Rules of Department of Labor and Industrial Relationss1.sos.mo.gov/cmsimages/adrules/csr/current/8csr/8c50-3.pdfTitle 8—DEPARTMENT OF LABOR AND INDUSTRIAL RELATIONS Division 50—Division

CODE OF STATE REGULATIONS 1ROBIN CARNAHAN (1/29/09)Secretary of State

Rules of

Department of Labor andIndustrial Relations

Division 50—Division of Workers’ CompensationChapter 3—Self-Insurance

Title Page

8 CSR 50-3.010 Rules Governing Self-Insurance ..............................................................3

Title 8—DEPARTMENT OF LABORAND INDUSTRIAL RELATIONS

Division 50—Division of Workers’Compensation

Chapter 3—Self-Insurance

8 CSR 50-3.010 Rules Governing Self-Insurance

PURPOSE: This rule sets forth requirementsand standards for authority to self-insure anemployer’s liability under the Workers’ Com-pensation law.

(1) Definitions.(A) For the purposes of this rule, the fol-

lowing terms shall mean:1. Association—An organization of per-

sons, businesses, firms, or corporationsjoined together for a certain or common pur-pose;

2. Estimated annual premium—The pre-mium collected from a trust member that iscomputed by applying the appropriate payrollcode classification rates to the trust member’sannual payroll and multiplying the results bythe experience modification factors of thetrust member as developed by the advisoryorganization approved by the Department ofInsurance, Financial Institutions and Profes-sional Registration and including any otherdiscounts and debits;

3. Executive director—Person designat-ed by the board of trustees of that trust tooversee all operations of the trust and who isnot an owner or employee of any servicecompany;

4. Foreign corporation—A corporationfor profit organized under laws other than thelaws of this state;

5. Group—Not less than ten (10) privateemployers not commonly owned or ten (10)governmental entities of the same type;

6. Pure premium rate—That portion ofthe rate which represents the loss cost perunit of exposure including loss allocated andunallocated adjustment expenses;

7. Rate—The cost of insurance per expo-sure base unit, prior to any application ofindividual risk variations based on loss orexpense considerations, and does not includeminimum premiums;

8. Regular member—Those persons,busi nesses, firms, or corporations whichmeet all eligibility requirements and areapproved for full membership into an associ-ation and which are also accorded all votingand membership privileges of the association;

9. Same industry—A group with em -ployer members of a similar nature, in thesame line of business, and using the sameclass codes pursuant to the uniform classifi-cation system filed by the advisory organiza-tion with the director of the Department ofInsurance, Financial Institutions and Profes-sional Registration in compliance with sec-tion 287.955, RSMo;

10. Security—A surety bond, an irrevo-cable letter of credit, or escrow deposit toassure the fulfillment of payment or perfor-mance of any workers’ compensation liabilityor obligation of an employer;

11. Service company—Any person, busi -ness, firm, or corporation that provides insur-ance or other workers’ compensation admin-istrative services, which includes, but is notlimited to, plan administrators, claims admin-istrators, loss control consultants, brokers,and agents;

12. Surplus or surplus monies—Theamount by which the sum of total premiumpaid by trust members and investment incomeexceeds the sum of—

A. Losses and loss adjustmentexpenses paid;

B. Administrative expenses incurred;C. Outstanding reserves for known

injuries and occupational diseases;D. Actuarially developed reserves for

case reserve development and the cost ofincurred but not reported injuries and occu-pational diseases; and

E. Previously paid surplus distribu-tions; and

13. Trust—A combination of persons,businesses, firms, or corporations boundtogether to secure, jointly and severally,workers’ compensation liability by holdingthe individual interests of each subservient toa common authority for the common interestsof all. This shall also include the writteninstrument that creates the trust.

(2) Individual Employer Self-Insurance—Application. An employer seeking exemptionfrom insuring his/her risk under the Workers’Compensation Act, by obtaining the privilegeof becoming an individual self-insurer, shallapply on the specified form titled Applicationfor Self-Insurance, WC-81, included herein.The initial application is to be presented atthe office of the Division of Workers’ Com-pensation in Jefferson City, Missouri, by arepresentative of the employer and servicecompany, if applicable. Each legal entitydesiring to self-insure shall submit a separateapplication. Such application shall be sworn

and executed by an executive officer of theapplicant.

(3) Individual Self-Insurance—AdditionalRequirements.

(A) In addition to the application, compli-ance with all of the following shall berequired:

1. Balance sheets and income statementsfor the last four (4) years; the balance sheetsand income statements must be provided foreach entity seeking self-insurance;

2. A statement or report setting forth thetotal of workers’ compensation benefits paidto date and current case reserves (includingmedical) for a minimum of the last three (3)claim years;

3. A statement or report reflecting thecurrent experience modification factor calcu-lated pursuant to the Uniform ExperienceModification Plan as approved by the Mis-souri Department of Insurance, FinancialInstitutions and Professional Registration;

4. A description of the administrativeorganization to be maintained by the employ-er or service company to handle workers’compensation matters, including the report-ing of injuries, authorization of medical care,providing payment of compensation, handlingof claims for compensation, and the safetyprogram, together with the name and locationof each such office and qualifications of thepersonnel in such office to perform such ser-vices. If a service company provides losscontrol services, it must be certified by thedivision. If a service company providesclaims administration services, it must belicensed through the Missouri Department ofInsurance, Financial Institutions and Profes-sional Registration. Designation of a servicecompany to administer workers’ compensa-tion claims, who is licensed by the MissouriDepartment of Insurance, Financial Institu-tions and Professional Registration, with acopy of the signed service agreement, whichshall include a commitment to handle claimsto their conclusion. In the event an employerwishes to change claims service companies,the employer may elect to contractually havethe current service company continue to han-dle existing claims to their conclusion or itmay elect to transfer that responsibility in anorderly fashion to the new service company.Any partner, member of a limited liabilitycorporation, or officer or director of any cor-poration or an immediate family member ofsuch person shall not be an owner or employ-ee of the service company;

5. All applicants, whether a corporationor other legal entity, both foreign and


Chapter 3—Self-Insurance 8 CSR 50-3

domestic, shall file with the application theappropriate Certificate of Good Standing, orits equivalent, regarding that particular entityas issued by its respective state in which orga-nized, along with a certified copy of theapplicant’s authority to do business in Mis-souri as issued by the Missouri Secretary ofState and copies of all relevant corporate res-olutions;

6. A chart of the organizational structureof the company, including any parent, sub-sidiary, or related entities; and

7. Other information including any sup-porting documentation as requested by thedivision. In accordance with the provisions ofsection 287.660.2, RSMo, the division shallfix and collect from the employer the reason-able expenses of any investigation necessaryto determine its ability to carry its own insur-ance; therefore, each application for authori-ty to become a self-insurer shall be accompa-nied by a remittance in the amount of twohundred fifty dollars ($250), payable to theDivision of Workers’ Compensation, to coverthe costs of such investigation, and the appli-cant shall be charged when the investigationcosts are in excess of two hundred fifty dol-lars ($250). This fee will not be refunded,regardless of the disposition of the applica-tion.

(B) The division shall make a preliminarydetermination based on the factors set out inparagraph (3)(I)1. to approve or deny theapplication and shall notify the applicant.Upon preliminary approval of the application,the employer shall comply with the follow-ing:

1. Provide security in the minimumamount of two hundred thousand dollars($200,000) and the division may, if it deemsadvisable in any particular case, require alarger amount. Security will be furnished inone (1) of three (3) ways: by filing with theDivision of Workers’ Compensation anapproved surety bond; by an irrevocable let-ter of credit; or by depositing in escrowapproved securities as defined in this section.In exceptional instances the division mayrequire additional security deposits equal toactuarially determined incurred losses.

A. If a surety bond is given, the sure-ty shall be by a company admitted by theMissouri Department of Insurance, FinancialInstitutions and Professional Registration totransact such business in this state and shallbe AM Best rated A- or better or shall havereserves acceptable to the department for anew and unrated company. The bond shall beon a form prescribed by the Division ofWorkers’ Compensation included herein

(Bond of Employer Carrying His Own Risk,WC-82 Bond). Any such bond shall be per-petual and shall not be released by the divi-sion unless additional replacement securityapproved by the division is provided. In thecase of insolvency, the proceeds of the suretybond shall be transferred to Missouri PrivateSector Individual Self-Insurers GuarantyCorporation, if applicable, in anticipation ofpayment for compensation obligations whichthe employer has not paid; but no funds shallbe used to make payments of compensationuntil the division has given the employer andsurety company thirty (30) days’ writtennotice.

B. If the securities are deposited inescrow, they shall be in the form of UnitedStates Government Obligations, which arelimited to treasury bills, notes, or bonds.Securities deposited in escrow or trust shallbe deposited only in a bank or trust companyin the state of Missouri. When securities aredeposited as provided above, the employershall file with the division an agreement on aform approved by the division included here-in (Escrow Agreement, Form 82 Escrow),providing that upon failure or neglect of theemployer to make payment of compensationall, or any part of such securities, as the occa-sion may require, may be sold. The proceedsof this sale shall be transferred to MissouriPrivate Sector Individual Self-Insurers Guar-anty Corporation, if applicable, in anticipa-tion of payment for compensation obligationswhich the employer has not paid; but nosecurities shall be sold or funds shall be usedto make payments of compensation until thedivision has given the employer and bank ortrust company thirty (30) days’ writtennotice.

C. An irrevocable letter of credit(hereafter letter of credit) must meet thoserequirements found in section 400.5-101,RSMo et seq., as well as those additionalrequirements found below. The letter of cred-it, along with an authorization for release ofconfidential information, must be submittedto the division on division-approved formsincluded herein (Irrevocable Letter of Credit,WC-249; Authorization For Release of Con-fidential Information, WC-249-3). In the caseof insolvency, the proceeds of the irrevocableletter of credit shall be transferred to the Mis-souri Private Sector Individual Self-InsurersGuaranty Corporation, if applicable, in antic-ipation of payment of compensation obliga-tions which the employer has not paid. Theletter of credit must include the followingprovisions:

(I) A letter of credit, issued by acommercial bank chartered under the laws ofMissouri or chartered pursuant to the Nation-al Banking Act, may be submitted to the Mis-souri Department of Labor and IndustrialRelations, Division of Workers’ Compensa-tion (hereinafter the division). The letter ofcredit must be in an amount equal to the oth-erwise required bond or securities;

(II) The letter of credit shall beirrevocable, and the beneficiary shall be thedivision. Payment shall be made immediatelyupon presentment of a demand for paymentsigned by the director of the division orhis/her designated representative;

(III) All letters of credit shall con-form to a required format. A standard letterof credit form embodying this format shall beprovided by the division and is included here-in (Irrevocable Letter of Credit, WC-249).All letters of credit shall be accompanied byan authorization for release of confidentialinformation allowing the director of the divi-sion or his/her designee to release confiden-tial information to the issuing bank;

(IV) A demand for payment upon aletter of credit may be presented for paymentonly upon reasons that bond proceeds wouldbe demanded;

(V) All letters of credit must benegotiable at a financial institution locatedwithin Missouri;

(VI) Letters of credit shall have aterm of one (1) year and shall be automati-cally renewable on an annual basis for anadditional five (5) years. A letter of creditmay be canceled by the issuer sixty (60) daysafter written notice is delivered to the divi-sion. Upon this notice the applicant shall berequired to substitute a surety bond withinsixty (60) days. If the required bond is notreceived within that time period, the selfinsurance privilege shall immediately termi-nate without notice;

(VII) The division shall not releasethe letter of credit until it is satisfied, eitherby audit or otherwise, that no claims existagainst the letter;

(VIII) An applicant shall berequired to augment letters of credit in any sit-uation where the applicant would be requiredto increase its coverage under a surety bond.This additional bonding requirement may besatisfied by increasing the letter of credit, sub-mitting an additional letter of credit, submit-ting an additional surety bond, or depositingadditional securities. Failure to increase theletter of credit amount when required willresult in the immediate termination of the selfinsurance privilege without notice; and

4 CODE OF STATE REGULATIONS (1/29/09) ROBIN CARNAHAN

Secretary of State

8 CSR 50-3—DEPARTMENT OF LABOR AND

INDUSTRIAL RELATIONS Division 50—Division of Workers’ Compensation

(IX) The division will call upon theletter of credit in the event of a default in thepayment of compensation obligations or ifalternative security in the form of a suretybond, an irrevocable letter of credit, orescrow deposit is not posted with the divisionat least thirty (30) days before the expirationof the letter of credit.

D. After an employer has securedhis/her liability by any one (1) of the methodsprovided by these rules and desires to substi-tute one (1) form of security for the other,substitution may be done with prior approvalof the division thirty (30) days before theeffective date;

2. All subsidiary corporations or othersubsidiary legal entities shall have the parentcorporation or other legal entity guarantee itsliability for payment of benefits under Chap-ter 287, RSMo, and shall file such guaranteewith the division along with a resolution ofthe parent entity authorizing such guarantee.The parent corporation or other legal entitymust be in business for at least four (4) years.The form and substance of such guaranteesshall be approved by the division as includedherein (Guaranty To Satisfy CompensationClaims Under Workers’ Compensation Lawof Missouri, WC-82A);

3. Provide confirmation of specificexcess insurance or aggregate excess insur-ance, or both types of insurance, issued by aninsurance carrier admitted by the Departmentof Insurance, Financial Institutions and Pro-fessional Registration to do business in thisstate with specified policy limits and reten-tion amounts approved by the division. Theinsurance carrier shall be AM Best rated A-or better or shall have reserves acceptable tothe department for a new and unrated compa-ny. The terms and conditions of the insurancecontract shall be applicable only to Missouri.This coverage cannot be canceled or nonre-newed unless written notice by certified mailis given to the other party to the policy and tothe division not less than sixty (60) daysbefore termination by the party desiring tocancel or not renew the policy; and

4. In accordance with section 287.860,RSMo, each applicant seeking to become aself-insurer, other than self-insured trusts, orindividual public sector self-insurers, asdefined in section 287.280 or 537.620,RSMo, shall become and remain members ofthe Missouri Private Sector Individuals Self-Insurers Guaranty Corporation.

(C) If preliminary approval is given, theemployer shall be given thirty (30) days fromthe date of notice of preliminary approval inwhich to comply with the requirements

included in the notice. If the requirements arenot met within the time prescribed, plus anyapproved extension, the application shall beconsidered withdrawn.

1. At the discretion of the division, theemployer may be granted additional time tomeet the requirements for approval of theself-insured program. A request for an exten-sion of time shall be made in writing by theemployer within the thirty (30)-day compli-ance period.

(D) The division shall make a final deter-mination to approve or deny the applicationof the employer. Upon meeting and maintain-ing the above requirements, an employer shallreceive a formal certificate approving its sta-tus as a self-insured employer. The privilegeshall continue upon filing of annual reportsand required tax payments and assessment,until revoked by the division or withdrawn bythe employer.

(E) The employer shall file with the divi-sion annually a sworn statement of all out-standing death and disability claims as pro-vided in subparagraph (3)(G)2.B. of this rule.The security filed by the employer shall be atleast one-half (1/2) of the outstanding liabili-ty shown on the report and shall not be lessthan required by paragraph (3)(B)1. of thisrule.

1. After considering all of the facts andcircumstances, if the division finds that it isnot reasonably certain that the employer’scondition is such as to ensure the payment ofthe employer’s outstanding liability, theemployer shall be required to give additionalsecurity of the same character as required inparagraph (3)(B)1. of this rule.

2. The division shall also have the rightat any time to require additional security inthe event of a catastrophe or a change in con-ditions of the employer, with respect to thefinancial condition of the employer, its out-standing liabilities for unpaid compensation,an increase in the payroll exposure, or other-wise. When the division determines that theamount of security should be increased, prop-er notice of such finding shall be given andreasonable opportunity afforded to complywith any added requirements. If the increasein the amount of security is required pursuantto paragraphs (3)(E)1. or 2. of this rule, theemployer shall have the right to request ameeting with the division to discuss theincrease.

(F) When an employer ceases to be self-insured under Chapter 287, RSMo theemployer may apply to the Division of Work-ers’ Compensation for the release of the secu-rities held in escrow or trust.

1. Such employer shall file a swornstatement of—

A. All of its outstanding liabilities ofcompensation;

B. All pending claims for compensa-tion; and

C. All accidents occurring in itsestablishment for a period of three (3) yearsprior to the date of such application.

2. The division shall have the right torequire that all of the securities held inescrow or trust be retained for a period ofthree (3) years from the date of closure of allcases of workers’ compensation liability, andafter three (3) years, the division shall havethe right to require that all or any part of thesecurities held in escrow be retained, asdeemed advisable by the division and thesecurities shall be released only on writtenorder of the division.

(G) Reports, upon forms provided by thedivision and the Missouri Department ofInsurance, along with all of the below listedreports, shall be filed by the self-insurer. Anyreports of a self-insurer who operates one ormore divisions under different trade names,or who operates at different locations underthe same name, shall make a consolidatedreport under its own name. Separate reportsin the name of the divisions or of the opera-tions at different locations will not be accept-ed. Separate reports are required for eachlegal entity for which there is a separate self-insurance authority.

1. The following report shall be submit-ted within ninety (90) days of the end of thecalendar year, or fiscal year, whichever isappropriate—

A. An itemized sworn statement ofthe self-insured employer’s assets and liabili-ties.

2. The following reports shall be sub-mitted within ninety (90) days at the end ofthe calendar year:

A. A classified workers’ compensa-tion payroll report for the prior calendar year;

B. A sworn statement of all outstand-ing death and disability claims as of Decem-ber 31 of each year; and

C. A sworn statement of indemnityand medical payments made by the employerfor the prior calendar year.

3. On an annual basis each employershall procure an experience rating sheet fromthe Uniform Experience Modification RatingPlan of the advisory organization, at theexpense of the employer.

4. The employer shall notify the divisionat least thirty (30) days prior to any change inownership, operations, service company,



address, security or any other change thataffects the employer’s self-insurance status.

5. The division may require additionalreports, including reports required by theMissouri Department of Insurance and theMissouri Private Sector Individuals Self-Insurers Guaranty Corporation, on an annualor as-needed basis. (Forms provided orapproved by the division must be used inmaking all required reports).

(H) The employer shall permit the divi-sion, or its duly authorized representative, tomake an examination of the employer’s assetsand liabilities and of its books of accounts forthe purpose of verifying any financial state-ment submitted. The division may, in its dis-cretion, accept the report of an independentcertified public accountant as proper compli-ance with this rule. If the division has con-cerns about the financial condition of anemployer after review of any report, a specialexamination or audit at the expense of theemployer may be required by the division.

(I) The division may decline to approve anapplication for self-insurance or terminate theself-insurance privilege if the employer isunable to demonstrate that the employer willbe able to meet all obligations under theWorkers’ Compensation Act.

1. The following factors shall be used indetermining if the employer can meet thoseobligations:

A. Profitability, efficiency, solvencyand liquidity ratios;

B. Profit and loss history;C. Organizational structure and man-

agement background;D. Workers’ compensation loss

history;E. Source and reliability of financial

information;F. Ratio of tangible net worth to annu-

al workers’ compensation premium;G. Number of employees;H. Excess insurance coverage;I. Guarantee by parent company;J. Surety bond or other security;K. Claims administration;L. Safety program;M. Experience modification factor;

andN. Other relevant factors as deter-

mined by the division.2. Notice of a denial or termination of

self-insured status, except where a self-insur-er has failed to continuously maintain securi-ty in an amount required by the division,shall be mailed to the employer. Failure tomaintain security will result in immediate ter-mination of self-insurance authority. The

notice shall include the grounds for denial ortermination. If the employer disagrees withthis action, it may request a hearing beforethe director to review the denial or termina-tion. The decision of the director may bereviewed according to the provisions of sec-tions 287.470 and 287.480, RSMo.

(J) The privilege of self-insurance may berevoked by the division at any time upon rea-sonable notice for good cause shown. Failureto comply with any portion of this rule orwith the rules of practice and procedure ofthe division or of the Labor and IndustrialRelations Commission of Missouri, or withan order or decision of the division, or theLabor and Industrial Relations Commission,or Court of Appeals, within the time pre-scribed therein, may be considered primafacie cause for revocation. Disregard of anyof the provisions of Chapter 287, RSMo as tothe time, method of payment of compensationbenefits, the furnishing of medical treatment,the filing of all accident and compensationreports, or failure to make payment of taxesor assessments or surcharges as required bylaw, or willful and intentional violation withintent to defraud employees of their compen-sation rights, may also be cause for revoca-tion. Insolvency of the employer, or fraud ormaterial misrepresentation in procuring thecertificate of authority, shall also constitutecause for revocation. Upon failure of a self-insurer to continuously maintain security, inthe amount required by the division, the self-insurance privilege shall immediately termi-nate without notice. The employer may filefor a review of a revocation according toparagraph (3)(I)2. and subsection (9)(C) ofthis rule.

(4) Trust Self-Insurers—Application. (A) Application for group coverage for the

express purpose of establishing a group self-insurers’ trust, to be administered under thedirection of an elected board of trustees, andto provide workers’ compensation coverageshall be made to the division. The applicationshall be made on a form prescribed by thedivision and shall contain answers to all ques-tions. The following groups may apply:

1. A group of at least ten (10) memberswith separate ownership;

2. Private employers in the same indus-try, bona fide, or regular members of a Mis-souri chartered association that has filed itsannual registration report with the secretaryof state for at least eight (8) years; or

3. Public employers of the same type ofunit including, but not limited to, groups

organized pursuant to section 537.610,RSMo.

(5) Trust Self-Insurers—Additional Require-ments.

(A) The application on division-approvedform included herein (Application for GroupSelf Insurance, WC-81A), as submitted by theboard of trustees of the self-insurers’ trust,shall be accompanied by all of the following:

1. A copy of the bylaws and trust agree-ment of the proposed group self-insurers’trust which shall be approved by the division.The trust agreement shall include an indem-nity clause which jointly and severally bindsthe group and each member thereof for pay-ment of benefits to employees of members ofthe group and all other liability pursuant toChapter 287, RSMo. A copy of the bylawsof the association or organization, if applica-ble, shall also be submitted. If there is a con-flict between these bylaws or trust agreementand any rule or statute, such statute or ruleshall supersede the bylaws or trust agree-ment;

2. An individual application of eachmember of the group applying for coverage inthe trust on division-approved form includedherein (Application for Membership In The,WC-81B), including acceptance or executionof the trust agreement, current financial state-ments, experience modification worksheetfrom the uniform experience modificationplan of the advisory organization, premiumworksheet, and three (3) years prior loss runsfor all members. The loss runs shall be filedseparately and combined;

3. A current financial statement of eachmember of a self-insurers’ group which takencollectively depicts the combined net worthof all members applying for coverage on theinception date of the trust which shall not beless than five (5) million dollars;

4. A composite listing of the estimatedannual premium to be developed by eachmember of the group individually and in totalas a group. The trustees shall provide proof,satisfactory to the division, that the total esti-mated annual premium of the trust will be atleast one (1) million dollars;

5. Proof of payment by each member ofnot less than twenty-five percent (25%) of theestimated annual premium into a designateddepository in the state of Missouri at incep-tion, with the remainder paid in equal month-ly or quarterly payments during the premiumyear, however, a member may make premiumpayments in advance of this schedule;

6. A nonrefundable filing fee in theamount of five hundred dollars ($500)


Secretary of State



payable to the Division of Workers’ Compen-sation;

7. Designation of the board of trusteesand executive director of the trust. The exec-utive director may be the chairman of theboard of the trust or another person, so longas the designee meets the requirements ofparagraph (1)(A)3.;

8. A budget showing all expectedincome and expenses on an accural basis forthe trust’s first year;

9. Proof shall be provided to demon-strate that, within its own organization, thetrust has ample facilities and competent per-sonnel to service its own program withrespect to underwriting matters andsafety/loss control services or shall contractwith an approved service company to providethese services. A service company shall havepersonnel or a safety/loss control service pro-gram certified by the division’s MissouriWorkers’ Safety Program. Underwritingguidelines and the safety/loss control serviceprogram shall be submitted to the division;and

10. Other relevant information includingany supporting documentation as requestedby the division.

(B) The division shall make a preliminarydetermination based on the factors set out inparagraph (3)(I)1. to approve or deny theapplication and shall notify the applicant.Upon preliminary approval of the application,the trust shall comply with the following:

1. Security shall be furnished in theamount set by the division, which may bechanged if it is deemed advisable. The secu-rity will be provided in accordance with para-graph (3)(B)1. of this rule except the mini-mum amount is set at five hundred thousanddollars ($500,000). Any trust in existence onthe effective date of this rule shall complywith this requirement by December 31, 1997.Any collateralization of security shall be pro-vided by the members of the trust or govern-ing association or organization, if applicable,and shall not encumber the assets of the trust;

2. Provide confirmation of specific andaggregate excess insurance in a form andamount approved by the division and issuedby a company admitted by the Department ofInsurance, Financial Institutions and Profes-sional Registration to transact business in thisstate or a substitute arrangement approved bythe division. The insurance carrier shall beAM Best rated A- or better or shall havereserves acceptable to the department of anew and unrated company. The terms andconditions of the insurance contract shall beapplicable only to Missouri. This coverage

cannot be canceled or nonrenewed unlesswritten notice by certified mail is given to theother party to the policy and to the divisionnot less than sixty (60) days before termina-tion by the party desiring to cancel or notrenew the policy; and

3. Provide proof of a fidelity bond oremployee dishonesty policy of not less thanone (1) million dollars for trustees and ser-vice companies, as well as proof of an errorsand omissions policy or professional liabilitypolicy for the service companies, and direc-tors and officers liability policy for trustees ofthe plan in a form and an amount acceptableto the division.

(C) If preliminary approval is given, thetrustees shall be given thirty (30) days fromthe date of notice of preliminary approval inwhich to comply with the requirementsincluded in the notice. If the requirements arenot met within the time prescribed, the appli-cation shall be considered withdrawn.

1. At the discretion of the division, thetrust may be granted additional time to meetthe requirements for approval of the self-insured program. A request for an extensionof time shall be made in writing by the trustwithin the thirty (30)-day compliance period.If the division does not receive proof that allrequirements for the self-insured programhave been met within the time prescribed, theapplication shall be considered withdrawn.

2. The division shall make a final deter-mination to approve or deny the applicationof the trust. Upon meeting the requirements,the trust shall receive a formal certificateapproving its status as a self-insured trust.The privilege shall continue until revoked bythe division or withdrawn by the trust.

(D) Any trust that is finally approved underthe provisions of subsection (5)(C), or hasbeen approved prior to the effective date ofthis rule, shall also be required to remain incompliance with the provisions of paragraphs(5)(A)1. and 6.–10., the provision of subsec-tions (5)(E) and (5)(F), and the provisions ofsections (6)–(9) of this rule during the con-tinued existence of the trust.

1. Any trust that is finally approvedunder the provision of subsection (5)(C), orhas been approved prior to the effective dateof this rule, shall also be required to maintaina minimum annual audited collected premiumof at least one (1) million dollars, except asset out in paragraph (5)(D)2.

2. Any trust approved prior to the effec-tive date of this rule that does not have aminimum annual audited collected premiumof at least one (1) million dollars on the effec-tive date of the rule shall not be required to

comply with the provisions of paragraph(5)(D)1. Any such trust shall be required tomaintain a minimum estimated annual premi-um level not less than ninety-five percent(95%) of the amount of that trust’s annualaudited collected premium as of July 1, 1997.Any such trust shall maintain a surplus toannual audited collected premium ratio of atleast twenty-five percent (25%). This ratioshall be determined annually beginning July1, 1997, based on the trust’s most recentaudited financial reports. The trust may electto comply with the provisions of paragraph(5)(D)1. by July 1, 1997, in lieu of therequirements of this paragraph.

(E) The trust shall have authority to admitand terminate members subject to the follow-ing:

1. After the inception date of the trust,prospective new members of the trust shallsubmit an application for membership to theboard of trustees, on a form approved by thedivision included herein (Application ForMembership In The, WC-81B). If approvedby the trustees, the trust may immediatelybind the new member. The application formembership with all documents required byparagraph (5)(A)2. and proof of compliancewith subsection (5)(A), shall within fifteen(15) days of the effective date of the applica-tion, be filed with the division for approval ordenial. The division shall approve or deny theapplication, and notify the trust, within twen-ty (20) days of receipt of the application; and

2. Individual members of a group shallbe subject to cancellation by the division forfailure to comply with any of these rules, orby the trust pursuant to the bylaws of thetrust. Additionally, individual members of thetrust may elect to terminate their participationin the trust subject to the provisions of theirrespective trust agreement or bylaws. Howev-er, such termination or cancellation shall notbe effective for thirty (30) days, or suchlonger period as may be provided for in thetrust agreement, after all parties have beennotified of the termination or cancellation.

(F) The privilege of the trust to self-insuremay be revoked by the division at any timeupon reasonable notice for good causeshown. Failure of the trust or any member ofthe trust to comply with any portion of thisrule or with the rules of practice and proce-dure of the division or of the Labor andIndustrial Relations Commission of Missouri,or with an order or decision of the Divisionof Workers’ Compensation, or the Labor andIndustrial Relations Commission or Court ofAppeals within the time prescribed therein,may be considered prima facie cause for




Secretary of State



revocation. Disregard of any of the provisionsof Chapter 287, RSMo, as to the time,method or payment of compensation benefit,the furnishing of medical treatment, the filingof all accident and compensation reports, orfailure to make payment of tax or assessmentsas required by statute, or willful and inten-tional violation with intent to defraudemployees of their compensation rights, mayalso be cause for revocation. Insolvency ofthe trust, fraud or material misrepresentationin procuring the certificate of authority, orthe misappropriation of trust funds by theexecutive director or trust shall also consti-tute cause for revocation. Upon failure of thetrust to continuously maintain security in theamount required by the division, the self-insurance privilege shall immediately termi-nate without notice and hearing. The trustmay file for review of a revocation accordingto paragraph (3)(I)2. and subsection (9)(C) ofthis rule.

(6) Trust Self-Insurers—Reports.(A) Reports as to financial standing, excess

coverage, coded workers’ compensation pay-roll records, accident experience, premiumcollections, and compensation payments shallbe made by each trust at the times and man-ner, and upon such forms as the division mayrequire, as follows:

1. A statement of financial condition ofthe trust audited by an independent certifiedpublic accountant shall be filed annually withthe division and within one hundred fifty(150) days after the end of the trust’s fiscalyear. The division may grant additional timeto file upon application of the trust for goodcause shown. The financial statement, notlimited to actuarially appropriate reserves,shall include as liabilities: all known claimsand expenses associated therewith; all claimsincurred but not reported and expenses asso-ciated therewith; all unearned premiums; andall bad debts. The division reserves the rightto prescribe the type of audits to be made anda uniform accounting system to be used byself-insurers’ trusts and service companies todetermine the solvency of the group self-insurers’ trust;

2. An annual actuarial study regardingreserves for all known claims and expensesassociated therewith, and claims incurred butnot reported and expenses associated there-with, which shall be included in the actuarialstudy. The study shall be given by a memberin good standing of the American Academy ofActuaries or of the Casualty Actuarial Societywho has been approved as qualified for sign-ing casualty loss reserve opinions by the

Casualty Practice Council of the AmericanAcademy of Actuaries and shall have experi-ence in Missouri workers’ compensation.The opinion shall be issued with a Statementof Actuarial Opinion as to the adequacy of thelosses, loss adjustment expenses, and ratescontained in the study;

3. Annually, or for a shorter term whichmust be approved by the division all rates uti-lized by the trust for each term must be filed.The rates must be accompanied by a report ofestimated annual premium and projectedexpenses. Projected expenses should includeestimated administrative expenses and esti-mated workers’ compensation liabilities. Thestatement of estimated workers’ compensa-tion liabilities shall be actuarially developedand may be combined with the opinionrequired in paragraph (6)(A)2. Estimatedannual premiums shall exceed projectedexpenses. Upon acceptance of the filed ratesby the division, the accepted rate shall remainconstant for the full term. The rates may becalculated as follows:

A. Rates actuarially developed on thetrust’s own experience; or

B. From the pure premiums ratesdeveloped and published by the advisoryorganization or the Department of Insurance,Financial Institutions and Professional Regis-tration; or

C. From the rates calculated by theDepartment of Insurance, Financial Institu-tions and Professional Registration based onrates filed by the twenty (20) insurance com-panies providing the greatest volume of work-ers’ compensation insurance coverage;

4. A quarterly claim activity summaryreport listing paid and reserved indemnity,medical and claims expenses for each trustyear. A trust year is considered open as longas one (1) claim for that trust year remainsunsettled;

5. A copy of the minutes of all trusteemeetings shall be submitted within thirty (30)days of the meeting;

6. A quarterly financial statement;7. Annual tax and assessment reports of

the Department of Insurance, Financial Insti-tutions and Professional Registration whichshall be filed with the department. The uni-form experience rating plan promulgated bythe advisory organization shall be used indetermining the modified premium;

8. Additionally, trusts shall utilize a uni-form experience rating plan promulgated byan approved advisory organization. Trustsshall develop experience ratings for theirmembers based on the plan;

9. All advertising and informationalbrochures shall be submitted to the divisionfor review and comment within thirty (30)days after distribution and use. If the divisiondisapproves, the trust shall revise the materi-al and distribute only the new material,which shall include an explanation of allchanges to be sent to all persons that receivedthe new material;

10. The trust shall notify the division atleast thirty (30) days prior to any change inownership, officers, trustees, operations, ser-vice company, address, security, or any otherchange that affects the trust’s self-insurancestatus. If a member of the trust changesaddress or ownership, the trust shall notifythe division within thirty (30) days of thechange;

11. The Annual Report for Self-InsuredTrusts shall be filed annually with the divi-sion within one hundred fifty (150) days fromthe end of the calendar year; and

12. Other reports as determined by thedivision.

(B) Any trust which fails or refuses to filethe above reports within the time limits pre-scribed in these rules may be notified that itsauthority to be self-insured will be terminat-ed according to the provisions of subsection(5)(E).

(7) Trust Self-Insurers; Trustee Responsibili-ties. To ensure the financial stability of theoperation of each self-insured trust, the boardof trustees shall be responsible for all opera-tions of the trust. The board of trustees shallhave at least five (5) persons elected from themembership of the trust, association, or orga-nization for stated terms of office, to directthe administration of the trust. The board’sduties shall include responsibility for approv-ing application for membership in such trust.A trustee, employee of the trust, or immedi-ate family member shall not be an owner,officer, or employee of the trust’s servicecompany(ies). The board of trustees of eachtrust shall take all necessary precautions tosafeguard the assets of the trust, including butnot limited to, all of the following:

(A) Where the trust has designated a fiscalagent to administer the financial affairs of thetrust, the fiscal agent, as obligee, shall fur-nish security as provided by paragraph(5)(B)3. in an amount sufficient, but not lessthan one (1) million dollars, to protect thetrust against the misrepresentation or misuseof any monies or securities. The amount ofthe bond or policy shall be determined by thedivision and evidence of such shall be filed asone (1) of the conditions required for


approval of the establishment and continuedoperation of a self-insurers’ trust;

(B) Retain responsibility for all moniescollected or disbursed from the trust, whichshall be placed in a designated depository.Trusts with three (3) years or less of experi-ence shall separate all monies into a claimstrust account and an administrative trustaccount. The claims trust account shall con-sist of the loss and loss adjustment expenseportion of the premium. The remaining pre-mium shall be placed in the administrativetrust account. Such designated depositoryshall be a Missouri bank or trust company.Interest earned shall accrue to its respectiveaccount. Such accounts shall be invested inUnited States treasury bills, notes, or bonds,certificates of deposit issued by a duly char-tered commercial bank, or a transactionaccount of the designated depository. Theexecutive director of the trust shall establish arevolving trust or account for use by theauthorized service company, for use in claimspayments;

(C) An audit of the accounts and records ofthe trust shall be conducted annually or at anytime required by the division, at the expenseof the trust unless the audit is conducted bythe division. Audits shall be made by inde-pendent certified public accountants or byauthorized representatives of the division.The division reserves the right to prescribethe type of audits to be made and a uniformaccounting system to be used by self-insurers’trusts and service companies to determine thesolvency of the group self-insurers’ trust;

(D) Monies collected as premiums shallnot be utilized by the board of trustees or itsfiscal agent, service company or executivedirector for any purpose unrelated to work-ers’ compensation. Further, monies shall notbe borrowed from the trust, or in the name ofthe trust, without prior approval of the divi-sion which shall be based on the nature andpurpose of such loan. Surplus monies from aprior trust year not needed for current oblig-ations may be invested as set out in subsec-tion (7)(B) of this rule. Upon approval of thedivision, up to twenty-five percent (25%) ofthese surplus monies may be invested in secu-rities designated by the Office of the StateTreasurer as acceptable collateral to securestate deposits pursuant to section 30.270.1,RSMo;

(E) Deposits in commercial banks shall belimited to institutions in Missouri and shallnot exceed the federally insured amount inany one (1) account, except that the federallyinsured amount on any one (1) account maybe exceeded if the amount involved in such an

account is fully collateralized under bankingrules for political subdivisions, but may nototherwise exceed either of the following fac-tors:

1. Five percent (5%) of the combinationof surplus and undivided profits and reservesas currently reported for each bank in thisstate in the biennial report of the Division ofFinance of the Department of EconomicDevelopment; and

2. Five hundred thousand dollars($500,000) per institution;

(F) The board of trustees may delegateauthority for specific functions to the planadministrator of the self-insured trust. Thefunctions which may be delegated include,but are not limited to, contracting with a ser-vice company, determining the premiumcharged and refunds payable to members, andapproving applications for membership. Alldelegated authority shall be specificallydefined in the written duly adopted bylaws ofthe trust and shall be subject to final approvalby the division; and

(G) The trustees shall not have authority toextend credit to individual members for pay-ment of premium.

(8) Trust Self-Insurers Trusts—Discounts,Sur charges, Surplus Distribution, Deficits.

(A) The trust shall not authorize total dis-counts for any individual member exceedingtwenty-five percent (25%). All discountsshall be based on objective quantitative fac-tors and applied uniformly to all trust mem-bers.

(B) The trustees of any trust may apply asurcharge in excess of the estimated annualpremium to any member with an unfavorableloss experience.

(C) Any surplus monies for a trust year inexcess of the amount necessary to fulfill allobligations under the Chapter 287, RSMo,for that trust year, including a provision forclaims incurred but not reported, may bedeclared to be refundable by the trustees one(1) year after the close of the trust year andshall be payable to the members after havingbeen approved by the division. Any requestfor distribution of surplus monies must beaccompanied by the actuarial opinionrequired by paragraph (6)(A)2. of this rule.The division will grant the application if suf-ficient monies are retained to assure that totalassets are greater than total liabilities for eachtrust year.

(D) In the event of an aggregate deficit inall trust years, the trust shall immediatelynotify the division and the deficit shall bemade up immediately from any of the follow-ing:

1. By an increase to the trust’s securityamount;

2. By assessment of the membership, asindicated in the trust’s bylaws;

3. By increased rates for subsequentyears; or

4. By such alternative method as thedivision may approve.

(E) Trusts with more than three (3) yearsof experience shall meet the following:aggregate surplus plus their current securityamount shall be greater than either one andone-half (1 1/2) times the largest historicalper occurrence retention or twenty percent(20%) of the trust’s current estimated annualpremium. If the trust does not meet the sur-plus requirement within the term of the planof action approved by the division, or anyextension that may be granted at the divi-sion’s sole discretion, the trust shall comeinto compliance by utilizing any of the four(4) options available in subsection (8)(D).

(9) Individual Self-Insured Employers andTrust Self-Insurers—Location of Administra-tion or Service Office, Miscellaneous.

(A) The division shall have the authority toconduct audits relating to safety, claims andany other audits deemed necessary andappropriate as determined by the division,and such audits will be performed at theexpense of the employer or trust, unless theaudit is conducted by the division.

(B) Employee leasing arrangements shallcomply with rules promulgated by theDepartment of Insurance.

(C) Any order of the division may bereviewed on application of the self-insuredemployer or trust. The director or the direc-tor’s designee shall review the matter, includ-ing the discretion to take evidence, if neces-sary in the review.

1. Any review by the director or thedirector’s designee that involves the taking ofevidence shall be conducted as a hearingaccording to the provisions of 8 CSR 50-2.010. Any order of the director or the direc-tor’s designee shall be subject to reviewaccording to the provisions of sections287.470 and 287.480, RSMo.

2. Any review by the director or thedirector’s designee that does not involve thetaking of evidence shall be conducted infor-mally. Any order of the director or the direc-tor’s designee shall be subject to review bythe director of the Department of Labor andIndustrial Relations.



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AUTHORITY: sections 287.280 and 287.650,RSMo 2000.* Original rule filed Dec. 28,1953, effective Jan. 3, 1954. Amended: FiledJan. 15, 1960, effective Jan. 26, 1960.Amended: Filed Sept. 4, 1963, effective Sept.15, 1963. Amended: Filed Jan. 8, 1971,effective Jan. 19, 1971. Amended: Filed Dec.14, 1972, effective Dec. 26, 1972. Amended:Filed Aug. 26, 1975, effective Sept. 5, 1975.Rescinded: Filed Oct. 27, 1982, effectiveMarch 11, 1983. Readopted: Filed Jan. 11,1982, effective June 11, 1982. Rescinded andreadopted: Filed March 6, 1996, effectiveNov. 30, 1996. Amended: Filed Aug. 15,2008, effective Feb. 28, 2009.

*Original authority: 287.280, RSMo 1939, amended1957, 1965, 1974, 1980, 1981, 1993, 1995, 1998 and287.650, RSMo 1939, amended 1949, 1961, 1980, 1993,1995, 1998.


Documents

Rules of Department of Labor and Industrial Relationss1.sos.mo.gov/cmsimages/adrules/csr/current/8csr/8c50-3.pdfTitle 8—DEPARTMENT OF LABOR AND INDUSTRIAL RELATIONS Division 50—Division