(a) Hazardous conditions. An approved PEO's plan and
trust are considered to be in hazardous condition if any of the following
conditions exist with respect to the plan and trust:
(1) assets to liability ratio less than 1:1;
(2) negative financial position;
(3) negative net income combined with negative retained
earnings;
(4) negative cash flow;
(5) failing to maintain minimum reserves;
(6) the trust failing to receive all monthly contributions
paid by clients to the approved PEO;
(7) transfers of funds between the trust and the approved
PEO not authorized under the trust agreement; or
(8) mismanagement by the third party administrator,
trustees, or approved PEO that endanger the solvency or operations
of the plan and trust.
(b) Regulation of solvency. An approved PEO and its
plan and trust are subject to Insurance Code Chapters 404, concerning
Financial Condition; 406, concerning Special Deposits Required Under
Potentially Hazardous Conditions; 441, concerning Supervision and
Conservatorship; and 443, concerning the Insurer Receivership Act.
(c) Order of actuarial review. On finding of good cause,
the commissioner will order an actuarial review of an approved PEO
in addition to the actuarial opinion. The approved PEO must pay the
cost of any additional actuarial review ordered by the commissioner.
(d) Order to correct deficiencies. If the commissioner
determines that the approved PEO's plan and trust do not comply with
this section or are found to be in hazardous condition, the commissioner
will order the approved PEO to correct the deficiencies. The commissioner
will take action authorized by the Insurance Code and other applicable
laws against the approved PEO and its plan and trust if the approved
PEO does not initiate immediate corrective action.
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