Could a Louisiana state employee insurance vendor without an A.M. Best rating keep receiving payroll deductions?

Plain-English summary

Louisiana's commissioner of administration asked whether DINA, a dental-plan vendor used by state employees, could remain in the voluntary payroll deduction system without an A.M. Best insurance rating. In Opinion 03-0317, the AG concluded that the vendor fit a statutory grandfather clause on the facts supplied: it received deductions on July 1, 2001, and met the payroll rules that were in effect on May 19, 2000. The AG acknowledged that the Legislature was unlikely to have anticipated this situation, but said it fit the statute's text.

The opinion also addressed the commissioner's proposed interim safeguard. DINA had previously provided a $100,000 letter of credit. The AG said it would be appropriate for the Division of Administration to require a letter of credit until corrective legislation was enacted. That answer addressed this vendor's stated facts; it did not waive the rating requirement for every insurance vendor.

Currency note

The full issue date is not legible in the available official extract. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant at issuance

State payroll officials

The AG read La.R.S. 42:455(D)(1) to preserve approval for vendors that received voluntary deductions on July 1, 2001, and continued to meet the older rules. Based on the commissioner's account, DINA/Guaranty met those conditions. The opinion said the Division could require a letter of credit pending legislation.

DINA/Guaranty and enrolled employees

The vendor lacked an A.M. Best rating. The commissioner reported that 2,100 employees were enrolled and virtually all had signed up through a tax sheltered cafeteria plan. The opinion treated the grandfather clause as the reason this particular vendor could remain approved, despite the rating issue described in the request.

Common questions

Could the state keep DINA/Guaranty in its insurance payroll deduction program without an A.M. Best rating?

The AG answered yes on the facts presented, because the vendor received deductions on the statutory date and continued to meet the earlier payroll rules.

Did a letter of credit replace the rating requirement for every insurance vendor?

The AG answered only the commissioner's question about DINA. It said a letter of credit would be appropriate for that vendor until corrective legislation was enacted.

Why did the number of enrolled employees matter to the request?

The commissioner said that ending DINA's payroll deduction access could affect 2,100 enrolled employees, virtually all of whom had signed up through a cafeteria plan. The AG recited that concern before applying the grandfather clause.

Background and statutory framework

La.R.S. 42:455 governed voluntary payroll deductions and set A.M. Best rating thresholds for general insurance deduction vendors. La.R.S. 42:456 listed permitted withholdings. The AG quoted the 2001 grandfather clause in La.R.S. 42:455(D)(1), which continued approval for vendors receiving deductions on July 1, 2001, if they continued to meet the Division of Administration's May 19, 2000 rules. Applying the facts supplied by the commissioner, the AG found DINA/Guaranty within that clause.

Citations and references

• La.R.S. 42:455 and La.R.S. 42:456: payroll deduction provisions discussed in the opinion.
• La.R.S. 42:455(D)(1): quoted grandfather clause.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0317

Original opinion text

One American Place
301 Main Street, Suite 600
DEPARTMENT OF JUSTICE
P.O. Box 94005
CIVIl. DIVISION
TEL.: (225) 342-7013
BATON ROUGE
FAX: (225) 342-2090

RICHARD P. JEYOUB
70804-9005
ATrORNEY GENERAL

NOV. 1 8
OPINION NUMBER 0:3-0:317

109 STATE EMPLOYEES
R.S. 42:455; 42:456

Discussion of eligibility of insurance payroll
Mr. Mark C. Drennen
deduction provider.
Commissioner of Administration
P. O. Box 94095
Baton Rouge, LA 70804

Dear Commissioner Drennen:

You requested the opinion of this office concerning a situation which has arisen in connection with a miscellaneous insurance payroll deduction provider, known as DINA.

The statutory provisions regarding payroll deductions are contained in La.R.S. 42:455 and La.R.S. 42:456. La.R.S. 42:455 provides that the authority for payroll deductions not otherwise provided by statute shall be governed by rules promulgated by the Division of Administration and administered by the state payroll office, provided that any general insurance deduction vendors have a current rating in A.M. Best of B+ or better for foreign companies1 and of B or better for domestic companies2. La.R.S. 42:456 lists the types of permitted payroll withholdings.

We have been furnished with information by you and by DINA as follows: DINA Dental Plan has been offered to employees since 1978 and DINA Dental Plan has been offered to State employees since 1987. DINA Dental Plan serves as the marketing/administration arm of Guaranty Assurance Company. Guaranty Assurance Compan~ has been licensed by the Louisiana Department of Insurance since March 20, 1984. DINA Dental Plan has not been licensed by the Department of Insurance. Until the year 2000, the Vendor Application Requests to the Division of Administration were submitted in the name of DINA. In 1999, Guaranty Assurance Company was acquired by Dental Economics, LLC., but it is still licensed in the name of Guaranty Assurance Company. Since 2000, the Vendor Application Requests were submitted to the Division of Administration under the name Guaranty Assurance Company. Counsel for DINA has advised this office that DINA

’La.R.S. 42:455(A)(1 )(b).

2La.R.S. 42:455(A)(2)(b).

3The initial Certificate of Authority was issued in the name of Guaranty Savings Assurance Company.

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Commissioner Mark C. Drennen
OPINION NUMBER 03-0317
Page -2-

Dental Plan and Guaranty Assurance Company are synonymous. Guaranty/DINA does not possess an A.M. Best rating.

The Division of Administration was of the understanding that DINA was not an insurance company and thus did not enforce the statutory requirement that an insurance deduction vendor have an A.M. Best rating. In lieu of the rating, DINA provided a $100,000 letter of credit to the Division of Administration similar to the bonding requirements for all non- insurance payroll providers. It is our understanding that Guaranty/DINA otherwise met all of the statutes and rules regarding payroll deductions.

You advised that if DINA cannot continue to offer their product, there may be an adverse impact upon the 2100 employees currently enrolled in their product offering, as virtually all signed up as part of the IRS Code Section 125 tax sheltered option "cafeteria plan". Consequently, if DINA cannot continue to do business as a payroll deduction provider, the employees will lose the coverage and the tax advantage of being able to pay the premium with pre-tax earnings. You advised that it is the intent of your office to seek a legislative solution; however, that will occur after the deadline for re-qualification occurs.

Your first question is:

Since this scenario was not contemplated and therefore not provided for under the existing statute, do the statutes provide any relief with regards to the current situation?

Enacted in the 2001 Louisiana Legislature, La.R.S. 42:455(D)(1) contains a "grandfather clause" which provides as follows:

D. (1) Notwithstanding any law, rule, or regulation to the contrary, every vendor receiving payment through voluntary payroll deductions as of July 1, 2001, under the Uniform Payroll System, shall continue to be approved as a vendor if such vendor continues to meet the requirements of the rules and regulations of the division of administration governing payroll deductions which were in effect on May 19, 2000. Further, those vendors receiving payment through voluntary payroll deductions, under the Uniform Payroll System, as of July 1, 2001, who apply for a new payroll deduction for additional products, policy forms, or service plans may do so subject to the rules and regulations of the division of administration governing payroll deductions which were in effect on May 19, 2000. (Emphasis added).

It is our understanding that notwithstanding R.S. 42:455(A) and the requirement of an A.M. Best rating, DINA/Guaranty (i) received payment through voluntary payroll deductions as

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Commissioner Mark C. Drennen
OPINION NUMBER 03-0317
Page -3-

of July 1, 2001, (ii) meets the requirements of the rules and regulations of the division of administration governing payroll deductions which were in effect on May 19, 2000, and therefore, pursuant to La.R.S. 42:455(D)(1) shall continue to be approved as a vendor. We suggest that it is unlikely that the situation presented in this request is what was contemplated by the legislature when they enacted La.R.S. 42:455(D)(1), however, the situation does fit the statute.

Since DINA provided a letter of credit previously, could we continue to accept a letter of credit in lieu of the Best rating until such time as corrective legislation is submitted and heard?

We believe that it would be very appropriate for the Division to require the submission of a letter of credit until such time as corrective legislation is enacted.

Trusting this adequately responds to your request, we remain

Yours very truly,

RICHARD P. IEYOUB
Attorney General

BY:
S. HESS
Assistant Attorney .=neral

RPI/MSH