DAR File No. 39755

Insurance, Administration

Rule R590-272

Commission Compensation Reporting

Change in Proposed Rule

DAR File No.: 39755
Filed: 04/15/2016 02:19:48 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The changes clarify that this rule applies only to a health benefit plan sold to a large customer. The rule is being changed based on revisions made in H.B. 36, passed during the 2016 General Session.

Summary of the rule or change:

The changes clarify that this rule applies only to a health benefit plan sold to a large customer based on revisions made to Subsection 31A-23a-501(4)(f) in H.B. 36, passed during the 2016 General Session. (DAR NOTE: This is the second change in proposed rule (CPR) for Rule R590-272. The original proposed new rule upon which the first CPR was based was published in the October 1, 2015, issue of the Utah State Bulletin, on page 72. The first CPR upon which this second CPR is based was published in the January 15, 2016, issue of the Utah State Bulletin, on page 124. Underlining in the rule below indicates text that has been added since the publication of the proposed new rule and the first CPR mentioned above; strike out indicates text that has been deleted. You must view the first CPR, the second CPR, and the proposed new rule together to understand all of the changes that will be enforceable should the agency make this rule effective.)

State statutory or constitutional authorization for this rule:

• Subsection 31A-2-201(3)
• Subsection 31A-23a-501(4)(f)

Anticipated cost or savings to:

the state budget:

There is no anticipated cost or savings to state budget because the rule governs only reports required for producers who sell a health benefit plan to certain large customers.

local governments:

There is no anticipated cost or savings to local governments because the rule governs only reports required for producers who sell a health benefit plan to certain large customers.

small businesses:

Small businesses may see slight savings because of a reduction in administrative costs to producers and consultants who have sold a health benefit plan to a large customer that is the state; a political subdivision of the state; a county, city, town, or local district; or a quasi-public corporation (Subsection 31A-23a-501(4)(f)(I)).

persons other than small businesses, businesses, or local governmental entities:

Large employers may see slight savings because of a reduction in administrative costs to producers and consultants who have sold a health benefit plan to a large customer that is the state; a political subdivision of the state; a county, city, town, or local district; or a quasi-public corporation (Subsection 31A-23a-501(4)(f)(I)).

Compliance costs for affected persons:

There are no compliance costs for any affected persons because there is no cost to comply with the changes to the rule.

Comments by the department head on the fiscal impact the rule may have on businesses:

This rule change is required due to actions taken by the Utah Legislature in H.B. 36, passed during the 2016 General Session.

Todd E. Kiser, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Steve Gooch at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at sgooch@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

05/31/2016

This rule may become effective on:

06/07/2016

Authorized by:

Steve Gooch, Information Specialist

R590. Insurance, Administration.

R590-272. Commission Compensation Reporting.

R590-272-1. Authority.

This rule is promulgated pursuant to Subsections 31A-2-201(3) and 31A-23a-501(4)(f) that authorizes the commissioner to adopt a rule to educate producers, consultants, and affiliates of producers how to provide an annual accounting of commission compensation as a result of the sale or placement of [insurance]a health benefit plan to a large customer.

 

R590-272-2. Scope.

This rule applies to all producers, consultants, and affiliates of producers selling or placing [insurance]a health benefit plan to a large customer described in Subsection 31A-23a-501(4)(f)(A), (B), (C) or (D).

 

R590-272-3. Purpose.

The purpose of this rule is to create a format, other than an Internal Revenue Service Form 5500, to provide an annual reporting of commission compensation from an insurer or a third party administrator associated with the sale or placement of [insurance]a health benefit plan to a large customer.

 

R590-272-4. Annual Accounting of All Compensation for Sale or Placement of Insurance to a Large Customer.

(1) Any producer, consultant, or affiliate of a producer selling or placing [insurance]a health benefit plan to a large customer described in Subsection 31A-23a-501(4)(f)(A), (B), (C) or (D), shall provide the large customer an annual accounting of all commission compensation that has been received or shall be received from an insurer or third party administrator as the result of a sale or placement.

(2) The accounting shall be provided [within fifteen days following the last day of the plan year]prior to the last day of the seventh month after the plan year ends.

(3) A copy of this annual accounting must be kept on file from inception until three years after the completion of the contract, and must be made available upon request of the commissioner.

(4) The annual accounting must include, at minimum, one of the following:

(a) a completed Department of the Treasury Internal Revenue Form 5500, Annual Return/Report of Employee Benefit Plan, and its relevant attachments for the applicable plan year; or

(b) the following:

(i) plan sponsor;

(ii) name of plan;

(iii) name and address of the plan administrator;

(iv) name of the insurance company;

(v) effective date of the plan;

(vi) number of active participants at beginning of the plan year;

(vii) total commission compensation paid or due during the plan year, and shall include on separate reporting lines:

(A) commissions;

(B) overrides;

(C) bonuses;

(D) contingent bonuses; or

(E) contingent commissions; and

(F) the name and address of each producer, consultant or affiliate to whom commissions are paid or due; and

(viii) signature lines for the plan administrator and the employer/plan sponsor for each producer, consultant or affiliate declaration[; or

(b) a completed Department of the Treasury Internal Revenue Form 5500(2014), Annual Return / Report of Employee Benefit Plan, version 140124].

(5) Each item listed in R590-272-4(4)([a]b)(vii) shall be separately identified in the report.

(6) A sample form, The Large Customer Compensation Disclosure Form, is available at the department and online at http://www.insurance.utah.gov/legalresources/currentrules.html.

 

R590-272-5. Enforcement Date.

The commissioner will begin enforcing the provisions of this rule 45 days from the rule's effective date.

 

R590-272-6. Severability.

If any provision or clause of this rule or its application to any person or situation is held invalid, that invalidity shall not affect any other provision or application of this rule which can be given effect without the invalid provision or application, and to this end the provisions of this rule are declared to be severable.

 

KEY: agency compensation, agent compensation, insurance, producer compensation

Date of Enactment or Last Substantive Amendment: 2016

Authorizing, and Implemented or Interpreted Law: 31A-2-201(3); 31A-23a-501(4)