1     
WORKERS' COMPENSATION FUND AMENDMENTS

2     
2016 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Val L. Peterson

5     
Senate Sponsor: Curtis S. Bramble

6     

7     LONG TITLE
8     General Description:
9          This bill modifies provisions related to the Workers' Compensation Fund to address its
10     board of directors.
11     Highlighted Provisions:
12          This bill:
13          ▸     modifies limits on compensation for directors;
14          ▸     modifies requirements for and restrictions on who can be a director;
15          ▸     allows for the number of directors to increase by two under certain circumstances;
16          ▸     addresses terms, quorum, and voting requirements if the board is increased to nine
17     directors; and
18          ▸     makes technical and conforming amendments.
19     Money Appropriated in this Bill:
20          None
21     Other Special Clauses:
22          None
23     Utah Code Sections Affected:
24     AMENDS:
25          31A-33-106, as last amended by Laws of Utah 2015, Chapter 427
26          31A-33-107, as last amended by Laws of Utah 2015, Chapter 427
27     

28     Be it enacted by the Legislature of the state of Utah:
29          Section 1. Section 31A-33-106 is amended to read:
30          31A-33-106. Board of directors -- Status of the fund in relationship to the state.
31          (1) There is created a board of directors of the Workers' Compensation Fund.
32          (2) [The] Except as provided in Subsection (18), the board shall consist of seven
33     directors.
34          (3) One director shall be the chief executive officer of the fund.
35          (4) (a) In accordance with a plan that meets the requirements of this section and the
36     fund's articles of incorporation and bylaws, the board shall nominate and the policyholders
37     shall elect six public directors as follows:
38          (i) four directors who are owners, officers, directors, or employees of policyholders,
39     each of whom is an owner, officer, or employee of a policyholder that has been insured by the
40     Workers' Compensation Fund for at least one year before the election of the director
41     representing the policyholder; and
42          (ii) two directors from the public in general.
43          (b) The plan described in Subsection (4)(a) shall comply with Section 31A-5-409 to the
44     extent that Section 31A-5-409 does not conflict with this section.
45          (5) No two directors may represent or be employed by the same policyholder.
46          (6) At least five directors elected by the policyholders shall have had previous
47     experience in:
48          (a) the actuarial profession;
49          (b) accounting;
50          (c) investments;
51          (d) risk management;
52          (e) occupational safety;
53          (f) casualty insurance; or
54          (g) the legal profession.
55          (7) A director who represents a policyholder that fails to maintain workers'
56     compensation insurance through the Workers' Compensation Fund shall immediately resign
57     from the board.
58          (8) A person may not be a director if that person:
59          (a) has any interest as a stockholder, employee, attorney, or contractor of a competing
60     insurance carrier providing workers' compensation insurance [in Utah];
61          (b) fails to meet or comply with the conflict of interest policies established by the
62     board; or
63          (c) is not bondable.
64          (9) After notice and a hearing, the board may remove any director for cause which
65     includes:
66          (a) neglect of duty; or
67          (b) malfeasance.
68          (10) (a) Except as required by Subsection (10)(b), the term of office of the directors
69     elected by the policyholders shall be four years, beginning July 1 of the year of appointment.
70          (b) Notwithstanding the requirements of Subsection (10)(a), the board shall, at the time
71     of election or reelection, adjust the length of terms to ensure that no more than two terms
72     expire in a calendar year.
73          (11) A director shall hold office until the director's successor is selected and qualified.
74          (12) When a vacancy occurs in the membership of the board for any reason, the
75     replacement shall be appointed by a majority of the board for the unexpired term, after which
76     time the replacement shall stand for policyholder election as described in the fund's articles of
77     incorporation and bylaws.
78          (13) The board shall annually elect a chair and other officers as needed from its
79     membership.
80          (14) (a) The board shall meet at least quarterly at a time and place designated by the
81     chair.
82          (b) The chair:
83          (i) may call board meetings more frequently than quarterly; and
84          (ii) shall call additional board meetings if requested to do so by a majority of the board.
85          (15) [Four] Except as provided in Subsection (18), four directors are a quorum for the
86     purpose of transacting all business of the board.
87          (16) [Each] Except as provided in Subsection (18), a decision of the board requires the
88     affirmative vote of at least four directors for approval.
89          (17) (a) [(i)] A director may receive compensation and be reimbursed for reasonable
90     expenses incurred in the performance of the director's official duties:
91          [(A)] (i) as determined by the board of directors; and
92          [(B) if the aggregate of compensation paid to all directors of the Workers'
93     Compensation Fund in a calendar year is less than or equal to the amount described in
94     Subsection (17)(a)(ii).]
95          [(ii) (A) For the period beginning January 1, 2016, and ending December 31, 2016, the
96     amount described in Subsection (17)(a)(i)(B) is $150,000.]
97          [(B) For calendar years beginning on or after January 1, 2017, the amount described in
98     Subsection (17)(a)(i)(B) is the sum of the amount under this Subsection (17)(a) for the previous
99     year and an amount equal to the greater of:]
100          [(I) an amount calculated by multiplying the amount under this Subsection (17)(a) for
101     the previous year by the actual percent change during the previous calendar year in the
102     consumer price index; and]
103          [(II) 0.]
104          [(C) For purposes of this Subsection (17), the consumer price index shall be calculated
105     as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue Code.]
106          (ii) in an amount not to exceed the reasonable market rate for directors of similarly
107     situated insurance carriers.
108          (b) Directors may decline to receive compensation and expenses for their service.
109          (c) The Worker's Compensation Fund shall pay compensation to and reimburse
110     reasonable expenses of directors as permitted by this section:
111          (i) from the Injury Fund; and
112          (ii) upon vouchers drawn in the same manner as the Workers' Compensation Fund pays
113     its normal operating expenses.
114          (d) The chief executive officer of the Workers' Compensation Fund shall serve on the
115     board without payment of compensation, but may be reimbursed for reasonable expenses in
116     accordance with Subsection (17)(a).
117          (e) The Workers' Compensation Fund shall annually report to the commissioner
118     compensation and expenses paid to the directors on the board.
119          (18) (a) In accordance with this Subsection (18), the board may increase the number of
120     directors on the board by one or two directors, except the board may not exceed a total of nine
121     directors.
122          (b) The board may increase the number of directors if:
123          (i) the board determines by unanimous vote, that the business needs of the Workers'
124     Compensation Fund would be best served by the expansion;
125          (ii) the majority of the total number of directors after the increase are policyholders of
126     the Workers' Compensation Fund;
127          (iii) an added director has experience described in Subsection (6);
128          (iv) the term of an additional director is compliant with Subsection (10), except that if
129     the board is increased to nine directors, at the time of election or reelection, the board shall
130     adjust the length of terms to ensure that no more than three terms expire in a calendar year;
131          (v) at least one of the two additional directors is nominated and elected by the
132     policyholders of the Workers' Compensation Fund subject to the requirements of:
133          (A) this section; and
134          (B) the Workers' Compensation Fund's articles of incorporation and bylaws; and
135          (vi) one of the two additional directors is not elected in accordance with Subsection
136     (18)(b)(v), the director shall be selected subject to the requirements of:
137          (A) this section; and
138          (B) the Workers' Compensation Fund's articles of incorporation and bylaws.
139          (c) If the board is increased to nine directors:
140          (i) five directors are a quorum for the purpose of transacting all business of the board;
141     and
142          (ii) a decision of the board requires the affirmative vote of at least five directors for
143     approval.
144          [(18)] (19) The placement of this chapter in this title does not:
145          (a) remove from the board of directors the managerial, financial, or operational control
146     of the Workers' Compensation Fund;
147          (b) give to the state or the governor managerial, financial, or operational control of the
148     Workers' Compensation Fund;
149          (c) consistent with Section 31A-33-105, cause the state to be liable for any:
150          (i) obligation of the Workers' Compensation Fund; or
151          (ii) expense, liability, or debt described in Section 31A-33-105;
152          (d) alter the legal status of the Workers' Compensation Fund as:
153          (i) a nonprofit, self-supporting, quasi-public corporation; and
154          (ii) an insurer:
155          (A) regulated under this title;
156          (B) that is structured to operate in perpetuity; and
157          (C) domiciled in the state; or
158          (e) alter the requirement that the Workers' Compensation Fund provide workers'
159     compensation:
160          (i) for the purposes set forth in Section 31A-33-102;
161          (ii) consistent with Section 34A-2-201; and
162          (iii) as provided in Section 31A-22-1001.
163          Section 2. Section 31A-33-107 is amended to read:
164          31A-33-107. Duties of board -- Creation of subsidiaries -- Entering into joint
165     enterprises.
166          (1) The board shall:
167          (a) appoint a chief executive officer to administer the Workers' Compensation Fund;
168          (b) receive and act upon financial, management, and actuarial reports covering the
169     operations of the Workers' Compensation Fund;
170          (c) ensure that the Workers' Compensation Fund is administered according to law;
171          (d) examine and approve an annual operating budget for the Workers' Compensation
172     Fund;
173          (e) serve as investment trustees and fiduciaries of the Injury Fund;
174          (f) receive and act upon recommendations of the chief executive officer;
175          (g) develop broad policy for the long-term operation of the Workers' Compensation
176     Fund, consistent with its mission and fiduciary responsibility;
177          (h) subject to Chapter 19a, Part 4, Workers' Compensation Rates, approve any rating
178     plans that would modify a policyholder's premium;
179          (i) subject to Chapter 19a, Part 4, Workers' Compensation Rates, approve the amount
180     of deviation, if any, from standard insurance rates;
181          (j) approve the amount of the dividends, if any, to be returned to policyholders;
182          (k) adopt a procurement policy consistent with the provisions of Title 63G, Chapter 6a,
183     Utah Procurement Code;
184          (l) develop and publish an annual report to policyholders, the governor, the Legislature,
185     and interested parties that describes the financial condition of the Injury Fund, including a
186     statement of expenses and income and what measures were taken or will be necessary to keep
187     the Injury Fund actuarially sound;
188          (m) establish a fiscal year;
189          (n) determine and establish an actuarially sound price for insurance offered by the
190     fund;
191          (o) establish conflict of interest requirements that govern the board, officers, and
192     employees;
193          (p) establish compensation and reasonable expenses to be paid to directors on the board
194     subject to the requirements of Section 31A-33-106, so that the board may not approve
195     compensation that exceeds the amount described in Subsection 31A-33-106(17)(a)[(i)(B)]; and
196          (q) perform all other acts necessary for the policymaking and oversight of the Workers'
197     Compensation Fund.
198          (2) Subject to board review and its responsibilities under Subsection (1)(e), the board
199     may delegate authority to make daily investment decisions.
200          (3) The fund may form or acquire a subsidiary or enter into a joint enterprise:
201          (a) only if that action is approved by the board; and
202          (b) subject to the limitations in Section 31A-33-103.5.




Legislative Review Note
Office of Legislative Research and General Counsel