BILL NUMBER: AB 1188	CHAPTERED  09/27/08

	CHAPTER  428
	FILED WITH SECRETARY OF STATE  SEPTEMBER 27, 2008
	APPROVED BY GOVERNOR  SEPTEMBER 27, 2008
	PASSED THE SENATE  AUGUST 14, 2008
	PASSED THE ASSEMBLY  AUGUST 25, 2008
	AMENDED IN SENATE  JULY 1, 2008
	AMENDED IN SENATE  JUNE 9, 2008
	AMENDED IN ASSEMBLY  APRIL 24, 2007
	AMENDED IN ASSEMBLY  APRIL 11, 2007

INTRODUCED BY   Assembly Member Coto

                        FEBRUARY 23, 2007

   An act to amend Section 742.245 of the Insurance Code, relating to
multiple employer welfare arrangements.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1188, Coto. Multiple employer welfare arrangements:
investments.
   Existing law provides for the certification by the Insurance
Commissioner of self-funded or partially self-funded multiple
employer welfare arrangements (MEWAs) if certain requirements are
met, including maintaining a specified cash surplus. Existing law
requires a self-funded or partially self-funded MEWA to maintain 25%
of that surplus in specified investments and authorizes the balance
of the assets of the MEWA to be invested in certain other
investments, as specified. Existing law requires a self-funded or
partially self-funded MEWA transacting business in the state to file
certain financial statements with the commissioner.
   This bill would authorize a self-funded or partially self-funded
MEWA to invest the balance of its assets in an office building or
buildings that will be used for its principal operations and business
if the MEWA obtains the commissioner's prior written approval and
treats the building or buildings as nonadmitted assets in the
financial statements filed with the commissioner.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 742.245 of the Insurance Code is amended to
read:
   742.245.  (a) A self-funded or partially self-funded multiple
employer welfare arrangement shall maintain at least 25 percent of
the surplus required by subdivision (n) of Section 742.24 in
investments specified in Article 3 (commencing with Section 1170) of
Chapter 2 of Part 2 of Division 1 and in Section 1192.5.
   (b) The balance of the assets of a self-funded or partially
self-funded multiple employer welfare arrangement may be invested in
the following:
   (1) An open-ended diversified management company, as defined in
the federal Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.),
that meets all of the following requirements:
   (A) It is registered with, and reports to, the Securities and
Exchange Commission.
   (B) It is domiciled in the United States.
   (C)  Substantially all of its investments consist of investment
grade debt instruments and cash.
   (D) All of its assets are held in the United States by a bank,
trust company, or other custodian chartered by the United States, its
states, or territories.
   (2) An amount not to exceed 75 percent of any excess of invested
assets over the sum of the reserves and related actuarial items held
in support of policies and contracts, plus the surplus required by
subdivision (n) of Section 742.24, may be invested in the following:
   (A) An open-ended diversified management company, as defined in
the federal Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.),
that meets all of the following requirements:
   (i) It is registered with, and reports to, the Securities and
Exchange Commission.
   (ii) It is domiciled in the United States.
   (iii) Its investments consist of common and preferred stocks and
cash.
   (iv) All of its assets are held in the United States by a bank,
trust company, or other custodian chartered by the United States, its
states, or territories.
   (B) Corporate notes, bonds, and preferred stocks that meet all of
the following requirements:
   (i) The issuer is domiciled in the United States or Canada.
   (ii) The investments are rated investment grade or better by at
least two of the following rating agencies, or their successors:
   (I) Standard & Poor's.
   (II) Moody's.
   (III) Fitch.
   (iii) The investments are exchange-traded. "Exchange-traded" as
used in this clause means listed and traded on the National Market
System of the NASDAQ Stock Market or on a securities exchange subject
to regulation, supervision, or control under a statute of the United
States and acceptable to the commissioner.
   (C) An investment in a single issuer made pursuant to subparagraph
(B) shall not exceed in the aggregate 10 percent of the multiple
employer welfare arrangement's funds described in this paragraph.
   (3) An investment made pursuant to paragraph (1) or subparagraph
(A) of paragraph (2) shall be made in, at minimum, three of the
companies described in those provisions.
   (4) An office building or buildings that will be used for the
multiple employer welfare arrangement's principal operations and
business if both of the following requirements are met:
   (A) The multiple employer welfare arrangement obtains prior
written approval from the commissioner.
   (B) The office building or buildings are treated on the financial
statements filed with the commissioner pursuant to Section 742.31 as
nonadmitted assets.
   (c) The commissioner may, in his or her discretion and after a
hearing, require by written order disposal of an investment made
either in violation of, or no longer in compliance with, this
section. The commissioner may also, after a hearing, require the
disposal of any investment made pursuant to paragraph (2) of
subdivision (b) if the multiple employer welfare arrangement has
failed to maintain cash or liquid assets sufficient to meet its
claims and any other contractual obligations. The commissioner may
also for good cause and after a hearing, by written order require the
disposal of an investment described in subdivision (b).