SECTION 13.573. Hazardous Condition; Violations of Statute

(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.

Source Note: The provisions of this §13.573 adopted to be effective May 17, 2016, 41 TexReg 3479