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Nombre de lectures	44
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Rulemaking Hearing Rules
Of the
Department of Commerce and Insurance
Division of Insurance

Chapter 0780-1-83
Self-Insured Workers’ Compensation Single Employers

Public Comments and Responses
By the Commissioner of Commerce and Insurance

Compiled Pursuant to Tenn. Code Ann. § 4-5-222

On December 17, 2004, a rulemaking hearing was held by Larry C. Knight, Jr.,
Assistant Commissioner for Insurance and John F. Morris, Chief Counsel for Insurance,
by designation of Paula A. Flowers, Commissioner, at the offices of the Department of
Commerce and Insurance. This hearing, conducted pursuant to the requirements of the
Uniform Administrative Procedures Act, Tenn. Code Ann. § 4-5-101 et seq., allowed the
Commissioner of Commerce and Insurance and her designees to hear public comments
and responses to the proposed rule. The rule is being promulgated pursuant to Tenn.
Code Ann. § 50-6-405(b).

The Commissioner solicited comments from the public by causing notice of the
hearing to be published in accordance with the requirements of Tenn. Code Ann. § 4-5-
203. The Commissioner received oral and written comments at the rulemaking hearing.

Comment 1

Rule 0780-1-83-.08 Reporting Requirements

It was commented that subsection (1)(a) of this Rule requiring an employer to file
independently audited financial statements according to Generally Accepted Auditing
Standards of the American Institute of Certified Public Accountants goes beyond what is
required by statute as Tenn. Code Ann. § 56-4-405(b)(2) only requires certified financial
statements, or those financials certified by an officer of the company.

Agency Response to Comment 1

Tenn. Code Ann. § 50-6-405(b)(2) requires a self-insuring employer to file evidence of
its ability to pay claims that may arise against the employer in the form of an annual
certified financial statement. The term “certified” is not currently defined by the statute.
The proposed rules attempt to clarify who is responsible for certifying the financial
statements of the self-insuring employer. Were the Department to interpret the statute
the way the commenter proposes, the Department would need to examine each
employer annually to verify the correctness of the financial condition being certified by
the officers and directors of the reporting companies. The existence of an independent audit allows the Department to rely upon the financial statements filed by the self-
insuring employers.

Comment 2

Rule 0780-1-83-.08 Reporting Requirements

It was commented that the requirement of this Rule that each self-insured employer file
an independently audited financial statement by March 1 of each year would create an
undue hardship on such employers. To comply with this requirement, employers would
be required to hire more staff so that the auditors would have sufficient data to complete
the audit by March 1. In addition, it was commented that the audit firms would charge a
much higher audit fee in order to speed up the audit process as typically only public
companies rush to complete their audit by March 1.

Agency Response to Comment 2

Tenn. Code Ann. § 50-6-405(b)(2) provides, in pertinent part, that a self-insuring
employer is required to provide the Commissioner “[e]vidence of the employer’s
financial ability to pay all claims that may arise against the employer in the form of an
annual certified financial statement, including a statement of assets and liabilities and a
statement of profit and loss, to be filed no later than sixty (60) days after the company’s
immediately preceding fiscal year.” This section describes the responsibilities for self-
insuring employers as it relates to when they must file their annual statements. The
Department does not have the authority to change these statutory requirements by rule,
and intends to enforce the will of the General Assembly.

Comment 3

Rule 0780-1-83-.08 Reporting Requirements

It was commented that the proposed rules require the financial condition of self-insuring
employers to be audited according to Generally Accepted Audited Standards while
insurers providing workers’ compensation insurance are required to file audited financial
statements that are prepared in conformity with statutory accounting practices
prescribed or permitted by the Department, which is a comprehensive basis of
accounting other than accounting principles generally accepted in the United States of
America.

Agency Response to Comment 3

The Department agrees with this comment’s description as to what is required of self-
insuring employers as opposed to insurance companies. The Department is also willing
to accept an employer’s annual statement prepared in accordance with statutory
accounting principles as being in compliance with this Rule as well. Comment 4

Rule 0780-1-83-.10 Taxes and Delinquencies

Section (3) of this Rule was objected to as it requires an employer to file a premium tax
return. The commenter observed that, for a self-insured employer, there is no
insurance policy with premium involved. The commenter further described the process
for a self-insured employer to pay tax to the Department. First, the commenter stated,
the Department requires the employer to file claims data with the National Council on
Compensation Insurance in order for the employer to obtain an experience rating factor.
This factor is filed with the Department along with the employer’s payroll. The
Department then computes the premium that the employer would have paid had the
employer purchased insurance coverage by a licensed insurance company. The 4.4%
tax is then applied to this figure in order to determine the amount of tax owed by the
employer.

Agency Response to Comment 4

The commenter has adequately described the process historically used by the
Department in facilitating the self-insured employers’ compliance with the tax
requirements of Tenn. Code Ann. § 56-4-207. This section requires self-insured
employers to compute their taxes as a percentage of the amount of premium the would have paid had they obtained workers’ compensation insurance
coverage from a licensed insurance company. As this tax is essentially a tax on
potential premium, the term “premium tax” seems to be a reasonable term to use in this
Rule.

Comment 5

It was commented that based upon the letter dated August 30, 2004 from the
Department, the Department has interpreted Tenn. Code Ann. § 50-6-405(b)(2) to
require a self-insured employer to have an actuary certify biannually the adequacy of
workers’ compensation self-insured losses and reserves. It was commented that this
requirement exceeded what is statutorily required.

Agency Response to Comment 5

Tenn. Code Ann. § 50-6-405(b)(2) requires self-insuring employers to file on a biennial
basis a certification by an actuary as to the correctness of the reported losses and the
adequacy of the employer’s reserves. This section describes the responsibilities for
self-insuring employers as it relates to when they must file their actuarial certifications.
The Department does not have the authority to change these statutory requirements by
rule, and intends to enforce the will of the General Assembly.

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