SB3404 98TH GENERAL ASSEMBLY

LRB098 19017 RPM 54167 b

98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
SB3404

Introduced 2/14/2014, by Sen. William R. Haine

SYNOPSIS AS INTRODUCED:

See Index

Amends the Illinois Insurance Code in relation to fraternal benefit societies. Adds the Fraternal Benefit Society Guaranty Association Law to the Code as a new Article to provide for the protection of members of fraternal benefit societies in the event of impairment or insolvency. Provides that a fraternal benefit society must be governed by a board of directors and managed by qualified officers. Sets the permissible number of directors and establishes certain qualifications. Authorizes the Director of Insurance to take action when a society is or may become insolvent. Creates the Illinois Fraternal Benefit Society Guaranty Association and requires participation by societies and others authorized to transact business in Illinois. Sets forth the powers and duties of the Association. Defines terms.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Insurance Code is amended by changing Sections 286.1, 294.1, 297.1, 300.1, 307.1, and 315.6 and by adding Section 295.2 and Article XVII 1/2 as follows:

(215 ILCS 5/286.1) (from Ch. 73, par. 898.1)

(Section scheduled to be repealed on January 1, 2017)

Sec. 286.1. Purposes and Powers.

(a) A society shall operate for the benefit of members and their beneficiaries by:

(1) Providing benefits as specified in Section 297.1 of this amendatory Act; and

(2) Operating for one or more social, intellectual, educational, charitable, benevolent, moral, fraternal, patriotic or religious purposes for the benefit of its members, which may also be extended to others. Such purposes may be carried out directly by the society or indirectly through subsidiary corporations or affiliated organizations.

(b) Every society shall have the power to adopt laws and rules for the government of the society, the admission of its members and the management of its affairs. It shall have the power to change, alter, add to or amend such laws and rules and shall have such other powers as are necessary and incidental to carrying into effect the objects and purposes of the society.

(c) A society that provides any of the benefits specified in Section 297.1 of this Code must be governed by a board of directors and managed by qualified officers. The directors shall have the powers and perform the duties ordinarily possessed and exercised by a board of directors under this Code. A board of directors shall be composed of not less than 3 nor more than 21 natural persons who are members of the society holding covered benefit certificates and who are at least 18 years of age and at least 3 of whom are residents and citizens of this State. After the effective date of this amendatory Act of the 98th General Assembly, at least 20%, but not fewer than one, of the directors shall be persons who are not officers or employees of the society. A person convicted of a felony may not be a director or an officer, and all directors and officers shall be of good character and known professional, administrative, or business ability. The known business ability shall include a practical knowledge of insurance, finance, or investment. The board of directors shall be elected annually by the holders of covered benefit certificates. Notwithstanding the foregoing, the Director may replace any society director or officer if that individual does not meet the standards and qualifications described in this subsection (c) or it is deemed to be in the best interests of the society's members.

(Source: P.A. 84-303.)

(215 ILCS 5/294.1) (from Ch. 73, par. 906.1)

(Section scheduled to be repealed on January 1, 2017)

Sec. 294.1. Reinsurance.

(a) A domestic society may enter into reinsurance transactions only in accordance with Article XI of this Code.

(b) A domestic society may reinsure the risks of another society in connection with a merger transaction with approval by the Director.

(Source: P.A. 84-303.)

(215 ILCS 5/295.2 new)

Sec. 295.2. Maintenance of solvency. If a domestic society has an authorized control level event described in Section 35A-25 of this Code under circumstances the Director determines will not be promptly remedied, the Director may, in addition to all other actions required or permitted by subsection (b) of Section 35A-25 of this Code, issue an order declaring the domestic society to be in hazardous condition and ordering that all steps be taken to remedy the condition pursuant to this Section. In such event:

(1) The domestic society may negotiate an agreement to transfer all members, certificates, and other assets and liabilities of the society to another organization through merger, consolidation, assumption, or other means. The transfer shall be concluded within the timeframe established by the Director and subject to approval by the Director. The transfer agreement shall be deemed fully approved by the domestic society upon a majority vote of its board of directors. The transfer shall be effective notwithstanding the provisions of Section 295.1 of this Code or any other law or rule, or laws of the domestic society requiring another form of notice to or approval by members, which shall be superseded by this Section.

(2) In the event of a transfer under this Section to an organization without a certificate of authority in this State, the Director may grant a limited certificate of authority to the organization, upon request, if the organization does not apply for and obtain a certificate of authority to transact business in this State. The limited certificate of authority shall grant the organization the authority to service the certificates following the transfer and fulfill all obligations owed to certificate holders but not the authority to otherwise transact insurance business in this State.

(3) The board of directors of a domestic society may suspend or modify its qualifications for membership as necessary or appropriate to facilitate a transfer under this Section, notwithstanding the laws of the society or any other law or rule to the contrary.

(215 ILCS 5/297.1) (from Ch. 73, par. 909.1)

(Section scheduled to be repealed on January 1, 2017)

Sec. 297.1. Benefits.

(a) A society may provide the following contractual benefits in any form:

(1) Death benefits;

(2) Endowment benefits;

(3) Annuity benefits;

(4) Temporary or permanent disability benefits;

(5) Hospital, medical or nursing benefits;

(6) Monument or tombstone benefits to the memory of deceased members; and

(7) Such other benefits as authorized for life insurers and which are not inconsistent with this amendatory Act.

(b) A society shall specify in its rules those persons who may be issued, or covered by, the contractual benefits in subsection (a), consistent with providing benefits to members and their dependents. A society may provide benefits on the lives of children under the minimum age for adult membership upon application of an adult person.

(c) A society must provide written notice to its members and obtain a signed acknowledgement of receipt in connection with the provision or issuance of any benefits not subject to guaranty association coverage that such benefits do not qualify for protection by a guaranty association. The form of such notice is subject to the prior approval of the Director.

(Source: P.A. 84-303.)

(215 ILCS 5/300.1) (from Ch. 73, par. 912.1)

(Section scheduled to be repealed on January 1, 2017)

Sec. 300.1. The Benefit Contract.

(a) Every society authorized to do business in this State shall issue to each owner of a benefit contract a certificate specifying the amount of benefits provided thereby. The certificate, together with any riders or endorsements attached thereto, the laws of the society, the application for membership, the application for insurance and declaration of insurability, if any, signed by the applicant and all amendments to each thereof shall constitute the benefit contract, as of the date of issuance, between the society and the owner, and the certificate shall so state. A copy of the application for insurance and declaration of insurability, if any, shall be endorsed upon or attached to the certificate. All statements on the application shall be representations and not warranties. Any waiver of this provision shall be void.

(b) Any changes, additions or amendments to the laws of the society duly made or enacted subsequent to the issuance of the certificate shall bind the owner and the beneficiaries and shall govern and control the benefit contract in all respects the same as though such changes, additions or amendments had been made prior to and were in force at the time of the application for insurance, except that no change, addition or amendment shall destroy or diminish benefits which the society contracted to give the owner as of the date of issuance.

(c) Any person upon whose life a benefit contract is issued prior to attaining the age of majority shall be bound by the terms of the application and certificate and by all the laws and rules of the society to the same extent as though the age of majority had been attained at the time of application.

(d) A society shall provide in its laws and its certificates that, if its reserves as to all or any class of certificates become impaired, its board of directors or corresponding body may require that there shall be paid by the owner to the society an assessment in the amount of the owner's equitable proportion of such deficiency as ascertained by its board, and that, if the payment is not made, either (1) it shall stand as an indebtedness against the certificate and draw interest not to exceed the rate specified for certificate loans under the certificates; or (2) in lieu of or in combination with (1), the owner may accept a proportionate reduction in benefits under the certificate. In no event, however, may an assessment obligation be forgiven by the society in lieu of collection or reduction in benefits. The society may specify the manner of the election and which alternative is to be presumed if no election is made. No such assessment shall take effect unless a 30-day notification has been provided to the Director, who shall have the ability to disapprove the assessment only if the Director finds that the assessment is not in the best interests of the benefit members of the domestic society. Disapproval by the Director shall be made within 30 days after receipt of notice and shall be in writing and mailed to the domestic society. If the Director disapproves the assessment, the reasons therefore shall be stated in the written notice.

(e) Copies of any of the documents mentioned in this Section, certified by the secretary or corresponding officer of the society, shall be received in evidence of the terms and conditions thereof.

(f) No certificate shall be delivered or issued for delivery in this State unless a copy of the form has been filed with the Director in the manner provided for like policies issued by life insurers in this State. Every life, accident, health or disability insurance certificate and every annuity certificate issued on or after one year from the effective date of this amendatory Act shall meet the standard contract provision requirements not inconsistent with this amendatory Act for like policies issued by life insurers in this State except that a society may provide for a grace period for payment of premiums of one full month in its certificates. The certificate shall also contain a provision stating the amount of premiums which are payable under the certificate and a provision reciting or setting forth the substance of any sections of the society's laws or rules in force at the time of issuance of the certificate which, if violated, will result in the termination or reduction of benefits payable under the certificate. If the laws of the society provide for expulsion or suspension of a member, the certificate shall also contain a provision that any member so expelled or suspended, except for nonpayment of a premium or within the contestable period for material misrepresentation in the application for membership or insurance, shall have the privilege of maintaining the certificate in force by continuing payment of the required premium.

(g) Benefit contracts issued on the lives of persons below the society's minimum age for adult membership may provide for transfer of control or ownership to the insured at an age specified in the certificate. A society may require approval of an application for membership in order to effect this transfer and may provide in all other respect for the regulation, government and control of such certificates and all rights, obligations and liabilities incident thereto and connected therewith. Ownership rights prior to such transfer shall be specified in the certificate.

(h) A society may specify the terms and conditions on which benefit contracts may be assigned.

(Source: P.A. 84-303.)

(215 ILCS 5/307.1) (from Ch. 73, par. 919.1)

(Section scheduled to be repealed on January 1, 2017)

Sec. 307.1. Annual License. Societies which were authorized to transact business in this State prior to the effective date of this amendatory Act may continue such business until the first day of July next succeeding the effective date of this amendatory Act. The authority of such societies and all societies hereafter issued certificates of authority may thereafter be renewed annually, but in all cases to terminate on the first day of the succeeding July. A certified copy or duplicate of such certificate of authority shall be prima facie evidence that the licensee is a fraternal benefit society within the meaning of this amendatory Act. No new certificates of authority to provide benefits specified in Section 297.1 of this Code shall be issued after the effective date of this amendatory Act of the 98th General Assembly.

(Source: P.A. 84-303.)

(215 ILCS 5/315.6) (from Ch. 73, par. 927.6)

(Section scheduled to be repealed on January 1, 2017)

Sec. 315.6. Application of other Code provisions. Unless otherwise provided in this amendatory Act, every fraternal benefit society shall be governed by this amendatory Act and shall be exempt from all other provisions of the insurance laws of this State not only in governmental relations with the State but for every other purpose, except for those provisions specified in this amendatory Act and except as follows:

(a) Sections 1, 2, 2.1, 3.1, 117, 118, 132, 132.1, 132.2, 132.3, 132.4, 132.5, 132.6, 132.7, 133, 134, 136, 138, 139, 140, 141, 141.01, 141.1, 141.2, 141.3, 143, 143c, 144.1, 147, 148, 149, 150, 151, 152, 153, 154.5, 154.6, 154.7, 154.8, 155, 155.04, 155.05, 155.06, 155.07, 155.08 and 408 of this Code; and

(b) Articles VIII 1/2, XII, XII 1/2, XIII, XIII 1/2, XXIV, and XXVIII of this Code.

(Source: P.A. 88-364; 89-97, eff. 7-7-95.)

(215 ILCS 5/Art. XVII.5 heading new)

ARTICLE XVII 1/2. FRATERNAL BENEFIT SOCIETY GUARANTY

ASSOCIATION

(215 ILCS 5/315a.1 new)

Sec. 315a.1. Short title. This Article may be cited as the Fraternal Benefit Society Guaranty Association Law.

(215 ILCS 5/315a.5 new)

Sec. 315a.5. Purpose. The purpose of this Article is to protect members of fraternal benefit societies who reside in this State and their beneficiaries, payees, and assignees, subject to certain limitations, against failure in the performance of contractual obligations due to the impairment or insolvency of their society. Nonresident members of such societies shall be protected by the Association established under this Article if: (1) they reside in states that have an association similar to the Association created by this Article; (2) they are not eligible for coverage by such association; (3) such society never held a license or certificate of authority in such states; and (4) such society was domiciled in this State. To provide this protection, (i) an association of fraternal benefit societies is created to enable the guaranty of payment of benefits and of continuation of coverages, (ii) members of the Association are subject to assessment to provide funds to carry out the purpose of this Article, and (iii) the Association is authorized to assist the Director, in the prescribed manner, in the detection and prevention of fraternal benefit society impairments or insolvencies.

(215 ILCS 5/315a.10 new)

Sec. 315a.10. Scope. This Article applies to any benefits issued under Article XVII of this Code.

(215 ILCS 5/315a.15 new)

Sec. 315a.15. Construction. This Article shall be construed to effect the purpose set forth in Section 315a.5 of this Code.

(215 ILCS 5/315a.20 new)

Sec. 315a.20. Definitions. As used in this Article:

"Association" means the Illinois Fraternal Benefit Society Guaranty Association created under Section 315a.25 of this Code.

"Director" means the Director of Insurance.

"Contractual obligation" means an obligation of the member fraternal benefit society under benefit contracts issued under Article XVII of this Code.

"Covered person" means a fraternal benefit society member who is entitled to the protection of the Association as described in Section 315a.5 of this Code.

"Covered benefit certificate" means any benefit certificate, contract, or other evidence of coverage within the scope of this Article under Section 315a.10 of this Code.

"Fund" means the fund created under Section 315a.25 of this Code.

"Impaired organization" means a member organization deemed by the Director after the effective date of this amendatory Act of the 98th General Assembly to be potentially unable to fulfill its contractual obligations, and not an insolvent organization.

"Insolvent organization" means a member organization that becomes insolvent and is placed under a final order of liquidation or rehabilitation by a court of competent jurisdiction.

"Member" means a person who is licensed or holds a certificate of authority to transact in this State any kind of business to which this Article applies under Section 315a.10 of this Code. "Member" includes a person whose certificate of authority may have been suspended pursuant to any provision of this Code.

"Premiums" mean direct gross premiums received on covered benefit contracts.

"Person" means an individual, corporation, partnership, association, fraternal benefit society, or voluntary organization.

"Resident" means a person who resides in this State at the time the organization is issued a notice of impairment by the Director or at the time a complaint for liquidation or rehabilitation is filed and to whom contractual obligations are owed. A person may be a resident of only one state which, in the case of a person other than a natural person, shall be its principal place of business.

(215 ILCS 5/315a.25 new)

Sec. 315a.25. Creation of the Association. There is created a not-for-profit legal entity to be known as the Illinois Fraternal Benefit Society Guaranty Association. All member organizations are and must remain members of the Association as a condition of their authority to transact business in this State. The Association must perform its functions under the plan of operation established and approved under Section 315a.45 of this Code and must exercise its powers through a board of directors established under Section 315a.30 of this Code. For purposes of administration and assessment, the Association must maintain the Fraternal Benefit Society Fund. The Association shall be supervised by the Director and is subject to this Article and any other applicable provisions of this Code.

(215 ILCS 5/315a.30 new)

Sec. 315a.30. Board of directors.

The board of directors of the Association shall consist of not fewer than 7 nor more than 11 members serving terms as established in the plan of operation. The Director shall name 2 members to the board and the member organizations, subject to the approval of the Director, shall select the remaining members of the board. Vacancies on the board must be filled for the remaining period of the term in the manner described in the plan of operation. To select the initial board of directors and initially organize the Association, the Director must give notice to all member organizations of the time and place of the organizational meeting. In determining voting rights at the organizational meeting, each member organization is entitled to one vote in person or by proxy. If the board of directors is not selected at the organizational meeting, then the Director may appoint the initial members.

In approving selections or in appointing members to the board, the Director must consider whether all member organizations are fairly represented.

Members of the board may be reimbursed from the assets of the Association for expenses incurred by them as members of the board of directors, but members of the board may not otherwise be compensated by the Association for their services.

(215 ILCS 5/315A.35 new)

Sec. 315A.35. Powers and duties of the Association.

(a) In addition to the powers and duties enumerated in other Sections of this Article, the Association shall have the powers set forth in this Section.

(b) If a domestic society is impaired, the Association may, subject to any conditions imposed by the Association other than those that impair the contractual obligations of the impaired society:

(1) guarantee, assume, or reinsure or cause to be guaranteed, assumed, or reinsured any or all of the contractual obligations to covered persons of the impaired organization;

(2) provide such moneys, pledges, notes, guarantees, or other means as are proper to effectuate paragraph (1) of this subsection (b) and ensure payment of the contractual obligations of the impaired organization pending action under paragraph (1) of this subsection (b); and

(3) loan money to the impaired organization.

(c) If a domestic, foreign, or alien organization is an insolvent organization, then the Association shall, subject to the approval of the Director:

(1) guarantee, assume, indemnify, or reinsure or cause to be guaranteed, assumed, indemnified, or reinsured the contractual obligations to covered persons of the insolvent organization;

(2) ensure payment of the contractual obligations of the insolvent organization to covered persons;

(3) provide such moneys, pledges, notes, guaranties, or other means necessary to discharge such duties.

(d) There shall be no liability on the part of and no cause of action shall arise against the Association or against any transferee from the Association in connection with the transfer by reinsurance or otherwise of all or any part of an impaired or insolvent organization's business by reason of any action taken or any failure to take any action by the impaired or insolvent organization at any time.

(e) If the Association fails to act within a reasonable period of time as provided in subsection (c) of this Section with respect to an insolvent organization, then the Director shall have the powers and duties of the Association under this Article with regard to such insolvent organization.

(f) The Association or its designated representatives may render assistance and advice to the Director upon his or her request concerning rehabilitation, payment of claims, continuations of coverage, or the performance of other contractual obligations of any impaired or insolvent organization.

(g) The Association has standing to appear before any court concerning all matters germane to the powers and duties of the Association, including, but not limited to, proposals for reinsuring or guaranteeing the covered health care plan certificates of the impaired or insolvent organization and the determination of the covered health care plan certificates and contractual obligations.

(h) Any person receiving benefits under this Article is deemed to have assigned the rights under their covered benefit certificates to the Association to the extent of the benefits received because of this Article, whether the benefits are payments of contractual obligations or continuation of coverage. The Association may require an assignment to it of such rights by any payee, covered person, or beneficiary as a condition precedent to the receipt of any rights or benefits conferred by this Article upon such person. The Association is subrogated to these rights against the assets of any insolvent organization and against any other party who may be liable to such payee, covered person, or beneficiary.

The subrogation rights of the Association under this subsection (h) have the same priority against the assets of the insolvent organization as that possessed by the person entitled to receive benefits under this Article.

(i) The contractual obligations of the insolvent organization for which the Association becomes or may become liable are as great as, but no greater than, the contractual obligations of the insolvent organization would have been in the absence of an insolvency unless those obligations are reduced as permitted by subsection (d) of this Section, but the aggregate liability of the Association shall not exceed $250,000 with respect to any one natural person.

(j) The Association may do all of the following:

(1) Enter into such contracts as are necessary or proper to carry out the provisions and purposes of this Article.

(2) Sue or be sued, including taking any legal actions necessary or proper for recovery of any unpaid assessments under Section 315a.40 of this Code. The Association shall not be liable for punitive or exemplary damages.

(3) Borrow money to effect the purposes of this Article. Any notes or other evidence of indebtedness of the Association not in default are legal investments for domestic organizations and may be carried as admitted assets.

(4) Employ or retain such persons as are necessary to handle the financial transactions of the Association and to perform such other functions as become necessary or proper under this Article.

(5) Negotiate and contract with any liquidator, rehabilitator, conservator, or ancillary receiver to carry out the powers and duties of the Association.

(6) Take such legal action as may be necessary to avoid payment of improper claims.

(7) Exercise, for the purposes of this Article and to the extent approved by the Director, the powers of a domestic organization, but in no case may the Association issue evidence of coverage other than that issued to perform the contractual obligations of the impaired or insolvent organization.

(8) Exercise all the rights of the Director under subsection (4) Section 193 of this Code with respect to covered benefit certificates after the association becomes obligated by statute.

(9) Request information from a person seeking coverage from the Association in order to aid the Association in determining its obligations under this Article with respect to the person, and the person shall promptly comply with the request.

(10) Take other necessary or appropriate action to discharge its duties and obligations under this Article or to exercise its powers under this Article.

(k) The obligations of the Association under this Article shall not relieve any reinsurer, insurer, or other person of its obligations to the insolvent organization (or its conservator, rehabilitator, liquidator, or similar official) or its covered benefit certificate holder, including without limitation any reinsurer, insurer, or other person liable to the insolvent insurer (or its conservator, rehabilitator, liquidator, or similar official).

(l) The Association shall be entitled to collect premiums due under or with respect to covered benefit certificates for a period from the date on which the domestic, foreign, or alien organization became an insolvent organization until the Association no longer has obligations under subsection (c) of this Section with respect to such certificates. The Association's obligations under subsection (c) of this Section with respect to any covered benefit certificates shall terminate in the event that all such premiums due under or with respect to such covered benefit certificates are not paid to the Association (1) within 30 days after the Association's demand therefor or (2) in the event that such certificates provide for a longer grace period for payment of premiums after notice of non-payment or demand therefor, within the lesser of (i) the period provided for in such certificates or (ii) 60 days.

(m) The board of directors of the Association shall have discretion and may exercise reasonable business judgment to determine the means by which the Association is to provide the benefits of this Article in an economical and efficient manner.

(n) When the Association has arranged or offered to provide the benefits of this Article to a covered person under a plan or arrangement that fulfills the Association's obligations under this Article, the person shall not be entitled to benefits from the Association in addition to or other than those provided under the plan or arrangement.

(o) Venue in a suit against the Association arising under the Article shall be in Cook County, Illinois. The Association shall not be required to give any appeal bond in an appeal that relates to a cause of action arising under this Article.

(215 ILCS 5/315A.40 new)

Sec. 315A.40. Assessments.

(a) For the purpose of providing the funds necessary to carry out the powers and duties of the Association, the board of directors shall assess the members, at such times and for such amounts as the board finds necessary. Assessments shall be due no later than 30 days after written notice to the members and shall accrue interest from the due date at such adjusted rate as is established under Section 531.09 of this Code, and such interest shall be compounded daily.

(b) There shall be 2 classes of assessments, as follows:

(1) Class A assessments shall be made for the purpose of meeting administrative costs and other general expenses and examinations conducted under the authority of the Director.

(2) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the Association under Section 315a.35 of this Code with regard to an impaired or insolvent domestic organization or insolvent foreign or alien organizations.

(c) The amount of any Class A assessment shall be determined by the Board and may be made on a non-pro rata basis.

Class B assessments against members shall be in the proportion that the premiums received on covered benefit certificates issued in this State by each assessed member on covered benefit certificates for the calendar year preceding the assessment bears to such premiums received on covered benefit certificates issued in this State for the calendar year preceding the assessment by all assessed members.

Assessments to meet the requirements of the Association with respect to an impaired or insolvent organization shall not be made until necessary to implement the purposes of this Article. Classification of assessments under subsection (b) of this Section and computations of assessments under this subsection (c) shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible.

(d) The Association may abate or defer, in whole or in part, the assessment of a member if in the opinion of the board payment of the assessment would endanger the ability of the member to fulfill its contractual obligations.

The total of all assessments upon a member organization may not in any one calendar year exceed 2% of the organization's premiums in this State during the calendar year preceding the assessment on the covered benefit certificates.

(e) If an assessment against a member organization is abated or deferred, in whole or in part, because of the limitations set forth in subsection (d) of this Section, the amount by which such assessment is abated or deferred may be assessed against the other member organizations in a manner consistent with the basis for assessments set forth in this Section. If the maximum assessment, together with the other assets of the Association, does not provide in any one year an amount sufficient to carry out the responsibilities of the Association, then the necessary additional funds may be assessed as soon thereafter as permitted by this Article.

(f) The board may, by an equitable method as established in the plan of operation, refund to members in proportion to the contribution of each organization, the amount by which the assets of the fund exceed the amount the board finds is necessary to carry out during the coming year the obligations of the Association, including assets accruing from net realized gains and income from investments. A reasonable amount may be retained in the fund to provide moneys for the continuing expenses of the Association and for future losses.

(g) An assessment is deemed to occur on the date upon which the board votes the assessment. The board may defer calling the payment of the assessment or may call for payment in one or more installments.

(h) It is proper for a member, in determining its rates, to consider the amount reasonably necessary to meet its assessment obligations under this Article.

(i) The Association must issue to each organization paying a Class B assessment under this Article a certificate of contribution, in a form prescribed by the Director, for the amount of the assessment so paid. All outstanding certificates are of equal dignity and priority without reference to amounts or dates of issue. A certificate of contribution may be shown by the organization in its financial statement as an admitted asset in such form and for such amount, if any, and period of time as the Director may approve, provided the organization shall in any event at its option have the right to show a certificate of contribution as an asset at percentages of the original face amount for calendar years as follows:

(1) 100% for the calendar year after the year of issuance;

(2) 80% for the second calendar year after the year of issuance;

(3) 60% for the third calendar year after the year of issuance;

(4) 40% for the fourth calendar year after the year of issuance;

(5) 20% for the fifth calendar year after the year of issuance.

(j) The Association may request information of members in order to aid in the exercise of its power under this Section, and member organizations shall promptly comply with a request.

(215 ILCS 5/315A.45 new)

Sec. 315A.45. Plan of operation.

(a) The Association must submit to the Director a plan of operation and any amendments thereto necessary or suitable to ensure the fair, reasonable, and equitable administration of the Association. The plan of operation and any amendments thereto become effective upon approval in writing by the Director.

(b) If the Association fails to submit a suitable plan of operation within 120 days following the effective date of this amendatory Act of the 98th General Assembly or if at any time thereafter the Association fails to submit suitable amendments to the plan, then the Director may, after notice and hearing, adopt such reasonable rules as are necessary or advisable to effectuate the provisions of this Article. The rules shall be in force until modified by the Director or superseded by a plan submitted by the Association and approved by the Director.

(c) All members must comply with the plan of operation. In addition to requirements enumerated elsewhere in this Article the plan of operation must:

(1) establish procedures for handling the assets of the Association;

(2) establish the amount and method of reimbursing members of the board of directors under Section 315a.30 of this Code;

(3) establish regular places and times for meetings of the board of directors;

(4) establish procedures for keeping records of all financial transactions of the Association, its agents, and the board of directors;

(5) establish the procedures whereby selections for the board of directors shall be made and submitted to the Director;

(6) establish any additional procedures for assessments under Section 315a.40 of this Code; and

(7) contain additional provisions necessary or proper for the execution of the powers and duties of the Association.

(d) The plan of operation shall establish a procedure for protest by any member of assessments made by the Association pursuant to Section 315a.40 of this Code. Such procedures shall require that:

(1) A member that wishes to protest all or part of an assessment shall pay when due the full amount of the assessment as set forth in the notice provided by the Association. The payment shall be available to meet Association obligations during the pendency of the protest or any subsequent appeal. Payment shall be accompanied by a statement in writing that the payment is made under protest and setting forth a brief statement of the grounds for the protest.

(2) Within 30 days following the payment of an assessment under protest by any protesting member, the Association must notify the member in writing of its determination with respect to the protest unless the Association notifies the member that additional time is required to resolve the issues raised by the protest.

(3) In the event the Association determines that the protesting member is entitled to a refund, the refund shall be made within 30 days following the date upon which the Association makes its determination.

(4) The decision of the Association with respect to a protest may be appealed to the Director.

(5) In the alternative to rendering a decision with respect to any protest based on a question regarding the assessment base, the Association may refer the protests to the Director for final decision with or without a recommendation from the Association.

(6) Interest on any refund due a protesting member shall be paid at the rate actually earned by the Association.

(e) The plan of operation may provide that any or all powers and duties of the Association, except those under Section 315a.35 and Section 315a.40, may be delegated to a corporation, association, or other organization that performs or will perform functions similar to those of the Association or its equivalent in 2 or more states. Such a corporation, association, or organization shall be reimbursed for any payments made on behalf of the Association and shall be paid for its performance of any function of the Association. A delegation under this subsection (e) shall take effect only with the approval of both the board of directors and the Director and may be made only to a corporation, association, or organization that extends protection not substantially less favorable and effective than that provided by this Article.

(215 ILCS 5/315A.50 new)

Sec. 315A.50. Voluntary dissolution. Upon application to the Director, a domestic society may request that it be dissolved and that its existence be terminated. The application shall demonstrate that the applicant has satisfied its members' certificate obligations or that it has transferred such obligations to another organization, domestic or foreign, by means of assumption or bulk reinsurance or otherwise, and that the domestic society's supreme governing body has approved the termination and dissolution. The application shall contain any other information required by the Director. Any limitation related to reinsurance by a domestic society shall not apply to reinsurance entered into in conjunction with the transfer of members' certificate obligations as a part of a voluntary dissolution. Upon approval of the application by the Director, the domestic society shall be deemed dissolved and its existence terminated as of the date set forth in the application.

(215 ILCS 5/310.1 rep.)

(215 ILCS 5/311.1 rep.)

Section 10. The Illinois Insurance Code is amended by repealing Sections 310.1 and 311.1.