Payroll Risk Insurance Act - Proposed Statutory Text

CBI-PAN-20-08 Version 1.0 www.betterins.org
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PAYROLL RISK INSURANCE ACT
Sec. 1. Congressional findings and purpose
Sec. 2. Definitions.
Sec. 3. Payroll risk insurance program.
Sec. 4. General authority and administration of program.
Sec. 5. Preservation provisions.
SEC. 1. CONGRESSIONAL FINDINGS AND PURPOSE
(a) FINDINGS.—The Congress finds that—
(1) it may be necessary for a State to issue an order effectively mandating
the suspension or significant curtailment of business operations in
the State or a part of the State for the purposes of preventing,
mitigating or recovering from widespread loss of life, impairment of
health, damage to property or damage to infrastructure resulting
from a local, regional or national disaster;
(2) the continuation of payroll, rent, mortgage interest payments and
utilities payments are essential to sustain workers and businesses
during the term of such an order and to the effective and efficient
restart of economic activity following the termination of the order;
(3) the market for small and medium sized businesses, nonprofits and
others to obtain business income insurance covering the cost of
continuing expenses such as payroll, rent, mortgage interest and
utilities during the suspension or significant curtailment of business
operations to comply with such an order is limited and not expected
to develop significantly;
(4) the decision whether to issue, continue or terminate such an order is
primarily that of the States and therefore a State should have
considerable responsibility and flexibility with respect to the
mitigation of the economic impact of the order on the economy,
businesses and workers of the State;
(5) the commercial property insurance industry maintains extensive
catastrophe claims management and other capabilities allowing it to
quickly and efficiently distribute financial relief to businesses during
a crisis; and
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(6) the United States Government should provide support to the States
in the form of reducible loans to State-sponsored nonprofit entities
capable of levying assessments on premium and pooling risks among
commercial property insurance companies with respect to insurance
on risks in the State in order to provide a defined period of support
to businesses and nonprofits through payments for certain
continuing expenses including payroll.
(b) PURPOSE.—The purpose of this title is to establish a Federal program that
provides for a voluntary system through which States retain responsibility
and flexibility to mitigate the economic impact of State orders effectively
suspending business activity on a widespread basis in response to a disaster
that-
(1) utilizes the capabilities of the commercial property insurance
industry;
(2) provides businesses and nonprofits with the certainty of a defined
period of coverage of continuing expenses including payroll; and
(3) relies on the regulatory oversight and financial resources of the
United States Government.
SEC. 2. DEFINITIONS.
(a) AFFILIATE.—The term ‘‘affiliate’’ means, with respect to a covered
policyholder, any person that controls, is controlled by, or is under common
control with the covered policyholder.
(b) CERTIFIED ORDER.—
(1) The term “certified order” means any order that is certified by the
Secretary under the Program to—
(A) be an order issued by or under the authority of a State;
(B) have been submitted by the State for certification under
this paragraph;
(C) have been issued for the purposes of preventing, mitigating
or recovering from widespread loss of life, impairment of
health, damage to property or damage to infrastructure
resulting from a local, regional or national disaster;

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(D) effectively require the suspension or significant curtailment
of business operations of covered policyholders within the
State or a substantial part of the State;
(E) be in the compelling national economic interest to certify
under this paragraph; and
(F) satisfy such other conditions as the Secretary may establish
by regulation.
(2) The Secretary shall publish notice of certification in the Federal
Register specifying the State, the order being certified, and the
effective date of the order with respect to the effect on business
operations described in clause (b)(1)(D) of this section.
(3) Any certification of, or determination not to certify, an order under
this paragraph shall be final, and shall not be subject to judicial
review.
(4) The Secretary may not delegate or designate to any other officer,
employee, or person, any determination whether to certify an order
under this paragraph.
(c) COVERED PAYROLL RISK PAYMENT.— The term ‘‘covered payroll risk
payment’’ means one or more payments to a covered policyholder totaling
an amount not to exceed the sum of four weeks of the cover policyholder’s
incurred continuing expenses for payroll, rent, mortgage interest and
utilities commencing on the effective date of the certified order and subject
to-
(1) a maximum amount of $5,ooo,ooo to any one covered policyholder
(including its affiliates);
(2) the rules of the participating fund; and
(3) the regulations established by the Secretary.
(d) COVERED POLICYHOLDER.— The term “covered policyholder” means a
person that on the effective date of a certified order is:
(1) insured by a policy of primary commercial property insurance issued
by a Member and covering a workplace in the State from which the
certified order issued; and

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(2) satisfies the criteria for covered policyholders established under the
rules of the participating fund.
(e) MEMBER OF THE FUND.—The term ‘‘member of the fund’’ means any
entity that is a member of the participating fund of a State because it is:
(1) licensed or admitted to engage in the business of providing primary
commercial property insurance in the State;
(2) an authorized surplus lines insurer in the State insuring risks of
primary commercial insurance in the State;
(3) a residual market insurance entity of the State; or
(4) any other entity to the extent provided in the rules of the Secretary.
(f) PARTICIPATING FUND.— The term “participating fund” means a Payroll
Risk Insurance Fund-
(1) Established by a State that has elected to participate in the Program;
and
(2) Has been approved by the Secretary for participation in the Program
in accordance with Section 3(b).
(g) PERSON.— The term ‘‘person’’ means any individual, business or nonprofit
entity (including those organized in the form of a partnership, limited
liability company, corporation, or association), trust or estate, or a State or
political subdivision of a State or other governmental unit.
(h) PROGRAM.—The term ‘‘Program’’ means the Payroll Risk Insurance
Program established by this title.
(i) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of the Treasury.
(j) STATE.—The term ‘‘State’’ means any State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, American Samoa,
Guam, each of the United States Virgin Islands, and any territory or
possession of the United States.

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SEC. 3. PAYROLL RISK INSURANCE PROGRAM.
(a) ESTABLISHMENT OF PROGRAM.—
(1) IN GENERAL.—There is established in the Department of the
Treasury the Payroll Risk Insurance Program.
(2) AUTHORITY OF THE SECRETARY.—Notwithstanding any other
provision of State or Federal law, the Secretary shall administer the
Program, and shall extend loans to participating funds in accordance
with this section.
(3) VOLUNTARY PARTICIPATION.—Each State may designate one
payroll risk insurance fund meeting the eligibility requirements
established by the Secretary in accordance with subsection (b) to
participate in Program for a period of ten consecutive years with the
option to continue participation for additional periods of ten
consecutive years unless:
(A) the program has terminated; or
(B) the Secretary has declined to approve or withdrawn the
approval of the payroll risk insurance fund for participation
in the Program.
(b) APPROVAL FOR PARTICIPATION. —A non-profit entity established by a
State and designated by the State for participation may apply to the
Secretary for participation in the Program. The Secretary shall issue
regulations establishing the procedures for application and criteria for
approval for participation in the Program. The criteria for approval for
participation in the Program shall include satisfactory evidence of—
(1) Principles, structures and frameworks ensuring sound governance
with respect to the decisions, operations and finances of the
participating fund;
(2) Mechanisms to ensure transparency to the Secretary, members, the
public and other stakeholders with respect to the decisions,
operations and finances of the participating fund;
(3) Mechanisms for the solicitation and consideration of input from the
Secretary, members, the public and other stakeholders with respect
to the decisions, operations and finances of the participating fund;
(4) Procedures for the selection of members of the board or other body
overseeing the decisions, operations and finances of the participating
fund that ensure representation from appropriate stakeholders

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including employees, businesses, nonprofits, members and
insurance intermediaries;
(5) Arrangements for adequate regulation and supervision of the
participating fund and its members by the State commissioner of
insurance or other appropriate official of the State; and
(6) Rules for the calculation of covered payroll risk payments that-
(A) Favor expeditious determination and payment;
(B) Approximate the actual amounts of loss;
(C) Cap or eliminate claims for excessive compensation and
expense; and
(D) Control fraud and waste.
(c) REVIEW OF APPROVED STATUS – The Secretary shall request
confirmation annually from a participating fund that it has continues to
operate in compliance with the eligibility criteria in accordance with
subsection (b) or, if such confirmation cannot be given, an explanation of
deviations and plans to remediate those deviations.
(1) The Secretary may suspend the approval for participation by a
payroll risk insurance fund until satisfactory evidence of remediation
of any deviations from the eligibility criteria (whether reported by the
participating fund or otherwise discovered).
(2) The Secretary may withdraw the approval for participation by a
payroll risk insurance fund in the absence of satisfactory evidence of
remediation of any deviations from the eligibility criteria (whether
reported by the participating fund or otherwise discovered) in which
case the payroll risk insurance fund may reapply for participation in
12 months.
(d) CONDITIONS FOR LOAN—No loan may be made to a participating fund
by the Secretary under this section unless—
(1) The Secretary has certified an order of the State of the participating
fund;
(2) The members of the participating fund are obligated by State law to
make covered payroll risk payments to covered policyholders;

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(3) The participating fund is obligated by State law to reimburse, in
whole or in part, covered payroll risk payments made by its
members;
(4) The participating fund has requested a loan from Treasury in the
amount equal to the reimbursable covered payroll risk payments
made or to be made in accordance with subsection (d)(3); and
(5) The request for a loan is made in a form and manner established by
the Secretary by regulation.
(e) LOAN— Upon approval of a request made in accordance with subsection
(d), the Secretary shall make a loan to a participating fund in an amount
equal to the reimbursable covered payroll risk payments made by its
members. The loan shall have a duration of 10 years with no payment
required during the first 12 months and carry a rate of interest set by the
Secretary but not exceeding 1 percent per annum.
(f) LOAN FORGIVENESS—
(1) The Secretary shall immediately reduce the obligation of a
participating fund to repay a portion of loan made in accordance with
subsection (d) by—
(A)90% of reimbursable covered payroll risk payments paid to
any covered policyholder who, together with its affiliates, had
no more than 500 full time and part time employees on the
effective date of the certified order;
(B)90% of reimbursable covered payroll risk payments paid to
any covered policyholder who was an independent contractor,
self-employed individual or sole proprietor on the effective
date of the certified order;
(C)50% of reimbursable covered payroll risk payments paid to
any covered policyholder who had more than 500 but less
than 5000 full time and part time employees on the effective
date of the certified order; and
(D)10% of reimbursable covered payroll risk payments paid to
any covered policyholder who had more than 5000 full time
and part time employees on the effective date of the certified
order.

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(2) The Secretary may reduce or eliminate the forgiveness otherwise
granted in accordance with subsection (f)(1) if the Secretary finds the
participating fund had materially failed to:
(A)comply with the rules, regulations and guidelines of the
program;
(B)implement and maintain the criteria for eligibility in
accordance with subsection (b);
(C)monitor, audit and verify the payments made by its members
and claims for reimbursement from the participating fund; or
(D) defaulted on its obligations with respect to the loan.
(g) ANNUAL ASSESSMENT— As a condition of continued eligibility for
participation in the program, each participating fund shall levy an annual
assessment on commercial property insurance premium written on risks in
the State of no less than 0.5% or such greater amount as the participating
fund determines is adequate to:
(1) Finance the operating expense of the participating fund;
(2) Raise awareness of the program with members and covered
policyholders;
(3) Establish standards, monitor compliance with those standards and
conduct testing and training with respect to the preparedness of
members to perform in accordance with the program; and
(4) Finance any loan granted pursuant to the program.
SEC. 4. GENERAL AUTHORITY AND ADMINISTRATION OF THE PROGRAM.
(a) GENERAL AUTHORITY.—The Secretary shall have the powers and
authorities necessary to carry out the Program, including authority—
(1) to investigate and audit all requests for loans under the Program; and
(2) to prescribe regulations and procedures to effectively administer and
implement the Program, and to ensure that all participating funds
are treated comparably under the Program.
(b) INTERIM RULES AND PROCEDURES.—The Secretary may issue interim
final rules or procedures specifying the manner in which—

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(1) Application may be made for participation in the Program;
(2) Orders may be certified under the Program; and
(3) Participating funds may request loans under the Program.
(c) CONTRACTS FOR SERVICES.—The Secretary may employ persons or
contract for services as may be necessary to implement the Program.
(d) FUNDING.—
(1) FEDERAL PAYMENTS.—There are hereby appropriated, out of
funds in the Treasury not otherwise appropriated, such sums as may
be necessary to make and forgive loans under the Program.
(2) ADMINISTRATIVE EXPENSES.—There are hereby appropriated,
out of funds in the Treasury not otherwise appropriated, such sums
as may be necessary to pay reasonable costs of administering the
Program.
(e) NOTICE TO CONGRESS.—The Secretary shall notify the Congress if a
certified order is expected to continue in force for longer than 4 weeks. The
notice shall contain information with respect to-
(1) the expected duration of the certified order;
(2) the amount of the loan request from the participating fund; and
(3) the amount the reduction of the loan.
(f) REPORTS.— Not later than June 30, 2022 and every other June 30
thereafter, the Secretary shall submit a report to the Committee on
Financial Services of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate that includes—
(1) an analysis of the overall effectiveness of the Program;
(2) an evaluation of whether any aspects of the Program have the effect
of discouraging or impeding insurers from providing commercial
property insurance including coverage for business income and extra
expense;
(3) an assessment of the governance, transparency, stakeholder
engagement and financial position of participating funds.

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SEC. 5. PRESERVATION PROVISIONS.
(a) Nothing in this title shall affect the jurisdiction or regulatory authority of
the insurance commissioner (or any agency or office performing like
functions) of any State over any insurer or other person except as
specifically provided in this title.
(1) During the period beginning on the date of enactment of this Act and
for so long as the Program is in effect, books and records of any
participating fund or any member that are relevant to the Program
shall be provided, or caused to be provided, to the Secretary, upon
request by the Secretary, notwithstanding any provision of the laws
of any State prohibiting or limiting such access.
(2) The Secretary may recover any loan amounts in default from the
guaranty fund or similar mechanism of the State of a participating
fund.
(b) Nothing in this title shall prohibit a participating fund to-
(1) Levy an assessment on premium in addition to that specified in
Section 3(f);
(2) Levy an assessment in an amount greater than that specified in
Section 3(f);
(3) Levy assessments in differing amounts based on line of business,
size of policyholder or other criteria;
(4) Purchase reinsurance or enter into other risk transfer arrangements
with respect to the obligations of the participating fund;
(5) Coordinate the obligation of a member to make covered payroll risk
payments with any otherwise applicable business income insurance;
and
(6) Reimburse its members for payments other than covered payroll risk
payments, provided that no such reimbursements shall be included
in any application for a loan or considered in the reduction of a loan
under the Program, including-
(A)payroll risk payments in excess of the maximum limit of time
or amount of covered payroll risk payments; and
(B)risk payments for elements not included within covered
payroll risk payments such as lost profits, extra expense and
excess compensation.

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(c) Nothing in this title shall prohibit the insurance commissioner (or any
agency or office performing like functions) from-
(1) Approving, disapproving or otherwise reviewing any rate charged to
policyholders with respect to covered payroll risk payments;
(2) Approving, disapproving or otherwise reviewing any form
describing covered payroll risk payments, the rights of covered
policyholders or the obligations of a participating fund and its
members;
(3) Approving, disapproving or otherwise reviewing any rate or form
regarding any insurance coverages for payments described in
subsection (b)(6); and
(4) Approving, disapproving or otherwise reviewing any rate or form
providing, limiting or excluding business income and extra expense
insurance including-
(A) an exclusion of coverage for business income losses
resulting from a certified order;
(B) a limitation of coverage for business income losses
resulting from a certified order; and
(C) coordination of coverage for business income losses
resulting from a certified order with covered payroll risk
payments.

Payroll Risk Insurance Act - Proposed Statutory Text

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