(a) For each plan that requires a TPATFA, the balance at all times must be the amount deposited plus accrued interest less authorized disbursements. If the TPATFA balance is less than the amount deposited plus accrued interest less authorized disbursements, it is presumed that the TPA misappropriated fiduciary funds and has acted in a financially irresponsible manner.
(b) If the TPATFA is interest bearing or income producing, the full nature of the account must be disclosed to the payor. The TPA shall secure written permission and authorization from the payor to invest the funds or otherwise dispose of the interest or earnings. No investment may be made that assumes any risk other than the risk that the obligor may not pay the principal when due. The use of specialized techniques or strategies that incur additional risks to generate higher returns or to extend maturities is not permitted. Such techniques include, but may not be limited to, the use of financial futures or options, buying on margins and pledging of TPATFA balances.
(c) The TPA may place TPATFA funds in interest-bearing or income-producing investments and retain the interest or income thereon, if the TPA obtains the prior written authorization of the payor. In addition to savings and checking accounts, a TPA may invest in the following:
(1) direct obligations of the United States of America or U.S. Government agency securities with maturities of not more than one year;
(2) certificates of deposit, with a maturity of not more than one year, issued by financial institutions that are insured by the FDIC or FSLIC, so long as the deposit does not exceed the maximum level of insurance protection provided to certificates of deposits held by such institutions;
(3) repurchase agreements with financial institutions or government securities dealers recognized as primary dealers by the Federal Reserve System if:
(A) The value of the repurchase agreement is collateralized with assets which are allowable investments for TPATFA funds; and
(B) The collateral has a market value at the time the repurchase agreement is entered into at least equal to the value of the repurchase agreement; and
(C) The repurchase agreement does not exceed 30 days;
(4) commercial paper, if the commercial paper is rated at least P-1 by Moody’s Investors Service, Inc. or at least A-1 by Standard & Poor’s Corporation;
(5) money market funds, if the money market funds invest exclusively in assets that are allowable investments under paragraphs (1) through (4) for TPATFA funds and the following conditions are met:
(A) Each investment transaction must be made in the name of the TPA’s TPATFA:
(B) The TPA shall maintain evidence of any investments; and
(C) Each investment transaction must flow through the TPA’s TPATFA.
(d) No deposit may be made into a CASA or disbursement made from a CASA except for claims and claims adjustment expenses.
(e) For each plan where a CASA is required, the balance in the CASA must at all times be the amount deposited less claims and claims adjustment expenses paid. If the balance is less than that amount, it is presumed that the TPA has misappropriated the funds and has acted in a financially irresponsible manner.
(f) The TPA shall maintain detailed books and records that reflect all transactions involving the receipt and disbursement of:
(1) contributions and premiums received on behalf of a payor; and
(2) claims and claim adjustment expenses received and paid on behalf of a payor.
(g) The detailed preparation, journalizing and posting of books and records must be maintained on a timely basis, and all journal entries for receipts and disbursements must be supported by evidential matter that must be referenced in the journal entry so that it may be traced for verification. The TPA shall prepare and maintain monthly financial institution account reconciliation of all TPATFA and CASA established by the TPA. The minimum detail required is as follows:
(1) the sources, amounts and dates of any money received and deposited by the TPA;
(2) the date and person to whom a disbursement is made. If the amount disbursed does not agree with the amount billed or authorized, the TPA shall prepare a written record as to the reason; and
(3) a description of the disbursement in such detail to identify the source document substantiating the purpose of the disbursement.
(h) Failure of the TPA to accurately and timely maintain the books and records is considered untrustworthy, hazardous or injurious to participants in the plan or the public and financially irresponsible.