§ 15472. Minimum Financial Requirements for a Group Self Insurer.

(a) In addition to other requirements specified in this Article 13, no private group shall be approved as a group self insurer, nor continue as a group self insurer, unless it demonstrates aggregate net worth and net earnings of the initial qualifying employer members and continuing qualifying core group members, as evidenced from the financial statements of those group members, as follows:

(1) No less than $5,000,000 in current consolidated net worth and a consolidated annual net income of the group core members of no less than $500,000, as documented in certified and independently audited financial statements; or

(2) No less than $10,000,000 in current consolidated net worth of core group members if the core group members do not demonstrate an consolidated net income of $500,000, as documented in certified and independently audited financial statements; or

(3) No less than $15,000,000 in current consolidated net worth of core group members, as documented in certified and independent CPA reviewed financial statements with the reviewer's report attached, or if the qualifying core group members consist, in whole or in part, of IRS Subchapter S-corporations as documented by certified and independent CPA reviewed financial statements with the reviewer's reports included with each statement.

(b) The Group Administrator shall provide to the Manager within 30 days of request documentation showing that the core members of the group self insurer continue to meet the requirements of subsection (a). The core members of the group self insurer need not be the same affiliate group members from year to year.

(c) The Group Administrator shall immediately advise the Manager in writing if at any time the consolidated net worth of the core group members of the group self insurer falls below the minimum amount set forth in subsection (a) of this section.

(d) Financial statements submitted to qualify group members pursuant to subsection (a) must be prepared according to Generally Accepted Accounting Principles (GAAP). If approved by the Manager and documented in the financial statement or schedules and notes accompanying the financial statement, the following may be accepted as meeting requirements:

(1) If documented in a written report from an independent real estate appraiser acceptable to the Manager and valued no more than 60 days before submission to the Manager, up to 75% of the fair market value of real property of the audit subject, as opposed to the purchase price of the real property when acquired, may be counted as a part of the audit subject's net worth;

(2) If documented in the financial statement, up to 50% of a corporate owner/officer's payroll may be considered as earnings rather than liabilities.

HISTORY

1. New section filed 6-30-94; operative 6-30-94 (Register 94, No. 26).

2. Amendment of section heading and section filed 3-2-2009; operative 3-2-2009 pursuant to Government Code section 11343.4 (Register 2009, No. 10).

Note

Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 3700, 3701, 3701.5, 3702, 3702.2 and 3702.10, Labor Code.