No. 39755 (New Rule): Rule R590-272. Commission Compensation Reporting

(New Rule)

DAR File No.: 39755
Filed: 09/15/2015 05:35:58 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The rule was the result of new legislation requiring a new reporting process for compensation paid to producers on large customer health benefit plan transactions.

Summary of the rule or change:

The rule educates producers, consultants and affiliate producers on how to report annually on compensation received or due on large customer/employer health benefit plans. It tells producers, consultants, and affiliate producers what disclosure information is required and provides a sample form.

State statutory or constitutional authorization for this rule:

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

Anticipated cost or savings to:

the state budget:

Once the process is in place, the state could benefit from a reduction in complaints and phone calls. This could free up FTEs for more critical issues.

local governments:

There will be no cost or savings to local government because the rule governs a reporting mechanism between individual producers and the state.

small businesses:

Small business could be affected because the insurance producers required to report could be part of a small business. The reporting process could cause a minimal increase in time spent on reporting.

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

Large employers will benefit from the reporting because the reports are provided to them to understand all of the expenses involved in a health benefit plan purchase. Large insurance agencies may have a larger cost attributed to the reporting process.

Compliance costs for affected persons:

There is no compliance cost for any affected persons. The reporting process has no required cost associated with it.

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

Reporting is a cost of doing business when associated with a large customer or employer in the insurance industry. This reporting will provide greater transparency to the purchaser, so they will know all commission compensation paid to the producer or agency on a sales transaction.

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 [e-mail]

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:

11/02/2015

This rule may become effective on:

11/09/2015

Authorized by:

Todd Kiser, Commissioner

RULE TEXT

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) 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 a health benefit plan from an insurer or a third party administrator to a large customer.

 

R590-272-2. Scope.

This rule applies to all producers, consultants, and affiliates of producers selling or placing a large customer health benefit plan coverage.

 

R590-272-3. Purpose.

The purpose of this rule is to create a format to provide an annual reporting of commission compensation from an insurer or a third party administrator associated with the sale or placement of a health benefit plan to a large customer.

 

R590-272-4. Annual Accounting of All Compensation for Sale or Placement of a Large Customer Health Benefit Plan.

(1) Any producer, consultant, or affiliate of a producer selling or placing a health benefit plan to a large customer, 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.

(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:

(a) 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)(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: 2015

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

 

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