SB345 - Revises provisions relating to associations of self-insured employers. (BDR 53-198)

REQUIRES TWO-THIRDS MAJORITY VOTE (§§ 1, 13) S.B. 345 - *SB345* SENATE BILL NO. 345–SENATOR DALY MARCH 13, 2025 ____________ Referred to Committee on Commerce and Labor SUMMARY—Revises provisions relating to associations of self- insured employers. (BDR 53-198) FISCAL NOTE: Effect on Local Government: May have Fiscal Impact. Effect on the State: Yes. ~ EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. AN ACT relating to industrial insurance; revising various requirements for an association of self-insured public or private employers, members of an association and members of a board of trustees of an association; revising permissible uses of money collected from members as annual assessments; prohibiting the distribution of dividends to members of an association by an association; revising provisions relating to certain administrative penalties; requiring an association of self-insured public or private employers operating on October 1, 2025, to apply for and be issued a new certificate to act as such an association; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law authorizes a group of five or more public or private employers, 1 under certain circumstances, to act as an association of self-insured employers for 2 the purpose of providing industrial insurance. (NRS 616B.350-616B.446) 3 Existing law requires members of such an association: (1) of public employers, 4 to be engaged in the same or similar classifications of employment; and (2) of 5 private employers, to be members or associate members of a bona fide trade 6 association, as determined by the Commissioner, which is incorporated in this State 7 and has been in existence for at least 5 years. (NRS 616B.350) Section 1 of this bill 8 additionally requires all members of an association of self-insured public or private 9 employers to perform related activities in a given industry. 10 Existing law requires an association of self-insured public or private employers 11 to be operated by a board of trustees whom the members of the association elect for 12 terms set forth in the bylaws of the association. The board of trustees must be 13 composed of: (1) for public employers, members who are officers or employees of 14 – 2 – - *SB345* employers who are members of the association; and (2) for private employers, at 15 least two-thirds of members who are employees, officers or directors of the 16 members of the association. (NRS 616B.365) Section 3 of this bill requires that the 17 board of trustees of an association of self-insured: (1) public employers be officers 18 or managerial employees of the public employers who are members of the 19 association; and (2) private employers be managerial employees, officers or 20 directors of the members of the association. Section 1 requires the bylaws of an 21 association to: (1) establish a procedure for nominating persons who may be elected 22 to the board of trustees which is free from certain outside influence; and (2) contain 23 a statement of fiduciary responsibility for administering the plan of insurance. 24 Existing law requires an association of self-insured public or private employers 25 and each member of the association to execute an indemnity agreement which 26 jointly and severally binds the association and each member to secure the payment 27 of all compensation due for industrial insurance claims. (NRS 616B.350, 616B.353, 28 616B.386) Existing law authorizes the Commissioner of Insurance to assess all 29 associations of self-insured public or private employers to provide for claims 30 against any insolvent association. (NRS 616B.443) Section 2 of this bill requires 31 such an indemnity agreement to: (1) authorize the association to assess certain fees 32 from members if any member defaults; and (2) notify members that the 33 Commissioner may assess the association to provide for claims against another 34 association pursuant to existing law. 35 Existing law requires an association of self-insured public or private employers 36 to: (1) collect an annual assessment from each member of the association; and (2) 37 maintain a policy of excess insurance in a form and amount required by the 38 Commissioner. (NRS 616B.353) Section 2 requires that: (1) money collected from 39 annual assessments be used only for the administration of the plan and to pay 40 claims; and (2) the required policy of excess insurance have a self-insured retention 41 of not less than $250,000. Section 2 also revises the minimum amount of a bond 42 which an association’s administrator is required to deposit with the Commissioner. 43 Section 4 of this bill requires the Commissioner, as part of an annual audit of each 44 association required by existing law, to verify the annual assessment required to be 45 paid by each member to ensure that the assessment is reasonable. 46 Existing law authorizes an association of self-insured public or private 47 employers, under certain circumstances, to declare and distribute dividends to the 48 members of the association. (NRS 616B.413) Section 5 of this bill: (1) prohibits an 49 association from declaring or distributing dividends to its members; and (2) 50 authorizes an association that has excess assets to reduce the annual assessment 51 required to be paid by each member of the association. 52 Existing law requires each association of self-insured public or private 53 employers to maintain certain reserves. (NRS 616B.419) Section 6 of this bill 54 requires an association to furnish information to the Commissioner upon request for 55 the review of such reserves. 56 Existing law authorizes the Commissioner to: (1) issue orders requiring that an 57 association of self-insured public or private employers or a member of the 58 association cease and desist from engaging in certain prohibited acts; and (2) 59 enforce such orders by imposing administrative fines or withdrawing the certificate 60 of the association if the association or a member violates such an order. (NRS 61 616B.425) Section 7 of this bill additionally authorizes the Commissioner to issue 62 and enforce such cease and desist orders against the board of trustees of an 63 association, the association’s administrator or a third-party administrator employed 64 by the association. 65 Existing law also authorizes the Commissioner to impose administrative fines 66 or institute proceedings to withdraw the certificate of an association for certain 67 violations of existing law and regulations. Existing law authorizes an association 68 that is aggrieved by a decision of the Commissioner to seek judicial review. 69 – 3 – - *SB345* (NRS 616B.428, 616B.431, 616B.437, 616D.120) Sections 8-10 and 12 of this bill 70 make those provisions equally applicable to an association’s administrator. 71 Section 11 of this bill requires the Commissioner to adopt regulations which 72 establish uniform policies for and the required contents of an underwriting plan for 73 each association of self-insured public or private employers. 74 Section 13 of this bill provides that any certificate issued by the Commissioner 75 authorizing a group of employers to act as an association of self-insured public or 76 private employers that is in effect on October 1, 2025, expires on October 1, 2026. 77 Section 13 requires an association of self-insured public or private employers that 78 wishes to continue to act as such an association after October 1, 2026, to apply for 79 and be issued a new certificate. 80 THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. NRS 616B.350 is hereby amended to read as 1 follows: 2 616B.350 1. A group of five or more employers may not act 3 as an association of self-insured public employers unless the group: 4 (a) Is composed of employers that perform related activities in 5 a given industry and are engaged in the same or similar 6 classifications of employment; and 7 (b) Has been issued a certificate to act as such an association by 8 the Commissioner. 9 2. A group of five or more employers may not act as an 10 association of self-insured private employers unless each member of 11 the group [:] performs related activities in a given industry, and: 12 (a) Is a member or associate member of a bona fide trade 13 association, as determined by the Commissioner, which: 14 (1) Is incorporated in this State; and 15 (2) Has been in existence for at least 5 years; and 16 (b) Has been issued a certificate to act as such an association by 17 the Commissioner. 18 3. An association of public or private employers that wishes to 19 be issued a certificate must file with the Commissioner an 20 application for certification. 21 4. The application must include: 22 (a) The name of the association. 23 (b) The address of: 24 (1) The principal office of the association. 25 (2) The location where the books and records of the 26 association will be maintained. 27 (c) The date the association was organized. 28 (d) The name and address of each member of the association. 29 (e) The names of the initial members of the board of trustees and 30 the name of the initial association’s administrator. 31 – 4 – - *SB345* (f) Such other information as the Commissioner may require. 1 5. The application must be accompanied by: 2 (a) A nonrefundable filing fee of $1,000 and, in addition to any 3 other fee or charge, all applicable fees required pursuant to 4 NRS 680C.110. 5 (b) Proof of compliance with NRS 616B.353. 6 (c) Proof that the association or its third-party administrator is 7 licensed or otherwise authorized to conduct business in this State 8 pursuant to title 57 of NRS. 9 (d) A copy of the agreements entered into with the association’s 10 administrator and a third-party administrator. 11 (e) A copy of the bylaws of the association [.] , which must: 12 (1) Contain a statement of fiduciary responsibility for 13 administering the plan of insurance. 14 (2) Establish a procedure for nominating persons who may 15 be elected to the board of trustees of the association which is free 16 from outside influence, control or pressure. 17 (f) [A] An executed copy of an indemnity agreement [jointly 18 and severally binding the association and each member of the 19 association to secure the payment of all compensation due pursuant 20 to chapters 616A to 617, inclusive, of NRS.] as required by 21 NRS 616B.353. 22 (g) A pro forma financial statement prepared by an independent 23 certified public accountant in accordance with generally accepted 24 accounting principles that shows the financial ability of the 25 association to pay all compensation due pursuant to chapters 616A 26 to 617, inclusive, of NRS. 27 (h) A reviewed financial statement prepared by an independent 28 certified public accountant for each proposed member of the 29 association or evidence of the ability of the association or its 30 proposed members to provide a solvency bond pursuant to 31 subsection 3 of NRS 616B.353. 32 (i) Proof that each member of the association will make the 33 initial payment to the association required pursuant to NRS 34 616B.416 on a date specified by the Commissioner. The payment 35 shall be deemed to be a part of the assessment required to be paid by 36 each member for the first year of self-insurance if certification is 37 issued to the association. 38 6. Except as otherwise provided in NRS 239.0115, any 39 financial information relating to a member of an association 40 received by the Commissioner pursuant to the provisions of this 41 section is confidential and must not be disclosed. 42 7. For the purposes of this section, “associate member of a 43 bona fide trade association” means a supplier whose business, as 44 determined by the Commissioner: 45 – 5 – - *SB345* (a) Is limited to a specific industry; and 1 (b) Primarily involves providing a product or service that is 2 directly used or consumed by substantially all of the members of the 3 trade association or bears a direct relationship to the business of the 4 members of the association. 5 Sec. 2. NRS 616B.353 is hereby amended to read as follows: 6 616B.353 1. An association of self-insured public or private 7 employers shall: 8 (a) Execute an indemnity agreement jointly and severally 9 binding the association and each member of the association to 10 secure the payment of all compensation due pursuant to chapters 11 616A to 617, inclusive, of NRS. The indemnity agreement must be 12 in a form prescribed by the Commissioner [.] and must authorize 13 the association to assess fees from members if any member 14 defaults. The agreement must notify members that the 15 Commissioner may assess the association to provide for claims 16 against another association pursuant to NRS 616B.443. An 17 association may add provisions to the indemnity agreement if they 18 are first approved by the Commissioner. 19 (b) Except as otherwise provided in this subsection, maintain a 20 policy of specific and aggregate excess insurance with a self- 21 insured retention of not less than $250,000 in a form and amount 22 required by the Commissioner. The excess insurance must be 23 written by an insurer approved by the Commissioner. To determine 24 the amount of excess insurance required, the Commissioner shall 25 consider: 26 (1) The number of members in the association; 27 (2) If the association is an association of self-insured public 28 employers, the types of governmental services provided by the 29 members of the association; 30 (3) If the association is an association of self-insured private 31 employers, the classifications of employment of the members of the 32 association; 33 (4) The number of years the association has been in 34 existence; and 35 (5) Such other information as the Commissioner deems 36 necessary. 37  Nothing in this paragraph prohibits an association from 38 purchasing secondary excess insurance in addition to the excess 39 insurance required by this paragraph. 40 (c) Collect an annual assessment from each member of the 41 association in an aggregate amount of at least $250,000 or in an 42 aggregate amount which the Commissioner determines is 43 satisfactory based on an annual review conducted by the 44 Commissioner of the actuarial s [Text truncated for display. 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