Subchapter A. INDIVIDUAL SELF-INSURANCE

§ 125.1. Purpose.

 The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:

   Act—The Workers’ Compensation Act (77 P. S. § §  1—1038.2).

   Actuary—A member in good standing of the Casualty Actuarial Society or a member in good standing of the American Academy of Actuaries.

   Affiliates—Employers which are closely related through common ownership or control.

   Aggregate excess insurance—Insurance which provides that the excess insurer pays on behalf of or reimburses a self-insurer for its payment of benefits on claims incurred during a policy period in excess of the retention amount to the excess insurer’s limit of liability.

   Applicant—An employer requesting permission to initiate or to renew self-insurance, an employer requesting permission for it and its affiliates or subsidiaries to initiate or to renew self-insurance, or a parent company requesting permission for its subsidiaries to initiate or to renew self-insurance.

   Bureau—The Bureau of Workers’ Compensation of the Department.

   Cash flow protection amount—The maximum amount of benefits a self-insurer pays over a 2-year period on an occurrence without reimbursement from an excess insurer under a specific excess insurance policy with a per year per occurrence cash protection plan.

   Claims service company—An individual, corporation, partnership or association engaged in the business of servicing a self-insurer’s claims, including the adjusting and handling of claims, the payment of benefits and the provision of required reports.

   Commonwealth—

     (i)   The government of the Commonwealth, including the following:

       (A)   The courts and other officers or agencies of the unified judicial system.

       (B)   The General Assembly, and its officers and agencies.

       (C)   The Governor, and the departments, boards, commissions, authorities and officers and agencies of the Commonwealth.

     (ii)   The term does not include any instrumentalities of the Commonwealth or political subdivisions.

   Department—The Department of Labor and Industry of the Commonwealth.

   Employer—An employer as defined in section 103 of the act (77 P. S. §  21) or under section 103 of the Occupational Disease Act (77 P. S. §  1203), or both.

   Excess insurer—An insurance company authorized to transact the class of insurance listed in section 202(c)(14) of The Insurance Company Law of 1921 (40 P. S. §  382(c)(14)).

   Instrumentality of the Commonwealth—An employer, politic and corporate, exercising an essential government function. The term does not include the Commonwealth or any political subdivisions.

   Loss development—The tendency of the cost of a group of claims to increase as they mature.

   Occupational Disease Act—The Pennsylvania Occupational Disease Act (77 P. S. § §  1201—1603).

   Parent company—A corporation which owns a majority of the voting stock of an employer or controls a majority of the employer’s board of directors appointments if the employer has no voting stock.

   Permit—The document issued by the Bureau to an employer which authorizes the employer to operate as a self-insurer.

   Political subdivision—A county, city, borough, incorporated town, township, school district, vocational school district and county institution district, municipal authority, or other entity created by a political subdivision under law.

   Private employer—An employer who is not a public employer as defined in this section.

   Public employer—The Commonwealth, an instrumentality of the Commonwealth or a political subdivision.

   Quick assets—The sum of an applicant’s cash, cash equivalents, current receivables and marketable securities.

   Retention amount—The maximum amount of benefits a self-insurer pays without reimbursement from the excess insurer under an aggregate excess insurance policy or under a specific excess insurance policy which does not include an annual cash flow protection plan. The term also includes the maximum amount of benefits a self-insurer pays on each occurrence without reimbursement from the excess insurer, if any, under a specific excess insurance policy which includes an annual cash flow protection plan.

   Runoff self-insurer—An employer that had been a self-insurer but no longer maintains a current permit.

   Security—Surety bonds, letters of credit or cash or negotiable government securities held in trust to be used for the payment of a self-insurer’s workers’ compensation liability upon order of the Bureau if the self-insurer fails to pay its liability due to its financial inability or due to the self-insurer filing for bankruptcy or being declared bankrupt or insolvent.

   Security constant—The Statewide average weekly wage multiplied by 300.

   Self-insurance—The privilege granted to an employer which has been exempted by the Bureau from insuring its liability under section 305 of the act (77 P. S. §  501) and section 305 of the Occupational Disease Act (77 P. S. §  1405).

   Self-insurer—An employer which has been granted the privilege to self-insure its liability and to maintain direct responsibility for the payment of this liability under the act and the Occupational Disease Act. The term includes a parent company or affiliate which has assumed a subsidiary’s or an affiliate’s liability upon the termination of the parent-subsidiary or affiliate relationship.

   Specific excess insurance—Insurance which provides that the excess insurer pays on behalf of or reimburses a self-insurer for its payment of benefits on each occurrence in excess of the retention amount to the excess insurer’s limit of liability.

   Statewide average weekly wage—The amount calculated and reported by the Bureau under section 105.1 of the act (77 P. S. §  25.1).

   Subsidiary—An employer whose voting stock or board of directors appointments are controlled by a parent company.

 (a)  An applicant shall file an application on a form prescribed by the Bureau. Questions on the application shall be answered thoroughly and completely with the most recent information available. A rider may be attached if more space is necessary. The application shall be signed by the applicant, or if a corporation, an officer of the corporation, and attested to as set forth on the application. Attached riders and applicable forms enclosed with the application shall be verified to in the sworn affidavit requested on the application.

 (b)  Initial applications shall be filed with the Bureau no later than 3 months prior to the requested effective date of self-insurance. Renewal applications shall be filed with the Bureau no later than 2 months prior to the expiration of the current permit.

 (c)  With the application, the applicant shall include:

   (1)  The nonrefundable statutory fee in the amount of $500 for initial applicants or $100 for renewal applicants required by section 305 of the act (77 P. S. §  501), payable to the ‘‘Commonwealth of Pennsylvania.’’ A statutory fee in the amount of $500 for initial applicants or $100 for renewal applicants is required for each affiliate or subsidiary included under a consolidated application under §  125.4 (relating to application for affiliates and subsidiaries).

   (2)  Its Security and Exchange Commission (SEC) Form 10-K for the last complete fiscal year, if applicable. The SEC Form 10-K does not serve as a substitute for the full completion of the application form.

   (3)  Its latest audit report issued by a licensed certified public accountant or accounting firm. The report shall cover the last complete fiscal-year period immediately prior to the date of application. If the most current audited period precedes the application date by more than 6 months, the applicant’s latest SEC Form 10-Q or unaudited interim financial statements shall be submitted. The audit report shall meet the following criteria:

     (i)   It shall include financial statements which are presented in conformance with applicable generally accepted accounting principles as promulgated by the Financial Accounting Standards Board or the Government Accounting Standards Board or with international accounting standards promulgated by the International Accounting Standards Board.

     (ii)   It shall state that the audit meets the reporting requirements defined either in the applicable generally accepted auditing standards promulgated by the AICPA or the applicable generally accepted governmental auditing standards promulgated by the Comptroller General of the United States in ‘‘Government Auditing Standards,’’ referred to as the Yellow Book. An unqualified or qualified opinion shall be stated on the most recent audited financial statements.

   (4)  Audit reports covering the applicant’s second and third most recent complete fiscal-year periods prior to the date of the application, if an initial application. If audit reports covering those periods are not available, financial statements reviewed by a certified public accountant in accordance with standards established by the AICPA covering the second and third most recent complete fiscal year periods will be accepted.

   (5)  A report of the applicant’s paid and incurred workers’ compensation loss experience in this Commonwealth under each of the 3 complete policy years prior to the application, if an initial application. Affiliates’ paid and incurred workers’ compensation loss experience shall be submitted if applicable. The loss information for each policy year shall be valued within 3 months prior to the date of the submission of the application.

   (6)  A report on a form prescribed by the Bureau stating the costs of claims incurred by the applicant by annual periods and projecting its outstanding liability under the act and the Occupational Disease Act, if a renewal application. Applicants are encouraged, but not required, to have their projection of outstanding liability prepared by an actuary.

   (7)  A report on a form prescribed by the Bureau summarizing the existence of the accident and illness prevention program required under section 1001(b) of the act (77 P. S. §  1038.1) and regulations promulgated thereunder, if a renewal applicant.

   (8)  At the direction of the Bureau, an applicant’s annual summaries of occupational injuries and illnesses, OSHA No. 200, if the applicant is required to keep Occupational Safety and Health Administration records.

 (d)  The applicant shall provide additional data and information that the Bureau deems pertinent to its review of the application based on the factors enumerated under §  125.6(a) (relating to decision on application). The applicant shall provide the data and information within the time prescribed by the Bureau, which will be reasonable based on the extent and availability of the data and information required.

 (e)  The Bureau will not begin its review of the application until the application and the required supporting materials as outlined in this section have been submitted.

 (f)  An initial applicant’s requested self-insurance effective date is subject to the approval of the Bureau. An initial applicant which fails to insure its liability pending review of its application will be subject to prosecution under the act and the Occupational Disease Act.

   The provisions of this §  125.3 amended October 23, 1998, effective October 24, 1998, apply to applicants, self-insurers, runoff self-insurers, group self-insurance funds and runoff funds, 28 Pa.B. 5459. Immediately preceding text appears at serial pages (201140) to (201141).

 (a)  An affiliate or subsidiary may be included under an application submitted by another affiliate or its parent company if the parent company or affiliate is incorporated under the laws of a state of the United States. The related entities will be included under one consolidated permit if the application is approved. A request shall be made on a form prescribed by the Bureau to add or delete an affiliate or a subsidiary to or from a consolidated permit after its issuance.

 (b)  An applicant shall provide a written agreement adopted by its board of directors on a form prescribed by the Bureau which states that the applicant guarantees the payment of all claims incurred by the affiliates or subsidiaries. The applicant shall further assume liability for the payment of an affiliate’s or subsidiary’s claims incurred during its period of self-insurance upon termination of the affiliate or parent-subsidiary relationship unless the applicant is relieved of this liability by the Bureau. In determining whether to relieve an applicant of a subsidiary’s or affiliate’s liability, the Bureau will consider, among other things, the financial ability of the new owner of the subsidiary or affiliate to pay the liabilities, the new owner’s credit worthiness and the adequacy of security held by the Bureau covering the liability.

 (c)  The guarantor may not terminate the agreement under any circumstances without first giving the Bureau and the affected affiliate or subsidiary 45 days written notice. The affiliate’s or subsidiary’s self-insurance status automatically terminates upon expiration of the 45-day notice period.

 (d)  If an affiliate or subsidiary not included under a consolidated application as outlined in subsection (a) wishes to self-insure, it shall submit an application in its own name and provide its own audit reports in the manner indicated in §  125.3 (relating to application). The Bureau may require the parent company to furnish appropriate financial information within a reasonable time according to the extent and nature of the requested information.

 (a)  An initial applicant must have been in business for at least 3 consecutive years prior to application.

 (b)  A private employer applicant shall demonstrate that 10% of its quick assets or 20% of its cash and cash equivalents at the end of 2 of the last 3 fiscal-year periods exceed a proposed cash flow protection amount or the proposed retention amount of its aggregate excess or specific excess insurance, whichever is less.

 (c)  A public employer applicant shall demonstrate that 10% of its general fund quick assets at the end of 2 of the last 3 fiscal-year periods exceed a proposed cash flow protection amount or the proposed retention amount of its aggregate excess or specific excess insurance, whichever is less.

 (d)  Subsections (b) and (c) do not apply to applicants which are not required to obtain specific excess insurance under §  125.11 (relating to specific excess insurance and aggregate excess insurance) nor to applicants which are self-insured prior to October 14, 1995.

 (a)  The application of an applicant which meets the requirements of §  125.5 (relating to minimum requirements) will be approved if the Bureau determines that the applicant has demonstrated, with reasonable certainty, the ability to meet all obligations under the act and the Occupational Disease Act. The Bureau will include the following factors in assessing an applicant’s ability to meet those obligations:

   (1)  The audit opinion required under §  125.3(c)(3) (relating to application).

   (2)  The length of time that the applicant has been doing business under its present corporate identity.

   (3)  The applicant’s overall solvency, identified as its ability to meet its financial obligations as they come due.

   (4)  The applicant’s organizational structure and management background.

   (5)  The nature of the applicant’s operations and its industry.

   (6)  Financial analysis appropriate for the particular applicant, including for example, industry ratio and cash flow analyses.

   (7)  The applicant’s debt ratings from National financial rating agencies, if any.

   (8)  The applicant’s workers’ compensation loss history and insurance history.

   (9)  The applicant’s potential financial workers’ compensation obligations, including average expected claims and maximum possible loss as limited by the excess insurance coverage obtained by the applicant, if any.

   (10)  The applicant’s claims administration history and compliance with the act, the Occupational Disease Act and this part.

   (11)  The existence and adequacy of the applicant’s accident and illness prevention program required under section 1001(b) of the act (77 P. S. §  1038.1(b)) and regulations thereunder.

 (b)  If the Bureau’s assessment under subsection (a) is that the applicant can meet its obligations, it will send to the applicant a preliminary approval notice of the application and a list of conditions as set forth under subsection (d) that shall be met before the applicant will be issued a permit. The Bureau may issue a permit to a renewal applicant subject to the renewal applicant complying with the conditions set forth by the Bureau.

 (c)  An applicant has 60 days from the receipt of the preliminary approval notice to comply with the conditions set forth by the Bureau. The applicant may toll the 60-day compliance period by filing a request for a conference under subsection (f). An applicant may be granted a 30-day extension to meet the conditions if the applicant requests an extension in writing to the Bureau within the initial 60-day compliance period. The application of an applicant which does not meet the conditions within the compliance period will be deemed withdrawn.

 (d)  The applicant will be issued a permit which is effective no sooner than 15 days after the following has been filed with the Bureau:

   (1)  Security in an amount as set forth in §  125.9 (relating to security requirements) or funding as set forth in §  125.10 (relating to funding by public employers).

   (2)  A certificate providing evidence of excess insurance as required by the Bureau.

   (3)  A guarantee agreement executed by its parent company or an affiliate as set forth in §  125.4 (relating to application for affiliates and subsidiaries), if required.

   (4)  Documents relating to any other requirement set by the Bureau to protect the compensation rights of employes.

 (e)  If upon review of the pertinent data under subsection (a) the Bureau finds that the applicant has not demonstrated its ability to meet its obligations, it will send to the applicant a preliminary denial notice of the application. The notice will state the documents, evidence and other data received from the applicant or otherwise reviewed or considered by the Bureau in rendering its preliminary determination.

 (f)  The applicant may request a conference with the Bureau upon receipt of the Bureau’s preliminary approval notice or denial notice. A conference request shall be made in writing within 20 days after the receipt of the preliminary notice. At the conference, the applicant may present additional evidence or data to support its application or the alteration of the conditions required in the preliminary approval notice. The applicant may present that information to the Bureau in writing, or in person, or both.

 (g)  After a conference and the receipt of written submissions, the Chief of the Self-Insurance Division of the Bureau will promptly review the entire record of the application and will issue a reconsideration decision on the application.

 (h)  An applicant shall have the right to appeal a reconsideration decision issued under subsection (g) with the Bureau within 30 days of the receipt of the reconsideration decision. Untimely appeals will be dismissed without further action by the Bureau.

   (1)  The Director of the Bureau will assign the appeal to a hearing officer who will schedule a de novo hearing on the appeal from the initial decision. The applicant will receive reasonable notice of the hearing date, time and place.

   (2)  The hearing will be conducted in a manner to provide the applicant and the Bureau the opportunity to be heard. The hearing officer will not be bound by strict rules of evidence. Relevant evidence of reasonably probative value may be received into evidence. Reasonable examination and cross-examination of witnesses will be permitted.

   (3)  Testimony will be recorded and a full record kept of the proceedings. The Bureau and the applicant will be provided the opportunity to submit briefs addressing issues raised.

   (4)  Following the close of the record, the hearing officer will promptly issue a written decision and order. The decision will include relevant findings and conclusions, and state the rationale for the decision. The decision will be served upon the applicant, the Bureau and counsel of record. The decision will include a notification to the applicant and the Bureau of further appeal rights to Commonwealth Court.

   (5)  The applicant or the Bureau, aggrieved by a decision rendered on an appeal, may file a further appeal to Commonwealth Court.

     (i)   An applicant which has been denied self-insurance may reapply after an annual audit report is published subsequent to the latest one submitted with the denied application.

 (a)  A permit is issued for 1 year, except that the Bureau may shorten or extend the effective period of a permit by not more than 6 months to facilitate the filing of timely audit reports with the next renewal application.

 (a)  This section applies to self-insured employers except the Commonwealth and political subdivisions. A private employer shall provide security in an amount as set forth in subsection (d). An instrumentality of the Commonwealth shall provide security in the minimum amount of the security constant rounded upward to the nearest hundred thousand or in a greater amount as determined by the Bureau to protect employes and their dependents against temporary interruptions in the payment of benefits by the self-insurer. The security required in this section is not a substitute for the applicant demonstrating its financial ability to pay compensation under the act and the Occupational Disease Act. A self-insurer’s security may be adjusted annually or more frequently as determined by the Bureau.

 (b)  The following forms of security are acceptable:

   (1)  A surety bond on a form prescribed by the Bureau issued by a company authorized to transact surety business in this Commonwealth by the Insurance Department.

     (i)   The surety company shall possess a current A. M. Best Rating of B+ or better or a Standard and Poor’s rating of claims paying ability of A or better.

     (ii)   The self-insurer shall replace the bond with a new bond issued by a surety company with an acceptable rating or with another acceptable form of security if the surety company’s rating falls below the acceptable rating after the bond is issued. If the bond is not replaced within 60 days, the Bureau will have discretion to draw on the surety bond and deposit the proceeds with the State Treasurer to secure the self-insurer’s liability.

   (2)  A security deposit held under a trust agreement prescribed by the Bureau and maintained for the benefit of employes of the self-insurer:

     (i)   The deposit shall consist of cash; bonds or other evidence of indebtedness issued, assumed or guaranteed by the United States of America, or by an agency or instrumentality of the United States; investments in common funds or regulated investment companies which invest primarily in United States Government or Government agency obligations; or bonds or other security issued by the Commonwealth and backed by the Commonwealth’s full faith and credit.

     (ii)   The securities shall be held in a Commonwealth chartered bank and trust company or trust company as defined in section 102 of the Banking Code of 1965 (7 P. S. §  102) or a Federally chartered bank or foreign bank with a branch office and trust powers in this Commonwealth.

   (3)  An irrevocable letter of credit using language required by the Bureau issued by and payable at a branch office of a commercial bank located in the continental United States, Alaska or Hawaii. The letter of credit shall state that the terms of the letter of credit automatically renew annually unless the letter of credit is specifically nonrenewed by the issuing bank 60 days or more prior to the anniversary date of its issuance:

     (i)   At the time of issuance of the letter of credit, the issuing bank or its holding company shall have a B/C or better rating or 2.5 or better score by Thomson BankWatch or the issuing bank shall have a CD rating of BBB or better by Standard & Poor’s Corporation.

     (ii)   The self-insurer shall replace the letter of credit with a new letter of credit issued by a bank with an acceptable credit rating or with another acceptable form of security if a bank’s rating falls below the acceptable rating after the letter of credit is issued. If the letter of credit is not replaced within 60 days, the Bureau will draw on the letter of credit and will deposit the proceeds to secure the self-insurer’s liability.

     (iii)   The applicant shall execute a trust agreement on a form prescribed by the Bureau with a Commonwealth chartered bank and trust company or trust company as defined in section 102 of the Banking Code of 1965 or a Federally chartered bank or foreign bank with a branch office and trust powers in this Commonwealth. The trust agreement will accommodate proceeds from a letter of credit drawn on by the Bureau.

 (c)  Affiliates included under a consolidated permit under §  125.4(a) (relating to application for affiliates and subsidiaries) must be included together under the forms of security provided. For purposes of this section, affiliates included under a consolidated permit are considered to be one self-insurer.

 (d)  The amount of security required of self-insured private employers is as described in paragraphs (1)—(4).

   (1)  For a new self-insurer, the Bureau will determine the amount of security. The initial security will be no less than the amount of the applicant’s total greatest annual insured incurred workers’ compensation losses in this Commonwealth during the 3 complete policy years prior to its application plus the security constant and rounded upward to the nearest hundred thousand.

   (2)  For those who have been approved for self-insurance for more than 1 year but less than 3 years, the amount of security is the greater of that outlined in paragraph (1) or 100% of the self-insurer’s outstanding liability net of excess insurance recoveries, as adjusted by its history of loss development by the Bureau or as projected by an actuary, plus the security constant and rounded upward to the nearest hundred thousand.

   (3)  For those who have been approved for self-insurance for 3 or more years, the amount of security is 100% of the self-insurer’s outstanding liability net of excess insurance recoveries, as adjusted by its history of loss development by the Bureau or as projected by an actuary, plus the security constant and rounded upward to the nearest hundred thousand.

   (4)  Notwithstanding this subsection, the Bureau may require security in an amount greater than outlined in this section if it finds that the security resulting from the description in paragraphs (1)—(3) would not be adequate to secure fully and guarantee the payment of incurred and future benefits to each self-insurer’s employes.

 (e)  A self-insurer wishing to refute the Bureau’s adjustment of its outstanding liability by its history of loss development may do so by providing a report prepared by an actuary.

 (f)  Only a projection of a self-insurer’s outstanding liability prepared by an actuary may be discounted to present value. The present value discount rate will be no more than the current yield of a 30-year United States Treasury bond.

 (g)  The Bureau may make adjustments to the loss development procedures it deems appropriate under the circumstances if the Bureau believes that a self-insurer has changed its reserving methodology in such a way as to invalidate loss development factors based on past experience. The Bureau may further require the self-insurer to obtain the services of an actuary to project its outstanding liability or require an appropriate party to conduct an audit of the self-insurer’s claims reserves.

 (h)  The Bureau may reduce the amount of security required of a self-insurer under subsection (d) if the self-insurer confirms that liabilities under the act and the Occupational Disease Act are funded through a Black Lung Benefits Trust established under section 501(c)(21) of the Internal Revenue Code of 1986 (26 U.S.C.A. §  501(c)(21)).

 (i)  The Bureau may reduce the amount of security required of a self-insurer under subsection (d) to no less than the security constant rounded upward to the nearest hundred thousand if the self-insurer establishes a funding trust to provide a source of funds for the payment of its liability. A self-insurer may elect to establish funding a trust or it may be required by the Bureau to establish a funding trust where the Bureau determines that a dedicated source of funds is needed to further ensure the timely payment of the self-insurer’s liability. In either case, the following conditions shall be met:

   (1)  The trust agreement shall be in a form prescribed by the Bureau.

   (2)  The trust assets shall be held in a Commonwealth chartered bank and trust company or trust company as defined in section 102 of the Banking Code of 1965 or a Federally chartered bank or foreign bank with a branch office and trust powers in this Commonwealth.

   (3)  The value of the trust fund shall be adjusted at least annually to the required funding level as determined by the Bureau or an actuary.

 (j)  A self-insurer with security as of October 14, 1995, which is less than the level of security required by subsection (d) may be permitted to phase in the level of required security over a maximum of 3 years. The Bureau will determine the terms of the phase-in period, including the length of time and the annual adjustments.

 (k)  The Bureau will not grant a request for a reduction in or release of security by a runoff self-insurer until at least 1 year has passed since the termination of its self-insurance status or the runoff self-insurer provides a certificate of insurance evidencing that its self-insurance liability has been assumed by an authorized workers’ compensation carrier. Requests shall be supported by a report prepared by an actuary projecting the runoff self-insurer’s outstanding workers’ compensation obligation, a claims reserves analysis prepared by an appropriate party or a certificate of insurance evidencing assumption of self-insurance liability. The Bureau will consider but is not bound by the findings of the reports in deciding security reduction or release requests.

 (l)  The amount of security required of a self-insurer under subsection (d) shall be discounted by 40% and rounded upward to the nearest hundred thousand if the debt of the self-insurer or of the affiliate guarantying the self-insurer’s liability is rated Aaa or Aa by Moody’s Investors Services or AAA or AA by Standard & Poor’s Corporation. The amount of security required of a self-insurer under subsection (d) shall be discounted by 20% and rounded upward to the nearest hundred thousand if the debt of the self-insurer or of the affiliate guarantying the self-insurer’s liability is rated A or Baa by Moody’s Investors Services or A or BBB by Standard & Poor’s Corporation. A self-insurer receiving one of the discounts outlined in this subsection shall increase its security to the amount required under subsection (d) as limited by this subsection, if applicable, if the debt rating of the self-insurer or of its guarantying affiliate is downgraded to below the rating qualifying it for the discount.

 (m)  Termination of self-insurance status may not relieve a runoff self-insurer from the obligation to provide security under this section, including the obligation to provide additional security due to increases in the value of its outstanding liability.

   The provisions of this §  125.9 amended October 23, 1998; subsections (a) and (b) apply to applicants, self-insurers, runoff self-insurers, group self-insurance funds and runoff funds and become effective upon publication in the Pennsylvania Bulletin; subsections (d), (i) and (l) apply to self-insurers upon commencement of the exemption period subsequent to final publication in the Pennsylvania Bulletin; subsection (m) applies to a runoff self-insurer commencing that status after it has renewed its permit subsequent to final publication in the Pennsylvania Bulletin, 28 Pa.B. 5459. Immediately preceding text appears at serial pages (201146) to (201149).

 (a)  A self-insured public employer shall establish a trust fund to provide a source of funds for the payment of benefits. The trust agreement shall be in a form prescribed by the Bureau. This section does not apply to the Commonwealth.

 (b)  For a public employer whose self-insurance status began or begins on or after October 14, 1995, the funding level of the trust fund established under subsection (a) shall be maintained at a level which is at least equal to the self-insurer’s outstanding liability.

 (c)  For a public employer whose self-insurance status began prior to October 14, 1995, the funding level of the trust fund established under subsection (a) shall be maintained at a level which is at least equal to the difference between the self-insurer’s outstanding liability as of a date determined by the Bureau following October 14, 1995, and its current outstanding liability or at a level which is greater than this amount as determined by the Bureau due to the financial condition or the workers’ compensation loss experience or funding history of the self-insurer.

 (a)  A self-insured private employer with quick assets of less than the Statewide average weekly wage multiplied by 200,000 or with cash and cash equivalents of less than the Statewide average weekly wage multiplied by 100,000 or a self-insured public employer with general fund quick assets of less than the Statewide average weekly wage multiplied by 50,000 shall obtain specific excess insurance with a liability limit acceptable to the Bureau and a retention amount or cash flow protection amount which is less than 10% of its quick assets. The Bureau may waive this requirement upon written request if the self-insurer demonstrates that it has sufficient financial strength and liquidity to assure that all obligations under the act and the Occupational Disease Act will be promptly met without the protection of an excess insurance policy.

 (b)  Aggregate excess insurance may be obtained by a self-insurer. The Bureau will not recognize a contract or policy of aggregate excess insurance in considering the ability of an applicant to fulfill its financial obligations under the act and the Occupational Disease Act unless the contract or policy complies with subsection (c).

 (c)  The contract or policy of aggregate excess insurance or specific excess insurance, or both, shall comply with the following:

   (1)  It shall be issued by an excess insurer which possesses an A. M. Best Rating of B+ or better or a Standard and Poor’s rating of claims paying ability of A or better.

   (2)  It shall state that it is not cancelable or nonrenewable unless written notice by registered or certified mail is given to the other party to the policy and to the Bureau at least 45 days before termination by the party desiring to cancel or not renew the policy.

   (3)  It shall state that if a self-insurer is unable to make benefit payments under the act and the Occupational Disease Act due to insolvency or bankruptcy, the excess carrier shall make payments to other parties involved in the paying of the self-insurer’s liability, as directed by the Bureau, subject to the policy’s retentions and limits.

   (4)  It shall state that the following apply toward reaching the retention amount in the excess contract:

     (i)   Payments made by the employer.

     (ii)   Payments made on behalf of the employer under a surety bond or other forms of security as required under this subchapter.

     (iii)   Payments made by the Self-Insurance Guaranty Fund.

   (5)  It shall state that it applies to any losses of a self-insurer under the act and the Occupational Disease Act; it may not exclude coverage for any categories of injuries or diseases compensable under the act and the Occupational Disease Act.

 (d)  A certificate of the excess insurance obtained by the self-insurer shall be filed with the Bureau together with a certification that the policy fully complies with subsection (c).

 (a)  A self-insurer and its claims service company are responsible for the prompt payment of compensation in accordance with the act, the Occupational Disease Act and this part.

 (a)  A self-insurer is responsible for the payment of assessments to maintain funds under the act, including:

   (1)  The Workmen’s Compensation Administration Fund.

   (2)  The Subsequent Injury Fund.

   (3)  The Workmen’s Compensation Supersedeas Fund.

   (4)  The Self-Insurance Guaranty Fund.

 (b)  A runoff self-insurer is liable for the payment of any assessments made after the termination or revocation of its self-insurance status until it has discharged the obligations to pay compensation which arose during the period of time it was self-insured. The assessments of a runoff self-insurer shall be based on the payment of claims that arose during the period of its self-insurance status.

 (a)  A self-insurer shall submit promptly a renewal application to continue its self-insurance status under this subchapter in the event of a change in its or its parent’s controlling interest, by sale or otherwise. Failure to comply with this subsection may result in the revocation of the self-insurer’s permit.

 (b)  A self-insurer which amends its articles, charter or agreement of incorporation, association, partnership or sole proprietorship to change its identity or business structure shall promptly notify the Bureau in writing of that action. The Bureau may request copies of documents or information deemed necessary to determine whether the transaction has affected the ability of the employer to self-insure.

 (a)  Notwithstanding the terms of a guarantee and assumption agreement executed under §  125.4(b)(relating to application for affiliates and subsidiaries), a self-insurer or a runoff self-insurer remains liable for workers’ compensation on injuries or disease exposures occurring during its period of self-insurance. With application to and permission from the Bureau, liability can be transferred to another employer. Liability may be transferred to a company authorized to write workers’ compensation insurance in this Commonwealth if the employer gives written notice to the Bureau within 10 days of the transfer.

 (b)  A self-insurer which liquidates or dissolves shall transfer its liability to a third party, subject to the approval of the Bureau, or shall insure its liability with a company authorized to write workers’ compensation insurance in this Commonwealth.

 A runoff self-insurer shall file an annual report with the Bureau by a date prescribed by the Bureau on a prescribed form. The report shall include a list of the runoff self-insurer’s open cases, the reserves on those cases, the administrator of those cases and the runoff self-insurer’s payout for workers’ compensation benefits in the preceding calendar year. This report shall be filed until all cases incurred during the runoff self-insurer’s period of self-insurance are closed.

 (a)  A claims service company desiring to engage in the business of adjusting and handling claims for an approved self-insurer shall register with the Bureau as provided under section 441(c) of the act (77 P. S. §  997(c)) and regulations thereunder on a prescribed form before entering into a contract to provide these services. The claims service company shall answer the questions on the registration form and shall swear to the information provided on the form.

 (b)  A claims service company shall have adequate facilities and employ competent staff to provide claims services in a manner which fulfills a self-insurer’s obligations under the act, the Occupational Disease Act and this part. A claims service company which repeatedly or unreasonably fails to provide claims adjusting or services promptly with the result that compensation is not paid as required under the act or the Occupational Disease Act may have its privilege of conducting this business revoked or suspended under the procedures of section 441(c) of the act.

 Unless otherwise provided, reference to the term ‘‘days’’ in this subchapter means calendar days. For purposes of determining timeliness of filing and receipt of documents transmitted by mail, 3 days shall be presumed added to the prescribed period. If the last day for filing a document is a Saturday, Sunday, legal holiday or a day on which the Bureau’s offices are closed, the time for filing shall be extended to the next business day. Transmittal by mail shall mean by first-class mail.