Multiple Employer Trusts And Self-insured Plans
23-92-101. Registration or licensure required.
(a) “Multiple employer welfare arrangement” has the same meaning as under 29 U.S.C. § 1002(40), as it existed on January 1, 2003.
(b)(1) Every fully insured multiple employer trust and fully insured multiple employer welfare arrangement that intends to provide benefits to citizens of this state shall register with the Insurance Commissioner prior to soliciting or enrolling members or prior to conducting any other business activity in Arkansas.
(2)(A) Each fully insured multiple employer trust and fully insured multiple employer welfare arrangement under this section that is conducting any business activity in Arkansas as of March 18, 2003, shall register with the commissioner no later than July 1, 2003.
(B) After the initial registration, each fully insured multiple employer trust and fully insured multiple employer welfare arrangement under this section that conducts business in Arkansas shall thereafter register with the commissioner no later than January 1 of each year for as long as it continues to do business in Arkansas.
(c)(1) A multiple employer trust or multiple employer welfare arrangement that is not fully insured must obtain a certificate of authority under regulations promulgated by the commissioner before doing business in Arkansas.
(2) In order to remain licensed, a multiple employer trust or multiple employer welfare arrangement that is not fully insured must comply with all Arkansas laws that are not inconsistent with the Employee Retirement Income Security Act of 1974, as it existed on January 1, 2003.
(3)(A) The commissioner shall adopt rules regulating multiple employer trusts and multiple employer welfare arrangements that are not fully insured.
(B) The rules shall include information and procedures concerning:
(i) The criteria and application for obtaining a certificate of authority from the State Insurance Department to conduct business in Arkansas;
(ii) The benefits to be offered;
(iii) Financial requirements;
(iv) Fees;
(v) Insolvency procedures;
(vi) Examinations;
(vii) Filing of forms and rates;
(viii) Written disclosures and other consumer protections;
(ix) Reporting requirements;
(x) Excess or stop loss insurance; and
(xi) Other factors the commissioner deems necessary for the effective regulation of multiple employer welfare trusts and multiple employer welfare arrangements that are not fully insured.
As used in this subchapter, “third party administrator” means any person, firm, or partnership that collects or charges premiums from or adjusts or settles claims on residents of this state in connection with life or accident and health coverage provided by a self-insured plan or a multiple employer trust or multiple employer welfare arrangement. “Third party administrator” includes administrative-services-only contracts offered by insurers and health maintenance organizations but does not include the following persons:
(1) An employer, for its employees or for the employees of a subsidiary or affiliated corporation of the employer;
(2) A union, for its members;
(3) An insurer or health maintenance organization licensed to do business in this state;
(4) A creditor, for its debtors, regarding insurance covering a debt between them;
(5) A credit card-issuing company that advances for or collects premiums or charges from its credit card holders as long as that company does not adjust or settle claims;
(6) An individual who adjusts or settles claims in the normal course of his or her practice or employment and who does not collect charges or premiums in connection with life or accident and health coverage; or
(7) An agency licensed by the Insurance Commissioner and performing duties pursuant to an agency contract with an insurer authorized to do business in this state.
23-92-202. Written agreement required.
A third party administrator may act in that capacity only if he or she has a written agreement with a self-insured plan or trust. The agreement shall be maintained by the administrator and subject to review by the Insurance Commissioner.
23-92-203. Certificate of registration.
(a) No person shall act or hold himself or herself out as an administrator unless he or she obtains a certificate of registration from the Insurance Commissioner.
(b) The certificate may be obtained by submitting an application on a form prescribed by the commissioner, paying a twenty-five dollar ($25.00) filing fee, and placing with the commissioner a surety bond as described in § 23-92-204.
(c) Each application shall have attached to it a list of all self-insured plans and trusts that have entered into service contracts with the applicant for administrative services. Every administrator shall update the list whenever changes occur.
(d) The certificate shall be issued by the commissioner unless, after a hearing, the commissioner determines that the applicant is:
(1) Not competent;
(2) Not trustworthy;
(3) Not financially responsible; or
(4) A convicted felon.
(e) Each certificate of registration shall be valid for the year issued and shall be renewed each year thereafter by submitting a twenty-five dollar ($25.00) annual fee.
(f) After conducting a hearing and finding that an administrator has violated any of the requirements of this subchapter or fails to meet the requirements for the issuance of a certificate, the commissioner may revoke or suspend the certificate of registration.
23-92-204. Bond required — Exceptions.
(a) Every applicant for a certificate of registration shall file with the application, and shall thereafter maintain in force while operating under the registration, a bond in favor of the people of the State of Arkansas executed by an authorized insurer. The bond shall have a total aggregate liability of twenty-five thousand dollars ($25,000). The bond shall be conditioned upon the full accounting and due payment to the person entitled thereto of any funds coming into the possession of the administrator.
(b) The bond shall remain in force until released by the Insurance Commissioner, or until cancelled by the surety. Without prejudice to any liability previously incurred thereunder, the surety may cancel the bond on thirty (30) days' advance written notice to both the administrator and the commissioner.
(c) Any applicant for a certificate of registration or for a renewal of a certificate shall not be required to post a bond pursuant to subsection (a) of this section if the applicant operates only pursuant to an administrative services agreement and does not collect, receive, or remit funds on the behalf of insureds.
23-92-205. Payments to administrator — Presumptions.
(a) When a self-insured plan or a trust utilizes the services of an administrator, the payment of premiums or charges to the administrator by the covered individual are presumed to have been received by the self-insured plan or trust.
(b) The payment of claims or the return of premiums to the administrator are not presumed to have been paid to the covered individual or claimant until the payment is received by the covered individual or claimant.
23-92-206. Collection of premiums, etc. — Deposits and withdrawals.
(a) An administrator is a fiduciary in collecting or returning premiums or charges for the party with whom it has a written agreement for administrative services.
(b) Funds collected by the administrator shall be immediately remitted to the person entitled to the funds or deposited in a separately identifiable bank account which shall be established and maintained by the administrator.
(c) The administrator shall maintain records clearly showing the deposits and withdrawals from the separately identifiable bank account for each party with whom it has a written agreement for administrative services. The administrator shall furnish to the party, upon his or her request, copies of the required records.
(d) Subject to the written agreement required by § 23-92-202, withdrawals from the bank account shall only be made for the following:
(1) Remittance to a plan or trust entitled to the funds;
(2) Deposit in an account maintained in the name of the party with whom the administrator has a written agreement;
(3) Transfer to and deposit in a claims-paying account;
(4) Payment to the administrator for its commission, fees, or charges;
(5) Remittance of return premiums to the person entitled to the funds;
(6) Payment of funds for premiums of reinsurance or pursuant to the provisions of any other contract entered into by the trust or plan.
(a) Every administrator shall maintain at its principal administrative office for the duration of the written agreement referred to in § 23-92-202 and five (5) years thereafter adequate books and records of all transactions between it, self-insured plans, trusts, and covered individuals. These books and records shall be maintained in accordance with prudent standards of insurance recordkeeping.
(b) The Insurance Commissioner shall have access to the books and records for the purpose of examination, audit, and inspection.
(c) Any trade secrets contained therein, including, but not limited to, the identity and addresses of plans and trusts, shall be confidential, except that the commissioner may use the information in any proceedings instituted against the administrator.
The compensation for an administrator may be based on:
(1) Premiums or charges collected;
(2) The number of claims paid or processed, or
(3) Some other fair and equitable basis provided by the contract.
— Arkansas Employee Leasing Act
23-92-301 — 23-92-316. [Repealed.]
— Arkansas Professional Employer Organization Recognition and Licensing Act
This subchapter may be cited as the “Arkansas Professional Employer Organization Recognition and Licensing Act”.
As used in this subchapter:
(1) “Client” means any person who enters into a coemployment relationship as a coemployer with a professional employer organization;
(2) “Coemployer” means a professional employer organization or a client of a professional employer organization;
(3) “Coemployment relationship” means:
(A) As between coemployers, a relationship in which the rights, duties, and obligations of an employer that arise out of an employment relationship have been allocated between coemployers under a professional employer agreement and this subchapter and which is intended to be an ongoing relationship rather than a temporary or project-specific relationship;
(B) As between each professional employer organization and a covered employee to which a professional employer agreement applies, an employment relationship in which:
(i) The professional employer organization is entitled to enforce the rights and is obligated to perform the duties and obligations allocated to the organization by the professional employer agreement and this subchapter; and
(ii) A covered employee is entitled to enforce against the professional employer organization the duties and obligations allocated to the organization by the professional employer agreement and this subchapter; and
(C) As between each client and a covered employee to which a professional employer agreement applies, an employment relationship in which each client:
(i) Is entitled to enforce the rights allocated to the client by the agreement and this subchapter;
(ii) Is obligated to provide and perform the employer obligations allocated to the client by the agreement and this subchapter; and
(iii) Is responsible for any employer right or obligation not otherwise allocated by the agreement or this subchapter;
(4) “Commissioner” means the Insurance Commissioner;
(5) “Controlling person” means:
(A) Any natural person who directly or indirectly possesses the power to direct or cause the direction of the management or policies of any professional employer organization, including:
(i) Direct or indirect control of ten percent (10%) or more of an ownership interest bearing the right to participate in policy making for the professional employer organization; or
(ii) The general power to endorse any negotiable instrument payable to or on behalf of the professional employer organization or to cause the direction of the management or policies of any professional employee organization; and
(B) Any natural person employed, appointed, or authorized by a professional employer organization to enter into a contractual relationship with a client company on behalf of the organization;
(6)(A) “Covered employee” means an individual having a coemployment relationship with a professional employer organization and a client who has entered into a professional employer agreement with respect to the employee.
(B) “Covered employee” includes the client's officers, directors, shareholders, partners, and managers to the extent that those persons act as operational managers or perform services for the client;
(7) “Department” means the State Insurance Department;
(8) “Employer service assurance organization” means an organization licensed under § 23-92-415;
(9) “Licensee” means a professional employer organization licensed under this subchapter;
(10) “Person” means any individual, partnership, corporation, limited liability company, association, or any legally recognized entity, however formed;
(11) “Professional employer agreement” means a written contract by and between a client and a professional employer organization under which the organization and the client agree to establish a coemployment relationship and which satisfies the requirements of § 23-92-409(c);
(12) “Professional employer organization” means any person engaged in the business of providing professional employer services;
(13)(A) “Professional employer organization group” means two (2) or more affiliated professional employer organizations.
(B) Two (2) or more professional employer organizations are affiliated if they have common owners having ownership interests in them of greater than fifty percent (50%);
(14) “Professional employer organization service organization affidavit” means an attestation or certification of a professional employer organization service organization and any additional information that conforms to the requirements in the rules and regulations as promulgated by the commissioner;
(15)(A) “Professional employer services” means the service of entering into a coemployment relationship under this subchapter in which at least a majority of the employees providing services to a client or to a division or work unit of a client are covered employees and in which:
(i) The arrangement is intended to be, or is, ongoing rather than temporary in nature; and
(ii) Employer responsibilities, including the right of direction and control of the employees, are shared by the professional employer organization and the recipient.
(B) “Professional employer services” does not include services performed by temporary employees or by persons determined to be independent contractors with respect to the recipient;
(16)(A) “Temporary help services” means services consisting of a person:
(i) Recruiting and hiring its own employees;
(ii) Finding other organizations that need the services of those employees;
(iii) Assigning those employees to perform work at or for the other organizations to support or supplement the other organizations' workforces or to provide assistance in special work situations, such as, but not limited to, employee absences, skill shortages, seasonal workloads, or to perform special assignments or projects; and
(iv) Customarily attempting to reassign the employees to other organizations when they finish each assignment.
(B) “Temporary help services” shall not be deemed professional employer services; and
(17)(A) “Transacting insurance” includes any of the following actions by a professional employer organization or its representatives:
(i) Soliciting prospective clients based solely or primarily on representation of insurance cost advantages;
(ii) Advising a prospective client regarding insurance coverage; or
(iii) Offering for sale or selling a policy of insurance to a client or employee.
(B) “Transacting insurance” does not include any of the following actions by a professional employer organization or its representatives:
(i) Soliciting prospective clients to enter into professional employee agreements;
(ii) Collecting information from a prospective client related to payroll, employee benefits, employment policies, workplace safety, and other employer responsibilities and operational experience;
(iii) Evaluating collected information to ascertain the professional employer organization's risk and cost associated with serving a prospective client's workforce;
(iv) Informing a prospective client of the terms and conditions under which the professional employer organization will enter into a professional employer agreement; or
(v) Performing employer responsibilities as required by this subchapter.
23-92-403. Relationship to other laws.
(a)(1) Neither this subchapter nor any professional employer agreement shall affect, modify, or amend any collective bargaining agreement or the rights or obligations of any client, professional employer organization, or covered employee under the National Labor Relations Act, as it existed on January 1, 2003.
(2) This subchapter preserves all rights to which a covered employee would be entitled under a traditional employment relationship.
(b) Neither this subchapter nor any professional employer agreement shall affect, modify, or amend any state, local, or federal licensing, registration, or certification requirement applicable to any client or covered employee.
(c) A covered employee who must be licensed, registered, or certified according to law or regulation is deemed solely an employee of the client for purposes of any license, registration, or certification requirement.
(d) A professional employer organization shall not be deemed to engage in any occupation, trade, profession, or other activity that is subject to licensing, registration, or certification requirements, or is otherwise regulated by a governmental entity, solely by entering into and maintaining a coemployment relationship with a covered employee who is subject to this subchapter or to regulations promulgated under this subchapter.
(e)(1) For purposes of determination of tax credits and other economic incentives provided by Arkansas that are based on employment, covered employees are deemed employees solely of the client.
(2) A client is entitled to the benefit of any tax credit, economic incentive, or other benefit arising as the result of the employment of covered employees of the client.
(3) Upon request by a client, each professional employer organization shall provide employment information reasonably required by an Arkansas agency or department that is necessary to support any request, claim, application, or other action by a client seeking any tax credit or economic incentive under subdivision (e)(2) of this section.
(f)(1) Applicants for licensing or a professional employer organization licensed under this subchapter authorize the Arkansas Employment Security Department, the Workers' Compensation Commission, and the State Insurance Department, or their successors, to release otherwise confidential information to the other departments or commission in this subdivision (f)(1) concerning the applicant or professional employer organization upon the written request by the requesting department or commission.
(2) The Arkansas Employment Security Department, the Workers' Compensation Commission, and the State Insurance Department shall maintain the confidentiality of information received under subdivision (f)(1) of this section unless the information is introduced into evidence at an administrative proceeding or at a civil or criminal trial arising out of a violation of this subchapter that involves the applicant, the professional employer organization, or the controlling person.
(g) Neither this subchapter nor any professional employer agreement shall affect, limit, restrict, or modify the rights or obligations of any client, professional employer organization, or covered employee with respect to:
(1) The payment of wages as required by contract or by state or federal law; and
(2) Compliance with the following:
(A) Sections 11-2-101 et seq., 11-3-101 et seq., 11-4-101 et seq., 11-5-101 et seq., 11-6-101 et seq., 11-7-201 et seq., the Arkansas Employment Security Law, § 11-10-101 et seq., and § 11-12-101 et seq.;
(B) Section 20-20-301 et seq.;
(C) Section 22-9-301 et seq., commonly referred to as the “Arkansas Prevailing Wage Law”;
(D) The Arkansas Civil Rights Act of 1993, § 16-123-101 et seq.;
(E) The Public Employees' Chemical Right to Know Act, § 8-7-1001 et seq.; and
(F) Section 7-1-102 concerning voting time, § 16-31-106 concerning jury duty, and § 21-4-101 concerning leave of absence for public service.
23-92-404. Licensing and renewal.
(a) Except as otherwise provided in this subchapter, no person shall provide, advertise, or otherwise hold itself out as providing professional employer services in Arkansas unless the person is licensed as a professional service organization under this subchapter.
(b)(1) Each professional employer organization required to be licensed under this subchapter shall provide the Insurance Commissioner information required by the commissioner on forms prescribed by the commissioner.
(2) The information required under subdivision (b)(1) of this section shall include the following information:
(A) The legal name of the professional employer organization and all other names under which the professional employer organization conducts business;
(B) The address of the principal place of business of the professional employer organization and the address of each office it maintains in Arkansas;
(C) The professional employer organization's taxpayer or employer identification number;
(D) A list by jurisdiction of each name under which the professional employer organization has operated in the preceding five (5) years, including any fictitious names, alternative names, names of predecessors, and, if known, successor business entities;
(E) A statement of ownership that shall include the name and evidence of the business experience of all controlling persons;
(F) A statement of each controlling person disclosing any interest in any other professional employer organization, whether licensed or not in Arkansas, in which the controlling person has a ten percent (10%) or greater interest;
(G) A statement of management, which shall include the name and evidence of the business experience of any person who serves as president or chief executive officer or otherwise has the authority to act as senior executive officer of the professional employer organization; and
(H)(i) A financial statement setting forth the financial condition of the professional employer organization as of a date not earlier than one hundred eighty (180) days before the date the financial statement is submitted to the commissioner.
(ii) The financial statement under subdivision (b)(1)(H)(i) of this section shall be prepared in accordance with generally accepted accounting principles, and unless the professional employer organization provides financial assurance as set forth in § 23-92-408(a)(2), the financial statement shall be audited by an independent certified public accountant licensed to practice in Arkansas or the state of domicile of the professional employer organization.
(iii) A professional employer organization group may submit combined or consolidated financial statements to meet the requirements of this section.
(c)(1) Each professional employer organization operating within this state as of July 16, 2003, shall complete its initial licensing no later than December 31, 2003.
(2) Each professional employer organization not operating within Arkansas as of July 16, 2003, shall complete its initial licensing before beginning operations within this state.
(d)(1) No later than the biennial anniversary date of its licensing, each licensee shall renew its licensing by notifying the commissioner of any changes in the information provided in the licensee's most recent licensing or renewal and by paying a renewal fee.
(2) If a licensee under this subchapter fails to renew its license at the time of renewal and pay the renewal fee, its license shall become delinquent.
(3)(A) Licensees under this subchapter shall have thirty (30) days after the renewal date in which to renew their licenses and pay in addition to the renewal fee under subdivision (d)(1) of this section a late fee not to exceed one thousand dollars ($1,000).
(B) If payment is not received within the thirty-day time period under subdivision (d)(3)(A) of this section:
(i) The license shall automatically become void without further action by the commissioner; and
(ii)(a) The commissioner shall enter a temporary order compelling the professional employer organization to cease and desist from any professional employer services in Arkansas.
(b) The order under subdivision (d)(3)(B)(ii)(a ) of this section shall provide for an opportunity for the professional employer organization to request a hearing.
(c) If the professional employer organization does not request a hearing within thirty (30) days after the entry of the order or if the commissioner finds after a hearing that the professional employer organization's license should not be renewed, the order entered under subdivision (d)(3)(B)(ii)(a ) of this section shall become permanent.
(d) The commissioner shall provide a copy of the order entered under subdivision (d)(3)(B)(ii)(a ) of this section to the Workers' Compensation Commission and the Arkansas Employment Security Department or their successors.
(e)(1) A professional employer organization group may satisfy any reporting and financial requirements of this subchapter on a consolidated basis.
(2) As a condition of licensing as a professional employer organization group, each affiliate of the group shall guarantee payment of all financial obligations with respect to wages, employment taxes, and employee benefits of each affiliate of the group.
(f)(1) A professional employer organization is exempt from the licensing requirements contained in subsections (a)-(e) of this section and §§ 23-92-405, 23-92-406, and 23-92-408 if the professional employer organization:
(A) Submits a properly executed request for exemption on a form provided by the State Insurance Department;
(B) Is domiciled outside of Arkansas and is licensed or registered as a professional employer organization in another state that has requirements the same or greater than this subchapter;
(C) Does not maintain an office in this state or solicit in any manner clients located or domiciled within this state; and
(D) Has one hundred (100) or fewer covered employees employed or domiciled in Arkansas.
(2) A professional employer organization's exemption from the licensing requirements under this subchapter shall be valid for two (2) years, subject to renewal, for as long as the professional employer organization:
(A) Continues to qualify for the exemption; and
(B) On or before the biennial anniversary date of the original grant of exemption, requests the exemption to continue.
(g) The commissioner shall maintain a list of professional employer organizations licensed or exempted under this subchapter.
(h) The commissioner may prescribe forms necessary to promote the efficient administration of this section.
(i) The commissioner shall reject an application for a license or for an exemption from license if the commissioner finds that:
(1) Any controlling person named in the license or exemption application is not of good moral character, business integrity, or financial responsibility; or
(2) The controlling person has violated a provision of this subchapter.
(j) A person engaged in the business of providing professional employer services shall be subject to licensing under this subchapter regardless of its use of the name “professional employer organization”, “PEO”, “staff leasing company”, “licensed staff leasing company”, “employee leasing company”, or any other name.
23-92-405. Controlling person.
(a) Each controlling person shall provide information and certifications necessary for the Insurance Commissioner to determine that the person is of good moral character and:
(1) Is at least eighteen (18) years of age; and
(2) Has the education, managerial, or business experience to successfully act as the controlling person of a professional employer organization.
(b)(1) As used in this subchapter, “good moral character” means a personal history of honesty, trustworthiness, fairness, a good reputation for fair dealings, and respect for the rights of others and for state and federal laws.
(2) The commissioner may conduct a thorough background investigation of the individual's good moral character, as the commissioner may deem necessary.
(c) The commissioner may prohibit a person found to qualify as a controlling person under subsection (a) of this section from exercising control over the professional employer organization if the commissioner subsequently finds that the person no longer qualifies under subsection (a) of this section.
(d) A controlling person may be removed or suspended from control for a definite period if he or she:
(1) Is indicted as the subject of a criminal investigation or is found guilty of, or pleads guilty or nolo contendere to:
(A) Bribery, fraud, or willful misrepresentation in obtaining, attempting to obtain, or renewing a license;
(B) A crime in any jurisdiction that relates to the operation of a professional employer organization business or the ability to engage in business as a professional employer organization; or
(C) Fraud, deceit, or misconduct in the:
(i) Classification of employees for purposes of determining workers' compensation rates;
(ii) Establishment or maintenance of self-insurance, whether health insurance or workers' compensation insurance; or
(iii) Operation of a professional employer organization;
(2) Is confined in any county jail, post adjudication, or confined in any state or federal prison or mental institution;
(3) Can no longer safely be entrusted to deal with the public or in a confidential capacity, due to mental disease or deterioration;
(4) Has been previously suspended and is found guilty for a second time of any misconduct that warrants suspension;
(5) Has been previously suspended and is found guilty of a course of conduct or practice that shows the licensee is so incompetent, negligent, dishonest, or untruthful that the money, property, transactions, and rights of investors or those with whom the licensee may sustain a confidential relationship may not safely be entrusted to the licensee;
(6) Fails to inform the commissioner in writing within thirty (30) days after being found guilty of, or entering a plea of guilty or nolo contendere to, any felony;
(7) Is determined liable for civil fraud by a court in any jurisdiction; or
(8) By bribery, misrepresentation, or fraud, obtains or attempts to obtain a new license or renews or attempts to renew a license to provide professional employer organization services.
23-92-406. Changes in control.
(a)(1) A license issued to any professional employer organization under this subchapter may not be transferred or assigned.
(2) A licensee may not operate an entity subject to licensing under this subchapter under any name or at any location other than that specified in the application for the license or without having received the prior written consent of the Insurance Commissioner.
(3) The commissioner may adopt additional rules to provide for a licensee's change of name or location.
(b)(1) A person or entity that seeks to purchase or acquire control of an entity licensed under this subchapter shall first apply to the commissioner for a certificate of approval for the proposed change of ownership unless the licensed entity to be acquired is a publicly traded entity, in which event the acquiring entity shall apply to the commissioner for a certificate of approval for the proposed change of ownership at the time the licensed entity publishes public notice of the intended purchase or acquisition of control.
(2) The application under subdivision (b)(1) of this section shall contain the name and address of the proposed new owner, controlling person, and any other information required by the commissioner.
(c)(1) Any existing stockholder or partner who intends to acquire control of an existing entity that is licensed under this subchapter shall first apply to the commissioner for a certificate of approval for the proposed change of ownership.
(2) The application shall contain the name and address of any stockholder or partner who owns ten percent (10%) or more of the entity and who seeks to acquire control, and any other information required by the commissioner.
(d)(1) Before recommending that a certificate of approval be issued to an applicant that has applied under subsection (a) or (b) of this section, the commissioner may conduct an investigation of the applicant and examine the records of the entity as part of the investigation in accordance with applicable law.
(2) As a part of his or her investigation, the commissioner shall determine if there are any complaints pending against the company being purchased, the controlling person proposed to operate the purchased entity, or the proposed controlling person's existing company.
(3) The commissioner shall issue a certificate of approval only after he or she has determined that the proposed new owner possesses the financial ability, experience, and integrity to operate the entity as required by this subchapter.
(e) The commissioner shall waive the requirements of subsection (d) of this section and shall automatically approve the proposed change in ownership if:
(1) The application meets the requirements of subsection (b) or (c) of this section;
(2) The proposed new owner and the current owner are part of the same controlled entity; and
(3) No member or controlling person of the controlled entity is under investigation or has been previously denied a license by the commissioner.
(f) Any application that is submitted to the commissioner under this section shall be deemed approved if the commissioner has not approved or rejected the application and provided the applicant with the basis for a rejection within ninety (90) days after the receipt of the completed application.
(a) Upon filing an initial licensing statement under this subchapter, a professional employer organization shall pay an initial licensing fee of one thousand dollars ($1,000).
(b) Upon each biennial renewal of a licensing statement filed under this subchapter, a professional employer organization shall pay a renewal fee of one thousand dollars ($1,000).
(c) Each professional employer organization exempt from licensing under the terms of this subchapter shall pay an exemption fee in the amount of fifty dollars ($50.00) upon initial application for exemption and upon each biennial renewal of the exemption.
(d) Upon the filing of each request for a change in ownership or controlling person filed under this subchapter, a professional employer organization shall pay a change-in-ownership fee of five hundred dollars ($500).
(e) By regulation, the Insurance Commissioner may increase, decrease, or eliminate any fee provided for in this section, but no fee provided for in this section shall ever exceed five thousand dollars ($5,000).
23-92-408. Financial assurance required.
(a) Each professional employer organization shall maintain:
(1) An audited minimum net worth of at least one hundred thousand dollars ($100,000), as reflected in the financial statements submitted to the Insurance Commissioner with the initial licensing, and annually thereafter; or
(2)(A) A bond in the amount of at least one hundred thousand dollars ($100,000).
(B) The terms and conditions of the bond shall be approved by the commissioner.
(C) The bond shall be conditioned so that the licensee and each member, employee, shareholder, or officer of a person, firm, partnership, corporation, or association operating as an agent of the licensee shall not:
(i) Violate the provisions of this subchapter or violate rules, regulations, or orders lawfully promulgated by the commissioner under this subchapter; or
(ii) Fail to pay any wages due under any contract made by the licensee in the conduct of its business subject to this subchapter.
(D) The bond required by this section shall be a surety bond issued by a corporate surety or insurer authorized to do business in Arkansas.
(E) In lieu of a bond, the professional employer organization may deposit either:
(i) Securities with a minimum market value of at least one hundred thousand dollars ($100,000) with an approved depository under an approved depository agreement under § 23-69-134(b)(4); or
(ii) An irrevocable letter of credit in a face amount of not less than one hundred thousand dollars ($100,000) in a form that is acceptable to the commissioner.
(F) The bond, deposited securities, or letter of credit shall secure payment by the professional employer organization of all taxes, wages, benefits, or other entitlement due to or with respect to a covered employee if the professional employer organization does not make the payments when due.
(G) Any securities deposited under this subsection may be included for the purpose of calculation of the minimum net worth required by this subsection.
(b)(1) Within forty-five (45) days after the end of each calendar quarter, a professional employer organization shall submit to the commissioner a statement by an independent certified public accountant that all applicable state payroll taxes for covered employees located in this state have been paid on a timely basis for that quarter.
(2) The statement shall be either in the form of an examination level attestation or shall be based upon agreed-upon procedures acceptable to the commissioner.
(3) The commissioner shall issue by rule requirements for procedures referred to in subdivision (b)(2) of this section.
(c)(1) If any person is aggrieved by the misconduct of any licensee, that person may maintain an action in his or her own name upon the bond or assets of the professional employer organization in any court of competent jurisdiction in this state.
(2) All claims shall be assignable, and the assignee shall be entitled to the same remedies upon the bond of the licensee as the aggrieved person would have been entitled if the claim had not been assigned.
(3) Any assignable claim under subdivision (c)(2) of this section may be enforced in the name of the assignee.
(4) Any remedy provided by this section is in addition to any other remedy which otherwise exists.
(d) An action on the bond or other security required by this section may be maintained by the commissioner in the name of the State of Arkansas in any court of competent jurisdiction in this state for the benefit of any person or persons aggrieved by the misconduct of the licensee.
(e)(1) If any licensee fails to file a new bond with the commissioner within thirty (30) days after notice of cancellation by the surety of the bond required by this section, the license issued to the licensee or the principal under the bond shall be deemed suspended until a new surety bond is filed with and approved by the commissioner.
(2) A person whose license is suspended under this section shall not carry on the business of a professional employer organization during the period of the suspension.
23-92-409. Relationships defined.
(a)(1) Except as specifically provided in this subchapter, the coemployment relationship between the client and the professional employer organization and between each coemployer and each covered employee shall be governed by the professional employer agreement.
(2) Neither this subchapter nor any professional employer agreement shall:
(A) Diminish, abolish, or remove rights of covered employees as to clients or obligations of clients as to a covered employee that existed before the effective date of a professional employer agreement;
(B) Terminate an employment relationship existing before the effective date of a professional employer agreement; or
(C) Create any new or additional enforcement right of a covered employee against a professional employer organization not specifically allocated to the professional employer organization in the professional employer agreement or under this subchapter.
(b) Except as specifically provided in this subchapter or in the professional employer agreement, in each coemployment relationship:
(1) The client is entitled to exercise all rights and is obligated to perform all duties and responsibilities otherwise applicable to an employer in an employment relationship; and
(2)(A) The professional employer organization shall be entitled to exercise only the rights and obligated to perform only the duties and responsibilities specifically required by this subchapter or by the professional employer agreement.
(B) The rights, duties, and obligations of the professional employer organization as coemployer with respect to any covered employee is limited to those rights during and obligations arising under the professional employer agreement and this subchapter during the term of coemployment by the professional employer organization of the covered employee.
(c) Each professional employer agreement shall include, at a minimum, the following:
(1)(A) The professional employer organization shall reserve a right of direction and control over the covered employees.
(B) However, the client may retain the right to exercise direction and control over covered employees as is necessary to:
(i) Conduct the client's business;
(ii) Discharge any fiduciary responsibility that it may have; or
(iii) Comply with any applicable licensing requirements;
(2) The professional employer organization shall:
(A) Pay wages and salaries to covered employees;
(B) Withhold, collect, report, and remit payroll-related and employment taxes; and
(C) To the extent the professional employer organization has assumed responsibility in the professional employer agreement, make payments for employee benefits for covered employees;
(3) The professional employer organization shall retain the authority to hire, terminate, and discipline the covered employees unless otherwise agreed; and
(4)(A) The responsibility to obtain workers' compensation coverage for covered employees from a carrier licensed to do business in Arkansas and otherwise in compliance with all applicable requirements shall be specifically allocated to either the client or the professional employer organization.
(B)(i) If the responsibility under subdivision (c)(4)(A) of this section is allocated to the professional employer organization under a professional employer agreement, the agreement shall require the professional employer organization to maintain records regarding the premium and loss experience related to workers' compensation insurance provided to covered employees under the agreement.
(ii) The professional employer agreement shall also provide that, if requested by the client at or after the termination of the agreement, the professional employer organization shall provide the records maintained under subdivision (c)(4)(B)(i) of this section to the client.
(C) If the professional employer organization or any of its controlling persons cannot provide the information requested under subdivision (c)(4)(B)(ii) of this section, any insurance carrier that provided the coverage for the covered employees shall provide it upon request of the client or the Insurance Commissioner.
(5)(A) Upon request, during the period the client is a party to a professional employer organization arrangement and for a period of ninety (90) days after termination of a professional employer organization arrangement, a client or former client is entitled to receive records of the professional employer organization regarding payroll, workers' compensation coverage, losses and claims, and employee benefits provided under the professional employer organization arrangement.
(B)(i) The professional employer organization may charge a reasonable fee for the cost of reproducing the information under subdivision (c)(5)(A) of this section.
(ii) This section does not require the disclosure of information to a client or former client concerning another client or former client of the professional employer organization.
(C) Either the professional employer organization or the controlling person, to the extent the person has access to the information, shall furnish the information requested within thirty (30) days of receiving the request.
(d) With respect to each professional employer agreement entered into by a professional employer organization, each professional employer organization shall provide written notice to each covered employee affected by the agreement of the general nature of the coemployment relationship between and among the professional employer organization, the client, and any covered employee.
(e)(1) A professional employer organization shall provide to a client within fifteen (15) days of receipt of a written request a record of wages by workers' compensation class code and claims loss runs for the lesser of the prior thirty-six (36) calendar months or the period of time the professional employer agreement between the client and professional employer organization has been effective.
(2) If a professional employer organization fails to provide the information in subdivision (e)(1) of this section and if the commissioner requests no later than ninety (90) days after the termination of the policy covering the client, the insurer providing the coverage shall provide to the client within thirty (30) days the information or as much information as the insurer possesses or should possess if the insurer has complied with applicable law.
(f)(1) Either a client or a professional employer organization may sponsor retirement and welfare benefit plans for its covered employees.
(2) If limited to the employees of the professional employer organization, a welfare benefit plan offered to the covered employees of a single professional employer organization shall not be considered a multiple employer welfare arrangement or trust within the meaning of applicable law.
(3) For purposes of § 23-86-201 et seq., with respect to a health benefit plan sponsored by a professional employer organization:
(A) A professional employer organization shall be considered the employer of all of its covered employees; and
(B) All covered employees of one (1) or more clients participating in a health benefit plan sponsored by a single professional employer organization shall be considered employees of the professional employer organization.
(4) If a professional employer organization offers to its covered employees any health benefit plan that is not fully insured by an authorized insurer, the plan shall:
(A) Utilize a third-party administrator licensed to do business in this state;
(B) Hold all plan assets, including participant contributions, in a trust account; and
(C) Provide sound reserves for the plan as determined using generally accepted actuarial standards.
(g) Except to the extent otherwise provided in a professional employer agreement:
(1) A professional employer organization shall not be liable for the acts, errors, or omissions of a client or of any covered employee when the covered employee is acting under the direction and control of a client;
(2) A client shall not be liable for the acts, errors, or omissions of a professional employer organization or of any covered employee of the client and a professional employer organization when the covered employee is acting under the direction and control of the professional employer organization;
(3) This subsection does not limit any contractual liability or obligation specifically provided in a professional employer agreement or the liabilities and obligations of any professional employer organization or client as defined elsewhere in this subchapter; and
(4) A covered employee is not, solely as the result of being a covered employee of a professional employer organization, an employee of the professional employer organization for purposes of general liability, insurance, fidelity bonds, surety bonds, or employer's liability not covered by workers' compensation carried by the professional employer organization unless the covered employees are included by specific reference in the professional employer agreement and applicable prearranged employment contract, insurance contract, or bond.
(h) Except as provided under § 23-92-411, the sale of professional employer services provided by professional employer organizations licensed under this subchapter shall not constitute the sale of insurance for purposes of Arkansas insurance law.
(i) Covered employees whose services are subject to sales tax shall be deemed the employees of the client for purposes of collecting and levying sales tax on the services performed by the covered employee.
(j) A licensed professional employer organization shall be deemed an employer of the covered employees and shall perform the following employer responsibilities in conformity with all applicable federal and state laws and regulations to:
(1) Pay wages and collect, report, and pay employment taxes from its own accounts;
(2) Pay unemployment taxes as required by the Arkansas Employment Security Law, § 11-10-101 et seq.;
(3)(A) Ensure that all covered employees are covered by workers' compensation insurance provided in conformance with the laws of this state.
(B) Workers' compensation coverage may be provided through a policy or plan maintained by either the professional employer organization or the client.
(C) However, for purposes of risks insured under the Arkansas Workers' Compensation Insurance Plan, § 23-67-301 et seq., the commissioner is authorized to promulgate rules and regulations as he or she deems necessary to assure that workers' compensation coverage is available to employees providing services for a client;
(4) Be entitled and to entitle the client, together as joint employers, to the exclusive remedy under § 11-9-105, under both the workers' compensation and employer's liability provisions of a workers' compensation policy or plan that either party has secured within the meaning of § 11-9-105; and
(5)(A) Not be vicariously liable for the liabilities of the client, whether contractual or otherwise.
(B) However, the client shall not be vicariously liable for the liabilities of the professional employer organization, whether contractual or otherwise.
(C) This section shall limit any direct contractual liability or any joint liability between the client and the professional employer organization.
23-92-410. Issuance, refusal, suspension, or revocation of license — Grounds and procedure.
(a) The Insurance Commissioner shall issue a license as a professional employer organization to any person who qualifies for the license under the terms of this subchapter.
(b) In addition, the commissioner may refuse to issue a license to any person, may suspend or revoke the license of any professional employer organization, or impose administrative fines as provided for in this subchapter when the commissioner finds:
(1) That the licensee or applicant has violated any of the provisions of this subchapter, the rules and regulations or other orders lawfully promulgated by the commissioner, or the conditions of financial assurances required by this subchapter;
(2) That the licensee or applicant has engaged in a fraudulent, deceptive, or dishonest practice; or
(3) For good and sufficient cause, that the licensee or applicant is unfit to be a professional employer organization within the meaning of this subchapter or of any of the rules and regulations or orders lawfully promulgated by the commissioner.
(c) The commissioner may not refuse to issue a license or suspend or revoke a license unless he or she furnishes the professional employer organization with a written statement of the charges against it and affords it an opportunity to be heard on the charges.
23-92-411. Deceptive practices.
(a) No professional employer organization shall:
(1) Evade or attempt to evade the provisions of this subchapter by purporting to be the sole employer of the covered employees;
(2) Present a proposal to enter into a professional employer agreement with a prospective client unless the following notice is printed in not less than 12-point bold type on the first page of the proposal:
“This proposal is intended to provide information about the general terms and conditions under which the above named firm will enter into an agreement to provide professional employer services. Information contained in this proposal does not constitute advice on legal, tax, or insurance matters. For advice on these matters, you should consult with the appropriate licensed professional.”;
(3) Enter into a professional employer agreement without a written provision signed by the client stating that the client is responsible for ensuring with the assistance of a licensed insurance producer that any subcontractor of the client has workers' compensation coverage as required by law;
(4) Transact insurance, as defined under § 23-60-102, except through a licensed resident or nonresident insurance producer;
(5) Use the name or title “licensed employee leasing company”, “employee leasing company”, “employee leasing company group”, “professional employer”, “professional employer organization”, “PEO”, “controlling person”, or words that would tend to lead one to believe that the person or entity is licensed under this subchapter when the person or entity has not been licensed under this subchapter;
(6) Attempt to use a license that has lapsed or has been suspended or revoked;
(7) Fail to maintain workers' compensation insurance as required by this subchapter;
(8) Conduct business without an active license;
(9) Transfer or attempt to transfer a license issued under this subchapter;
(10) Violate or fail to conform to any provision of this subchapter or any lawful order or rule issued under this subchapter;
(11) Fail to notify the Insurance Commissioner in writing of any change of the primary business address or the addresses of any of the licensee's offices in the state;
(12) Have an adverse material final action taken by any state or federal regulatory agency for violations within the scope or control of the licensee;
(13) Fail to inform the commissioner in writing within thirty (30) days after any adverse material final action by a state or federal regulatory agency;
(14) Fail to meet or maintain the requirements for licensure as a professional employer organization; or
(15) Attempt to obtain or renew a license to provide professional employment services by bribery, misrepresentation, or fraud.
(b) The commissioner may prescribe by regulation additional acts or omissions that shall be deemed to constitute deceptive practices under this subchapter.
(a) Any person who engages in the business of a professional employer organization or acts as a professional employer organization without first procuring a license or who otherwise violates any of the provisions under this subchapter shall be liable for a civil penalty of not less than two hundred fifty dollars ($250) nor more than five thousand dollars ($5,000) for each day that it engages in the business of providing professional employer services without a license.
(b)(1) Any person who violates any of the provisions under this subchapter or who violates any rules or regulations promulgated by the commissioner under this subchapter shall be liable for a civil penalty for each offense of not less than two hundred fifty dollars ($250) nor more than five thousand dollars ($5,000) for each violation.
(2) For any violation affecting two (2) or more employees covered by a professional employer organization agreement, the fine shall be multiplied by the number of employees affected by the violation.
(c) The Insurance Commissioner shall have the statutory power to enjoin or restrain by bringing an action in the Pulaski County Circuit Court against any person who engages in the business of or acts as a professional employer organization without having first procured a license for engaging in the business of a professional employer organization or acting as a professional employer organization.
23-92-413. Nondisclosure of proprietary information.
(a)(1) Professional employer organizations and professional employer organization groups are required under this subchapter to file with the Insurance Commissioner certain proprietary material, including financial records and financial information and client lists, the disclosure of which would give advantage to competitors.
(2)(A) The commissioner shall not consider proprietary material under this subchapter to be subject to mandatory disclosure under § 25-19-105(b)(9)(A).
(B) If litigation or any other proceedings are instituted to compel disclosure, the total expense of the proceedings shall be paid by the professional employer organization or professional employer organization group whose proprietary material is being sought.
(C) The commissioner shall give notice in writing to any professional employer organization or professional employer organization group whose client lists or other material that the commissioner deems to be proprietary are being sought under the Freedom of Information Act of 1967, § 25-19-101 et seq.
(b) Notwithstanding subsection (a) of this section or any other law governing disclosure of confidential information, the commissioner, the Director of the Arkansas Employment Security Department, and the Workers' Compensation Commission may exchange information among themselves for the purposes of regulating professional employer organizations.
23-92-414. Employer service assurance organization affidavit.
(a) The Insurance Commissioner may provide by rule and regulation for the acceptance of an employer service assurance organization affidavit provided on behalf of a professional employer organization in lieu of the requirements under §§ 23-92-404 — 23-92-406 and 23-92-408 and the fees provided for in § 23-92-407.
(b) The fee for filing an employer service assurance organization affidavit shall be five hundred dollars ($500) for initial licensure and five hundred dollars ($500) for each biennial renewal.
23-92-415. Licensing of employer service assurance organizations.
(a)(1) No employer service assurance organization shall provide any service relating to the regulation of professional employer organizations, and no state agency, professional employer organization, or insurer shall utilize the services of the organization for those purposes unless the organization has obtained a license from the Insurance Commissioner.
(2) No state agency, professional employer organization, or insurer shall use the services of an employer service assurance organization unless the organization has obtained a license from the commissioner.
(b) No employer service assurance organization shall refuse to supply any services for which it is licensed in Arkansas to any state agency, professional employer organization, or insurer authorized to do business in Arkansas and offering to pay the fair and usual compensation for the services.
(c)(1) An employer service assurance organization applying for a license shall include with its application:
(A) A copy of its:
(i) Constitution, charter, or articles of organization, agreement, association, or incorporation; and
(ii) Bylaws, plan of operation, and any other rules or regulations governing the conduct of its business;
(B) A list of its members and subscribers;
(C) The name and address of one (1) or more residents of this state upon whom notices, process affecting it, or orders of the commissioner may be served;
(D) A statement showing its technical qualifications for acting in the capacity for which it seeks a license;
(E)(i) Financial assurance acceptable to the commissioner, including:
(a)(1) A surety bond issued by a corporate surety in favor of a trust, maintained at a national bank with the bank serving as trustee, in an amount of not less than one million dollars ($1,000,000) or an equivalent amount of cash or other security acceptable to the commissioner on behalf of each professional employer organization for which the employer service assurance organization provides an affidavit under § 23-92-414.
(2) The security under subdivision (c)(1)(E)(i)(a )(1 ) shall be held by the trust to compensate for payment of claims made by clients, employees, insurers, or taxing authorities in accordance with the employer service assurance organization's policies and procedures, as approved by the commissioner, and if the professional employer organization fails to pay wages, taxes, insurance premiums, and contributions to employee retirement plans as promised in its professional employer organization service arrangement or as required by law; and
(b) A surety bond issued by a corporate surety in favor of the State of Arkansas in the amount of not less than one hundred thousand dollars ($100,000), the terms and conditions of which shall be approved by the commissioner.
(ii) The one hundred thousand dollar ($100,000) surety bond shall be conditioned so that any professional employer organization for which the employer service assurance organization provides an affidavit under § 23-92-414 and each member, employee, shareholder, or officer or a person, firm, partnership, corporation, or association operating as an agent of the professional employer organization will not violate rules, regulations, or orders lawfully promulgated by the commissioner under this subchapter or fail to pay any wages due under any contract made by the professional employer organization in the conduct of its business under this subchapter;
(F) License fees as provided by § 23-61-401 for rate service organizations; and
(G) Any other relevant information and documents that the commissioner may require.
(2)(A) Every organization that has applied for a license shall notify the commissioner of every material change in facts or in the documents on which its application was based.
(B) Any amendment to a document filed under this section shall become effective thirty (30) days after it is filed.
(3)(A) If the commissioner finds that the applicant and the natural persons through whom it acts are competent, trustworthy, and technically qualified to provide the services proposed and that all requirements of the law are met, he or she shall issue a license specifying the authorized activity of the applicant.
(B) The commissioner shall not issue a license if the proposed activity would tend to create a monopoly or to lessen substantially the competition in any market.
(4) Licenses issued under this section shall remain in effect until the licensee withdraws from the state or until the license is suspended or revoked if an employer service assurance organization under § 23-92-416 continues the license each calendar year, upon the following activity by the licensee:
(A) Payment on or before January 1 of a continuation fee as provided in § 23-61-401 for rate service organizations;
(B) Filing of a letter requesting continuation of its license for the following calendar year; and
(C) Submission of information that may be required by the commissioner.
23-92-416. Employer service assurance organizations — Prohibited activities.
(a) No employer service assurance organization shall attempt to monopolize or to combine or conspire with any other person to monopolize any market or make any arrangement with any professional employer organization, employer service assurance organization, or other person that has the purpose or effect of unreasonably restraining trade or of substantially lessening competition in the business of professional employer organization services or insurance.
(b) An employer service assurance organization may not have or adopt any rule, exact any agreement, or formulate or engage in any program that would require any member or subscriber to:
(1) Interfere with the right of any professional employer organization to conduct business in the state as permitted by law and independent of that service organization;
(2) Utilize some or all of its services as provided by the service organization's policies and procedures as approved by the Insurance Commissioner;
(3) Adhere to its standards, procedures, or membership requirements except on a voluntary basis; or
(4) Prevent any professional employer organization from acting independently.
23-92-417. Employer service assurance organization — Permitted activities.
In addition to other activities permitted, any employer service assurance organization may:
(1) Provide services under §§ 23-92-414 and 23-92-419(b);
(2) Develop and administer standards, procedures, and programs of accreditation and financial assurance and other services for professional employer organizations and state agencies unless otherwise prohibited by law; and
(3) Furnish any other services not prohibited by this subchapter.
23-92-418. Filing of information.
(a) Each employer service assurance organization shall file with the Insurance Commissioner each affidavit and related document and information under § 23-92-414 or
§ 23-92-419(b) on or before the date the affidavit or related document and information are otherwise due, as prescribed by the commissioner.
(b) The commissioner may extend the filing deadline by prior written notice to the filer.
23-92-419. Rules and regulations.
(a)(1) The Insurance Commissioner may prescribe rules and regulations for the conduct of the business of professional employer organizations needed to implement this subchapter.
(2) The commissioner shall adopt rules and regulations under this subchapter in compliance with the Arkansas Administrative Procedure Act, § 25-15-201 et seq.
(b)(1) The commissioner may adopt reasonable rules for use by employer service assurance organizations to record and report to the commissioner information determined by the commissioner to be necessary or appropriate for the administration of this subchapter and for the effectuation of its purposes.
(2) The commissioner may designate one (1) or more employer service assurance organizations to assist him or her in gathering, compiling, and reporting the information.