407(2) and OAR 436-050-0180; and (B) Failure to provide the required security deposit as required under paragraph (A) will result in revocation of the city’s, county’s, school district's, or qualified self-insured employer group’s self-insurance certification as of that date.