Illinois General Assembly - Full Text of HB2622
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Full Text of HB2622  100th General Assembly




HB2622 EnrolledLRB100 11185 SMS 21486 b

1    AN ACT concerning regulation.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Illinois Insurance Code is amended by
5changing Section 416 and by adding Article XLVI as follows:
6    (215 ILCS 5/416)
7    Sec. 416. Illinois Workers' Compensation Commission
8Operations Fund Surcharge.
9    (a) As of July 30, 2004 (the effective date of Public Act
1093-840), every company licensed or authorized by the Illinois
11Department of Insurance and insuring employers' liabilities
12arising under the Workers' Compensation Act or the Workers'
13Occupational Diseases Act shall remit to the Director a
14surcharge based upon the annual direct written premium, as
15reported under Section 136 of this Act, of the company in the
16manner provided in this Section. Such proceeds shall be
17deposited into the Illinois Workers' Compensation Commission
18Operations Fund as established in the Workers' Compensation
19Act. If a company survives or was formed by a merger,
20consolidation, reorganization, or reincorporation, the direct
21written premiums of all companies party to the merger,
22consolidation, reorganization, or reincorporation shall, for
23purposes of determining the amount of the fee imposed by this



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1Section, be regarded as those of the surviving or new company.
2    (b)(1) Except as provided in subsection (b)(2) of this
3Section, beginning on July 30, 2004 (the effective date of
4Public Act 93-840) and on July 1 of each year thereafter, the
5Director shall charge an annual Illinois Workers' Compensation
6Commission Operations Fund Surcharge from every company
7subject to subsection (a) of this Section equal to 1.01% of its
8direct written premium for insuring employers' liabilities
9arising under the Workers' Compensation Act or Workers'
10Occupational Diseases Act as reported in each company's annual
11statement filed for the previous year as required by Section
12136. The Illinois Workers' Compensation Commission Operations
13Fund Surcharge shall be collected by companies subject to
14subsection (a) of this Section as a separately stated surcharge
15on insured employers at the rate of 1.01% of direct written
16premium. The Illinois Workers' Compensation Commission
17Operations Fund Surcharge shall not be collected by companies
18subject to subsection (a) of this Section from any employer
19that self-insures its liabilities arising under the Workers'
20Compensation Act or Workers' Occupational Diseases Act,
21provided that the employer has paid the Illinois Workers'
22Compensation Commission Operations Fund Fee pursuant to
23Section 4d of the Workers' Compensation Act. All sums collected
24by the Department of Insurance under the provisions of this
25Section shall be paid promptly after the receipt of the same,
26accompanied by a detailed statement thereof, into the Illinois



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1Workers' Compensation Commission Operations Fund in the State
3    (b)(2) The surcharge due pursuant to Public Act 93-840
4shall be collected instead of the surcharge due on July 1, 2004
5under Public Act 93-32. Payment of the surcharge due under
6Public Act 93-840 shall discharge the employer's obligations
7due on July 1, 2004.
8    (c) In addition to the authority specifically granted under
9Article XXV of this Code, the Director shall have such
10authority to adopt rules or establish forms as may be
11reasonably necessary for purposes of enforcing this Section.
12The Director shall also have authority to defer, waive, or
13abate the surcharge or any penalties imposed by this Section if
14in the Director's opinion the company's solvency and ability to
15meet its insured obligations would be immediately threatened by
16payment of the surcharge due.
17    (d) When a company fails to pay the full amount of any
18annual Illinois Workers' Compensation Commission Operations
19Fund Surcharge of $100 or more due under this Section, there
20shall be added to the amount due as a penalty the greater of
21$1,000 or an amount equal to 5% of the deficiency for each
22month or part of a month that the deficiency remains unpaid.
23    (e) The Department of Insurance may enforce the collection
24of any delinquent payment, penalty, or portion thereof by legal
25action or in any other manner by which the collection of debts
26due the State of Illinois may be enforced under the laws of



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1this State.
2    (f) Whenever it appears to the satisfaction of the Director
3that a company has paid pursuant to this Act an Illinois
4Workers' Compensation Commission Operations Fund Surcharge in
5an amount in excess of the amount legally collectable from the
6company, the Director shall issue a credit memorandum for an
7amount equal to the amount of such overpayment. A credit
8memorandum may be applied for the 2-year period from the date
9of issuance, against the payment of any amount due during that
10period under the surcharge imposed by this Section or, subject
11to reasonable rule of the Department of Insurance including
12requirement of notification, may be assigned to any other
13company subject to regulation under this Act. Any application
14of credit memoranda after the period provided for in this
15Section is void.
16    (g) Annually, the Governor may direct a transfer of up to
172% of all moneys collected under this Section to the Insurance
18Financial Regulation Fund.
19    (h) After the effective date of this amendatory Act of the
20100th General Assembly, the Director shall make a loan to the
21Illinois Employers Mutual Insurance Company of $10,000,000
22from the Illinois Workers' Compensation Commission Operations
23Fund for the start-up funding and initial capitalization of the
24Illinois Employers Mutual Insurance Company. The Board of
25Directors of the Illinois Employers Mutual Insurance Company
26shall make an application to the Director for the loans,



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1stating the amount to be loaned to the Illinois Employers
2Mutual Insurance Company. The Illinois Employers Mutual
3Insurance Company shall repay the loans in full within 5 years
4after issuance, plus any interest that would have accrued
5thereon had the loan not occurred.
6(Source: P.A. 95-331, eff. 8-21-07.)
7    (215 ILCS 5/Art. XLVI heading new)

10    (215 ILCS 5/1700 new)
11    Sec. 1700. Purpose. The purpose of this Article is to
12establish the Illinois Employers Mutual Insurance Company as a
13nonprofit, independent public corporation to insure Illinois
14employers against liability for workers' compensation and
15occupational disease coverage.
16    (215 ILCS 5/1705 new)
17    Sec. 1705. Definitions. As used in this Article:
18    "Board" means the board of directors of the Illinois
19Employers Mutual Insurance Company.
20    "Board director" means a member of the board of directors
21of the Company.
22    "Company" means the Illinois Employers Mutual Insurance
23Company created by this Article.



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1    (215 ILCS 5/1710 new)
2    Sec. 1710. Establishment of the Company.
3    (a) There is hereby created the Illinois Employers Mutual
4Insurance Company, which shall be a nonprofit, independent
5public corporation. The Company shall be operated as a domestic
6mutual insurance company, subject to all applicable provisions
7of this Code.
8    (b) The Company shall issue insurance for workers'
9compensation and occupational disease. The Company shall not
10provide any other type of insurance.
11    (c) The Company shall provide workers' compensation
12coverage to employers at the highest level of service and
13savings consistent with reasonable applicable actuarial
14standards and shall maintain the financial integrity of the
15Company. The Company shall foster employer involvement in
16safety initiatives and the creation of workplace safety plans
17set forth in Section 1740 of this Article.
18    (d) The Company shall not be considered a State agency or
19instrumentality of the State for any purpose. Employees of the
20Company are not employees of the State and are not subject to
21the Personnel Code. The Company shall not receive any State
22appropriations or funds, except for an initial loan or loans
23made pursuant to Section 416 of this Code. The State shall not
24borrow or otherwise appropriate funds from the Company. The
25Company or its liabilities shall not be deemed to constitute a



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1debt or a liability of the State or a pledge of the full faith
2and credit of the State.
3    (215 ILCS 5/1715 new)
4    Sec. 1715. Board of directors.
5    (a) The Company shall be managed by a 7-member board of
6directors. The board of directors shall be appointed by the
7Governor with the advice and consent of the Senate. For the
8initial set of appointments, 2 Board directors shall be
9appointed to a term ending July 1, 2019, 2 Board directors
10shall be appointed to a term ending July 1, 2020, 2 Board
11directors shall be appointed to a term ending July 1, 2021, and
12one Board director shall be appointed to a term ending July 1,
132022. All initial appointments shall be made by the Governor
14within 30 days after the effective date of this amendatory Act
15of the 100th General Assembly. Thereafter, all appointments or
16reappointments shall be a for a 5-year term ending on July 1 of
17the fifth year. The appointment and reappointment of Board
18directors by the Governor shall be subject to the provisions of
19Article 3A of the Illinois Governmental Ethics Act.
20    (b) A Board director appointed by the Governor must meet
21all of the following qualifications:
22        (1) he or she does not have any interest as a
23    stockholder, employee, attorney, agent, broker, or
24    contractor of an insurance entity that writes workers'
25    compensation insurance or whose affiliates write workers'



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1    compensation insurance; however, nothing in this Section
2    shall be construed to prohibit an individual who previously
3    had an interest in an insurance entity that writes workers'
4    compensation insurance or whose affiliates write workers'
5    compensation insurance from being appointed to the Board;
6        (2) he or she is not the spouse or an immediate family
7    member living with a person who has an interest as a
8    stockholder, employee, attorney, agent, broker, or
9    contractor of an insurance entity that writes workers'
10    compensation insurance or whose affiliates write workers'
11    compensation insurance; however, nothing in this Section
12    shall be construed to prohibit an individual who previously
13    had an interest in an insurance entity that writes workers'
14    compensation insurance or whose affiliates write workers'
15    compensation insurance from being appointed to the Board;
16        (3) he or she is a resident of the State of Illinois;
17        (4) he or she is of good moral character and has never
18    pleaded guilty to, or been found guilty of, a felony; and
19        (5) he or she is not a registered lobbyist under the
20    Lobbyist Registration Act.
21    (c) The Board directors shall elect a chairman from the
23    (d) The Board is vested with the full power, authority, and
24jurisdiction over the Company and may perform any necessary or
25convenient act in the exercise of its power. The Board shall
26discharge its duties with the care, skill, prudence, and



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1diligence as that of prudent directors acting in a similar
2enterprise and purpose. The powers of the Board include, but
3are not limited to:
4        (1) the ability to enter into contracts;
5        (2) the purchase of reinsurance; and
6        (3) the declaration of dividends.
7    (e) The Board shall develop bylaws which shall be subject
8to the restrictions set forth in this Article. The bylaws shall
9provide for a schedule of at least quarterly meetings and set
10forth rules specifically relating to the conduct of meetings
11and voting procedures.
12    (f) The Board shall reflect the ethnic, cultural, and
13geographical diversity of the State.
14    (215 ILCS 5/1720 new)
15    Sec. 1720. Ratemaking. The Board shall have full power and
16authority to establish rates to be charged by the Company for
17insurance, subject to the applicable provisions of this Code.
18The Board shall contract for the services of or hire an
19independent actuary, who is a member in good standing with the
20American Academy of Actuaries, to develop and recommend
21actuarially sound rates. Rates shall be set at amounts
22sufficient, when invested, to carry all claims to maturity,
23meet the reasonable expenses of conducting the business of the
24Company, and maintain a reasonable surplus.



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1    (215 ILCS 5/1725 new)
2    Sec. 1725. Guaranty fund. The Company shall be subject to
3Article XXXIV of this Code and shall pay any assessments
4required for members of the Illinois Insurance Guaranty Fund.
5    (215 ILCS 5/1730 new)
6    Sec. 1730. Chief executive officer.
7    (a) The Board shall hire a chief executive officer who
8shall serve at the pleasure of the Board. The chief executive
9officer shall not be a member of the Board and must be
10qualified by education and experience to manage an organization
11with financial and operational obligations to policyholders
12and claimants. The compensation of the chief executive officer
13shall be determined by the Board.
14    (b) The chief executive officer shall be responsible for
15conducting the day-to-day operations of the Company, including
16the hiring of personnel. The chief executive officer shall also
17maintain an Internet website for the Company, which shall
18include information regarding the purchase of policies from the
19Company, as well as any reports required to be published under
20this Article.
21    (c) The chief executive officer shall present a proposed
22operating budget for the Company to the Board for its approval
23on an annual basis. The operating budget shall include a
24description of administrative and personnel costs.



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1    (215 ILCS 5/1735 new)
2    Sec. 1735. Liability. The Board and its employees shall
3not be personally liable for acts performed in good faith,
4without the intent to defraud, and made in an official
6    (215 ILCS 5/1740 new)
7    Sec. 1740. Workplace safety plan.
8    (a) The chief executive officer shall formulate,
9implement, and monitor a workplace safety plan for all
10policyholders. This plan shall include written guidance to
11reduce workplace accidents, prevent injuries, and promote safe
12working conditions. Each plan shall have clearly stated safety
13objectives for the policyholder.
14    (b) Employees of the Company shall have access to the
15premises of any policyholder for the purpose of examining the
16safety conditions of the workplace. The Company may terminate a
17policy if there is a refusal by the policyholder to permit
18on-site examinations by the Company or if the policyholder
19disregards or fails to comply with the safety objectives set
20forth by the Company in the workplace safety plan.
21    (215 ILCS 5/1745 new)
22    Sec. 1745. Investments.
23    (a) The Company shall formulate and adopt an investment
24policy that safeguards the value of all assets and maximizes



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1investment potential. All investments by the Company shall be
2subject to the applicable restrictions for domestic mutual
3insurers set forth in this Code.
4    (b) The Company may retain an independent investment
5counsel who shall be subject to standards applicable to
6fiduciaries responsible for safeguarding the assets of a
8    (215 ILCS 5/1750 new)
9    Sec. 1750. Dividends.
10    (a) The Company may declare a dividend in accordance with
11the requirements set forth in this Code.
12    (b) Dividends may be distributed in the form of premium
13discounts, dividends, or a combination of dividends and
15    (c) In addition to any requirements for dividends set forth
16in this Code, dividends may only be distributed if:
17        (1) the initial funding of the Company has been repaid
18    in full;
19        (2) an independent actuarial report of the prior year's
20    operations has been completed and reviewed by the Board;
21        (3) the Company has met all expenses for administration
22    and claims for the prior year; and
23        (4) adequate reserves exist to pay all claims.
24    (215 ILCS 5/1755 new)



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1    Sec. 1755. Sale of policies. The Company shall administer
2the sale of policies for workers' compensation and occupational
3disease coverage. The Company shall utilize the Internet and
4other technologies to the greatest extent possible in order to
5facilitate the purchase of a policy for employers in this
7    (215 ILCS 5/1760 new)
8    Sec. 1760. Auditing requirements.
9    (a) The Company shall be subject to all examinations and
10audits required under this Code.
11    (b) The Board shall retain a competent and independent firm
12of certified public accountants to perform an annual audit of
13the performance and management of the Company and an audit of
14the accounts, funds, and securities of the Company. The costs
15of these audits shall be paid for by the Company. The audits
16shall be published on the Company's Internet website.
17    (215 ILCS 5/1765 new)
18    Sec. 1765. Annual report.
19    (a) On July 1, 2018, the Board shall prepare and submit a
20report to the Governor, the President of the Senate, the
21Minority Leader of the Senate, the Speaker of the House, and
22the Minority Leader of the House. This report shall describe
23the progress of the Company to date in establishing its
24operations as a domestic mutual insurance company in this State



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1providing workers' compensation and occupational disease
2coverage. This report shall include the information required in
3subsection (b) of this Section, if available.
4    (b) Beginning July 1, 2019 and continuing every July 1
5thereafter, the Board shall prepare and submit a report to the
6Governor, the President of the Senate, the Minority Leader of
7the Senate, the Speaker of the House, and the Minority Leader
8of the House. This report shall contain, at a minimum, the
9following information:
10        (1) a summary of the most recent audits performed
11    pursuant to Section 1760 of this Code;
12        (2) statistical and actuarial data related to the
13    determination of premium rate levels; and
14        (3) the incidence of work-related injuries and costs
15    related to those injuries.
16    (c) The reports required under this Section shall be
17submitted electronically and posted on the Internet website of
18the Company.
19    Section 99. Effective date. This Act takes effect upon
20becoming law.



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2 Statutes amended in order of appearance
3    215 ILCS 5/416
4    215 ILCS 5/Art. XLVI
5    heading new
6    215 ILCS 5/1700 new
7    215 ILCS 5/1705 new
8    215 ILCS 5/1710 new
9    215 ILCS 5/1715 new
10    215 ILCS 5/1720 new
11    215 ILCS 5/1725 new
12    215 ILCS 5/1730 new
13    215 ILCS 5/1735 new
14    215 ILCS 5/1740 new
15    215 ILCS 5/1745 new
16    215 ILCS 5/1750 new
17    215 ILCS 5/1755 new
18    215 ILCS 5/1760 new
19    215 ILCS 5/1765 new