Ariz. Admin. Code § R20-5-1539 - Retrospective Rating Plan; Eligibility; Formula; Necessary Information
A. The Division may
require a Self-Insurer to use a Retrospective Rating Plan for purposes of
premium taxes required under A.R.S. §§
23-961 and 23-1065 if:
1. The Self-Insurer has an Experience
Modification Rate specific to Arizona that exceeds 1.10 for two consecutive
years; or
2. The Self-Insurer
demonstrates financial instability as evidenced by declining financial ratios,
an increase in leveraged debt or a net loss.
B. The Division shall calculate the net
taxable premium under a Retrospective Rating Plan, using the most recent year's
data, as follows: {[(payroll multiplied by the Payroll Classification Rate)
multiplied by (the Experience Modification Rate specific to Arizona) multiplied
by (1 minus the Deviation Rate) multiplied by the (Basic Premium Factor)] plus
[(losses for the current year plus adjusted losses from the previous year)
multiplied by (the Loss Conversion Factor)]} multiplied by the tax
multiplier.
C. The Retrospective
Rating Plan applies only to operations and payroll in Arizona. The Self-Insurer
shall combine all operations in Arizona to calculate the premium taxes required
under A.R.S. §§
23-961 and 23-1065.
D. The Experience Modification Rate specific
to Arizona for purposes of determining the net taxable premium under a
Guaranteed Cost Plan shall be calculated in the manner described in
R20-5-1534(C). If the Division cannot calculate an Experience Modification Rate
in the second and all following tax years because the Self-Insurer does not
have any injuries, the Experience Modification Rate shall be set at
1.00.
E. The Division shall use
assigned risk rates to calculate the premium taxes required under A.R.S.
§§
23-961 and 23-1065 for all SelfInsurers on the Retrospective
Rating Plan. The assigned risk rates shall be established annually by an
actuary retained by the Commission that is a member the American Academy of
Actuaries (MAAA) or a fellow of the Casualty Actuarial Society
(FCAS).
F. A Self-Insurer shall
provide the information required by R20-5-1536(E) in support of using a
Retrospective Rating Plan.
Notes
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