Employee Benefit Plan Administrator Bond - Statewide in Wisconsin
Table of Contents
Brief Summary
The bond for a Wisconsin employee benefit plan administrator is a calculation, not a number off a fee sheet. Work it out from the funds you will actually handle and you post the right figure the first time, somewhere between a $15,000 floor and a $500,000 ceiling, signed, sealed and ready to send to OCI with your application.
Wisconsin licenses employee benefit plan administrators under Chapter 633 of the statutes, and Wis. Admin. Code Ins 8.28 sets the performance bond. Administrators that collect premiums or employee contributions, or commingle funds of more than one principal, post the greater of $25,000 or 10 percent of projected funds handled for Wisconsin residents, capped at $500,000. Administrators that collect nothing and keep a separate fiduciary account for each principal post the greater of $15,000 or 5 percent of projected claim funds, capped at $250,000.
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How to Apply for an Employee Benefit Plan Administrator Bond:
- Decide which formula applies: do you collect premiums or contributions, or commingle funds of more than one principal?
- Project the premiums, charges and claim funds you expect to handle for Wisconsin residents in the coming fiscal year.
- Leave out worker's compensation plan and Ins 15 warranty plan amounts if they apply to you.
- Prepare a financial statement on a GAAP basis for your most recently completed fiscal year.
- Apply through NIPR or on paper with OCI form 30-001 and pay the $100 fee.
- Send the signed and sealed original bond directly to OCI.
Detailed Information About the Wisconsin Employee Benefit Plan Administrator Bond:
Two formulas, and which one is yours
The deciding question is whether you touch the money on the way in. Ins 8.28 splits administrators into two groups.
If you collect premiums or employee contributions for any principal, or commingle funds belonging to more than one principal, the bond is the greater of $25,000 or 10 percent of the premiums, charges and claim funds you project handling for Wisconsin residents during the fiscal year after the year covered by your financial statement. It never has to exceed $500,000.
If you do not collect premiums or contributions and you keep a separate fiduciary account for each principal, the bond is the greater of $15,000 or 5 percent of projected claim funds for Wisconsin residents over the same period. It never has to exceed $250,000.
Amounts handled for self-insured, partially insured or divided insurance worker's compensation plans under DWD 80.60 or 80.61, and for warranty plans under chapter Ins 15, can be left out of the calculation.
Bond terms
The bond is continuous in form, issued by an insurer authorized to do a surety business in Wisconsin, and runs in favor of the Commissioner of Insurance. OCI asks for a new original bond, signed and sealed, carrying the signatures of the principal, a company officer and the attorney in fact, sent directly to the office.
Who needs the license
Wis. Stat. 633.01 defines an administrator as a person who directly or indirectly solicits or collects premiums or charges, effects coverage, or adjusts or settles claims for a plan. Employers acting for their own employees, unions acting for members, authorized insurers, agents who limit themselves to sales, and attorneys handling claims without collecting premiums fall outside that definition. Under 633.13(3), a plan cannot engage an administrator that has not shown proof of a license or an exemption.
OCI also accepts an EBPA Application for Exemption, form 30-003, from an applicant that collects only contributions to self-funded ERISA plans, does not collect or administer stop-loss premiums, and performs no function for a multi-employer welfare arrangement.
Fees and renewal
The initial license fee is $100. The license renews every year by August 1 for another $100, with financial statements for the prior fiscal year and a new original bond whenever bond coverage changes.
Eligibility and Requirements for a Wisconsin Employee Benefit Plan Administrator Bond:
- Obligee: Wisconsin Commissioner of Insurance.
- Continuous bond from an insurer authorized to do a surety business in Wisconsin.
- Minimum of $25,000 for administrators that collect or commingle funds, and $15,000 for those that do not.
- Individual applicants must hold an active Wisconsin intermediary individual license.
- Annual renewal by August 1 with the $100 fee and current financial statements.
Wisconsin Employee Benefit Plan Administrator Bond FAQs:
The lower one under Ins 8.28(3): the greater of $15,000 or 5 percent of projected claim funds for Wisconsin residents, never more than $250,000. Commingling funds of more than one principal moves you to the higher formula even if you never collect a premium.
Yes. A bond under the collecting formula need not exceed $500,000, and a bond under the separate account formula need not exceed $250,000.
Only if the required amount has changed. Ins 8.26 asks for proof with the renewal that the bond still meets Ins 8.28 in that case, and OCI wants a new original signed and sealed bond whenever bond coverage changes.
No. Ins 8.28(4) lets an administrator exclude amounts handled for self-insured, partially insured or divided insurance worker's compensation plans under DWD 80.60 or 80.61, and for warranty plans under chapter Ins 15.
The surety looks at the bond amount your formula produces, your financial statements, the owners' credit and how client money is handled. A larger projected volume means a larger bond. You get an exact quote after the application is reviewed.
