A. The Division may require a Self-Insurer to use a Retrospective Rating Plan for purposes of premium taxes required under A.R.S. §§ 23-961 and 23-1065 if:
- 1. The Self-Insurer has an Experience Modification Rate specific to Arizona that exceeds 1.10 for two consecutive years; or
- 2. The Self-Insurer demonstrates financial instability as evidenced by declining financial ratios, an increase in leveraged debt or a net loss.
- B. The Division shall calculate the net taxable premium under a Retrospective Rating Plan, using the most recent year’s data, as follows: {[(payroll multiplied by the Payroll Classification Rate) multiplied by (the Experience Modification Rate specific to Arizona) multiplied by (1 minus the Deviation Rate) multiplied by the (Basic Premium Factor)] plus [(losses for the current year plus adjusted losses from the previous year) multiplied by (the Loss Conversion Factor)]} multiplied by the tax multiplier.
- C. The Retrospective Rating Plan applies only to operations and payroll in Arizona. The Self-Insurer shall combine all operations in Arizona to calculate the premium taxes required under A.R.S. §§ 23-961 and 23-1065.
- D. The Experience Modification Rate specific to Arizona for purposes of determining the net taxable premium under a Guaranteed Cost Plan shall be calculated in the manner described in R20-5-1534(C). If the Division cannot calculate an Experience Modification Rate in the second and all following tax years because the Self-Insurer does not have any injuries, the Experience Modification Rate shall be set at 1.00.
- E. The Division shall use assigned risk rates to calculate the premium taxes required under A.R.S. §§ 23-961 and 23-1065 for all Self-Insurers on the Retrospective Rating Plan. The assigned risk rates shall be established annually by an actuary retained by the Commission that is a member the American Academy of Actuaries (MAAA) or a fellow of the Casualty Actuarial Society (FCAS).
- F. A Self-Insurer shall provide the information required by R20-5-1536(E) in support of using a Retrospective Rating Plan.
Historical Note
New Section made by final rulemaking at 28 A.A.R. 3435 (October 28, 2022), with an immediate effective date of October 5, 2022 (Supp. 22-4).