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Public Act 098-0814
Public Act 0814 98TH GENERAL ASSEMBLY
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Public Act 098-0814
| | SB0646 Enrolled | LRB098 04895 RPM 34923 b |
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| AN ACT concerning regulation.
| Be it enacted by the People of the State of Illinois, | represented in the General Assembly:
| Section 5. The Illinois Insurance Code is amended by | changing Sections 286.1, 291.1, 294.1, 297.1, 300.1, and 315.6 | and by adding Sections 295.2 and 315.9 as follows:
| (215 ILCS 5/286.1) (from Ch. 73, par. 898.1)
| (Section scheduled to be repealed on January 1, 2017)
| Sec. 286.1. Purposes and Powers. | (a) A society shall operate for the
benefit of members and | their beneficiaries by:
| (1) Providing benefits as specified in Section 297.1 of | this amendatory Act; and
| (2) Operating for one or more social, intellectual, | educational,
charitable, benevolent, moral, fraternal, | patriotic or religious purposes
for the benefit of its | members, which may also be extended to others.
Such | purposes may be carried out directly by the society or | indirectly
through subsidiary corporations or affiliated | organizations.
| (b) Every society shall have the power to adopt laws and | rules for the
government of the society, the admission of its | members and the management
of its affairs. It shall have the |
| power to change, alter, add to or amend
such laws and rules and | shall have such other powers as are necessary and
incidental to | carrying into effect the objects and purposes of the society.
| (c) A domestic society that provides any of the benefits | specified in Section 297.1 of this Code must be governed by a | board of directors and managed by qualified officers subject to | the following requirements: | (1) The laws of a society must provide that: | (i) the board of directors shall have the powers | and perform the duties ordinarily possessed and | exercised by a board of directors under this Code, | including, but not limited to, the authority and | responsibility for the hiring and the discharge of a | president, chief executive officer, or an equivalent | position, except that a society that elects its | president, chief executive officer, or equivalent | position pursuant to its by-laws, as of the effective | date of this amendatory Act of the 98th General | Assembly, may continue to do so if it elects a | president, chief executive officer, or equivalent | position that meets qualifications set forth in a rule | adopted by the Director; and | (ii) the board of directors may remove a director | for cause and replace the director with another | qualified director. | After the effective date of this amendatory Act of the |
| 98th General Assembly, a domestic society shall amend its | laws, as necessary, to comply with this paragraph (1) as | soon as reasonably practicable, but in no event later than | January 1, 2019. | (2) A person convicted of a felony may not be a | director or an officer of a domestic society. | (3) A society shall provide information regarding | qualifications of board candidates to voting members prior | to the time of election. | (4) Each newly elected director of a domestic society | shall participate in a board training or orientation | program within 6 months after their election to the board | that includes information regarding board duties and | responsibilities. | (5) At least annually, the board of directors shall | conduct a self-assessment. | (6) Each domestic society shall establish an audit | committee. The composition and responsibilities of the | audit committee shall comply with the Illinois | Administrative Code provisions relating to annual | financial reporting. | (Source: P.A. 84-303.)
| (215 ILCS 5/291.1) (from Ch. 73, par. 903.1)
| (Section scheduled to be repealed on January 1, 2017)
| Sec. 291.1. Organization. A domestic society organized on |
| or after
the effective date of this amendatory Act shall be | formed as follows:
| (a) Seven or more citizens of the United States, a | majority of whom are
citizens of this State, who desire to | form a fraternal benefit society may
make, sign and | acknowledge, before some officer competent to take
| acknowledgement of deeds, articles of incorporation, in | which shall be stated:
| (1) The proposed corporate name of the society, | which shall not so
closely resemble the name of any | society or insurance company already
authorized to | transact business in this State as to be misleading or | confusing;
| (2) The place where its principal office shall be | located within this State;
| (3) The purposes for which it is being formed and | the mode in which its
corporate powers are to be | exercised. Such purposes shall not include more
| liberal powers than are granted by this amendatory Act; | and
| (4) The names and residences of the incorporators | and the names,
residences and official titles of all | the officers, trustees, directors or
other persons who | are to have and exercise the general control of the
| management of the affairs and funds of the society for | the first year or
until the ensuing election, at which |
| all such officers shall be elected by
the supreme | governing body, which election shall be held not later | than one
year from the date of issuance of the | permanent certificate of authority;
| (b) Duplicate originals of the articles of | incorporation, certified
copies of the society's bylaws | and rules, copies of all proposed forms of
certificates, | applicants and rates therefor, and circulars to be issued
| by the society and a bond conditioned upon the return to | applicants of the
advanced payments if the organization is | not completed within one year
shall be filed with the | Director, who may require such further information
as the | Director deems necessary. The bond with sureties approved | by the
Director shall be in such amount, not less than | $300,000
nor more than $1,500,000, as
required by the | Director. All documents filed are to be in the
English | language. If the Director finds that the purposes of the | society
conform to the requirements of this amendatory Act | and all provisions of the law
have been complied with, the | Director shall approve the articles of
incorporation and | issue the incorporators a preliminary certificate of
| authority authorizing the society to solicit members as | hereinafter provided;
| (c) No preliminary certificate of authority issued | under the provisions
of this Section shall be valid after | one year from its date of issue or
after such further |
| period, not exceeding one year, as may be authorized by
the | Director, upon cause shown, unless the 500 applicants
| hereinafter required have been secured and the | organization has
been completed as herein provided. The | articles of incorporation and all other
proceedings | thereunder shall become null and void in one year from the
| date of the preliminary certificate of authority or at the | expiration of
the extended period, unless the society shall | have completed its
organization and received a certificate | of authority to do business as
hereinafter provided;
| (d) Upon receipt of a preliminary certificate of | authority from the
Director, the society may solicit | members for the purpose of completing its
organization, | shall collect from each applicant the amount of not less | than
one regular monthly premium in accordance with its | table of rates and
shall issue to each such applicant a | receipt for the amount so collected.
No society shall incur | any liability other than for the return of such
advance | premium nor issue any certificate nor pay, allow or offer | or
promise to pay or allow any benefit to any person until:
| (1) Actual bona fide applications for benefits | have been secured on not
less than 500 applicants and | any necessary evidence of
insurability has been | furnished to and approved by the society;
| (2) At least 10 subordinate lodges have been | established into which the
500 applicants have been |
| admitted;
| (3) There has been submitted to the Director, under | oath of the
president or secretary, or corresponding | officer of the society, a list of
such applicants, | giving their names, addresses, date each was admitted,
| name and number of the subordinate lodge of which each | applicant is a
member, amount of benefits to be granted | and premiums therefor; and
| (4) It shall have been shown to the Director, by | sworn statement of the
treasurer or corresponding | officer of such society, that a least 500
applicants | have each paid in cash at least one regular monthly
| premium as herein provided, which premiums in the | aggregate shall amount to
at least $150,000. Said | advance premiums
shall be held in trust during the | period of organization, and, if the society
has not | qualified for a certificate of authority within one | year unless
extended by the Director, as herein | provided, such premiums shall be
returned to said | applicants; and
| (5) In the case of a domestic society that is | organized after the effective date of this amendatory | Act of the 98th General Assembly, the society meets the | following requirements: | (i) maintains a minimum surplus of $2,000,000, | or such higher amount as the Director may deem |
| necessary; and | (ii) meets any other requirements as | determined by the Director. | (e) The Director may make such examination and require | such further
information as the Director deems necessary. | Upon presentation of
satisfactory evidence that the | society has complied with all the provisions
of law, the | Director shall issue to the society a certificate of | authority
to that effect and that the society is authorized | to transact business
pursuant to the provisions of this | amendatory Act; and
| (f) Any incorporated society authorized to transact | business in this
State at the time this amendatory Act | becomes effective shall not be
required to reincorporate.
| (Source: P.A. 84-303.)
| (215 ILCS 5/294.1) (from Ch. 73, par. 906.1)
| (Section scheduled to be repealed on January 1, 2017)
| Sec. 294.1. Reinsurance. | (a) A domestic society may enter into reinsurance
| transactions only in accordance with Article XI of this Code.
| (b) A domestic society may reinsure the risks of another | society in connection with a merger transaction with approval | by the Director. | (Source: P.A. 84-303.)
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| (215 ILCS 5/295.2 new) | Sec. 295.2. Maintenance of solvency. | (a) In the event a domestic society has an authorized | control level event described in Section 35A-25 of this Code | under circumstances the Director determines will not be | promptly remedied, the Director may, in addition to all other | actions required or permitted by subsection (b) of Section | 35A-25 of this Code, issue an order declaring the domestic | society to be in hazardous condition and ordering that all | steps be taken to remedy such condition pursuant to this | Section. | (b) A domestic society may negotiate an agreement to | transfer members, certificates, and other assets and | liabilities of the society, in whole or in part, to another | organization through merger, consolidation, assumption, or | other means. Such transfer shall be concluded within the | timeframe established by the Director and subject to approval | by the Director. Such transfer agreement shall be deemed fully | approved by the domestic society upon majority vote of its | board of directors. Such transfer shall be effective | notwithstanding the provisions of Section 295.1 of this Code or | any other law or regulation or laws of the domestic society | requiring another form of notice to or approval by members, | which shall be superseded by this Section. | (c) In the event of an agreement to transfer under this | Section to an organization without a certificate of authority |
| in this State, the Director may grant a limited certificate of | authority to such organization, upon request, if the | organization does not apply for and obtain a certificate of | authority to transact business in this State. Such limited | certificate of authority shall grant the organization | authority to service the certificates following the transfer | and fulfill all obligations owed to certificate holders but not | to otherwise transact insurance business in this State. | (d) The board of directors of a domestic society may | suspend or modify its qualifications for membership as | necessary or appropriate to facilitate an agreement to transfer | under this Section, notwithstanding the laws of the society, or | any other law or regulation to the contrary.
| (215 ILCS 5/297.1) (from Ch. 73, par. 909.1)
| (Section scheduled to be repealed on January 1, 2017)
| Sec. 297.1. Benefits. | (a) A society may provide the following contractual
| benefits in any form:
| (1) Death benefits;
| (2) Endowment benefits;
| (3) Annuity benefits;
| (4) Temporary or permanent disability benefits;
| (5) Hospital, medical or nursing benefits;
| (6) Monument or tombstone benefits to the memory of | deceased members; and
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| (7) Such other benefits as authorized for life insurers | and which are
not inconsistent with this amendatory Act.
| (b) A society shall specify in its rules those persons who | may be
issued, or covered by, the contractual benefits in | subsection (a),
consistent with providing benefits to members | and their dependents.
A society may provide benefits on the | lives of children under the minimum age
for adult membership | upon application of an adult person. | (c) After the effective date of this amendatory Act of the | 98th General Assembly, a society shall provide an applicant for | contractual benefits a disclosure statement that reads | substantially as follows: | ". . . . . . .(name of the society) is licensed to do | business in the State of Illinois as a fraternal benefit | society. As such, it is not included in the Illinois Life | and Health Guaranty Association (otherwise known as the | Guaranty Association). This means that fraternal benefit | societies cannot be assessed for the insolvency of other | life insurers or other fraternal benefit societies. By law, | a fraternal benefit society is responsible for its own | solvency. If there is an impairment of reserves, a | certificate holder may be assessed a proportionate share of | the impairment. This process is described in the | certificate issued by the society.". | The statement must appear immediately above the | applicant's signature on the society's membership application |
| or certificate or policy application, in uppercase and bold | type or boxed.
| (Source: P.A. 84-303.)
| (215 ILCS 5/300.1) (from Ch. 73, par. 912.1)
| (Section scheduled to be repealed on January 1, 2017)
| Sec. 300.1. The Benefit Contract. | (a) Every society authorized to do
business in this State | shall issue to each owner of a benefit contract a
certificate | specifying the amount of benefits provided thereby. The
| certificate, together with any riders or endorsements attached | thereto,
the laws of the society, the application for | membership, the application
for insurance and declaration of | insurability, if any, signed by the
applicant and all | amendments to each thereof shall constitute the benefit
| contract, as of the date of issuance, between the society and | the owner,
and the certificate shall so state. A copy of the | application for insurance
and declaration of insurability, if | any, shall be endorsed upon or attached
to the certificate. All | statements on the application shall be
representations and not | warranties. Any waiver of this provision shall be void.
| (b) Any changes, additions or amendments to the laws of the | society duly
made or enacted subsequent to the issuance of the | certificate shall bind
the owner and the beneficiaries and | shall govern and control the benefit
contract in all respects | the same as though such changes, additions or
amendments had |
| been made prior to and were in force at the time of the
| application for insurance, except that no change, addition or | amendment
shall destroy or diminish benefits which the society | contracted to give the
owner as of the date of issuance.
| (c) Any person upon whose life a benefit contract is issued | prior to
attaining the age of majority shall be bound by the | terms of the
application and certificate and by all the laws | and rules of the society to
the same extent as though the age | of majority had been attained at the
time of application.
| (d) A society shall provide in its laws and its | certificates that, if its
reserves as to all or any class of | certificates become impaired, its board of
directors or | corresponding body may require that there shall be paid by
the | owner to the society an assessment in the amount of the owner's | equitable proportion of
such deficiency as ascertained by its | board, and that, if the payment is not
made, either (1) it | shall stand as an indebtedness against the certificate
and draw | interest not to exceed the rate specified for certificate loans
| under the certificates; or (2) in lieu of or in combination | with (1), the
owner may accept a proportionate reduction in | benefits under the
certificate. However, in no event may an | assessment obligation be forgiven, credited, or repaid by | whatever means or however labeled by the society in lieu of | collection or reduction in benefits, unless provided to all | society members and approved in writing by the Director, except | that the forgiveness or repayment of any assessments issued by |
| a society that remain outstanding as of the date of this | amendatory Act of the 98th General Assembly may be forgiven or | repaid by any manner or plan certified by an independent | actuary and filed with the Director to make reasonable and | adequate provision for the forgiveness or repayment of the | assessment to all society members. Notwithstanding the | foregoing, a society may fully repay, credit, or forgive an | assessment from the date of death of any life insured under a | certificate so long as the plan to forgive or repay the | assessment is certified by an independent actuary and filed | with the Director to make reasonable and adequate provision for | the forgiveness or repayment of the assessment to all assessed | society members as a result of the death. The society may | specify the manner of the election and which
alternative is to | be presumed if no election is made. No such assessment shall | take effect unless a 30-day notification has been provided to | the Director, who shall have the ability to disapprove the | assessment only if the Director finds that such assessment is | not in the best interests of the benefit members of the | domestic society. Disapproval by the Director shall be made | within 30 days after receipt of notice and shall be in writing | and mailed to the domestic society. If the Director disapproves | the assessment, the reasons therefore shall be stated in the | written notice.
| (e) Copies of any of the documents mentioned in this | Section, certified
by the secretary or corresponding officer of |
| the society, shall be received
in evidence of the terms and | conditions thereof.
| (f) No certificate shall be delivered or issued for | delivery in this
State unless a copy of the form has been filed | with the Director in the
manner provided for like policies | issued by life insurers in this State.
Every life, accident, | health or disability insurance certificate and every
annuity | certificate issued on or after one year from the effective date | of
this amendatory Act shall meet the standard contract | provision requirements not
inconsistent with this amendatory | Act for like policies issued by life insurers in
this State | except that a society may provide for a grace period for | payment
of premiums of one full month in its certificates. The | certificate shall
also contain a provision stating the amount | of premiums which are payable
under the certificate and a | provision reciting or setting forth the
substance of any | sections of the society's laws or rules in force at the
time of | issuance of the certificate which, if violated, will result in | the
termination or reduction of benefits payable under the | certificate. If the
laws of the society provide for expulsion | or suspension of a member, the
certificate shall also contain a | provision that any member so expelled or
suspended, except for | nonpayment of a premium or within the contestable
period for | material misrepresentation in the application for membership | or
insurance, shall have the privilege of maintaining the | certificate in force
by continuing payment of the required |
| premium.
| (g) Benefit contracts issued on the lives of persons below | the society's
minimum age for adult membership may provide for | transfer of control or
ownership to the insured at an age | specified in the certificate. A society
may require approval of | an application for membership in order to effect
this transfer | and may provide in all other respect for the regulation,
| government and control of such certificates and all rights, | obligations and
liabilities incident thereto and connected | therewith. Ownership rights
prior to such transfer shall be | specified in the certificate.
| (h) A society may specify the terms and conditions on which | benefit
contracts may be assigned.
| (Source: P.A. 84-303.)
| (215 ILCS 5/315.6) (from Ch. 73, par. 927.6)
| (Section scheduled to be repealed on January 1, 2017)
| Sec. 315.6. Application of other Code provisions. Unless | otherwise
provided in this amendatory Act, every fraternal | benefit society shall be
governed
by this amendatory Act and | shall be exempt from all other provisions of the
insurance laws | of this State not only in governmental relations with the
State | but for every other purpose, except for those provisions | specified in
this amendatory Act and except as follows:
| (a) Sections 1, 2, 2.1, 3.1, 117, 118, 132, 132.1, | 132.2, 132.3, 132.4,
132.5, 132.6, 132.7, 133, 134, 136, |
| 138,
139, 140, 141,
141.01, 141.1, 141.2, 141.3, 143, 143c, | 144.1, 147, 148, 149, 150, 151,
152, 153, 154.5, 154.6, | 154.7, 154.8, 155, 155.04, 155.05, 155.06, 155.07,
155.08 | and 408 of this Code; and
| (b) Articles VIII 1/2, XII, XII 1/2, XIII, XXIV, and | XXVIII of this Code.
| (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
| (215 ILCS 5/315.9 new) | Sec. 315.9. Voluntary dissolution. Upon application to the | Director, a domestic society may request that it be dissolved | and that its existence be terminated. The application shall | demonstrate that the applicant has satisfied its members' | certificate obligations or that it has transferred such | obligations to another organization, domestic or foreign, by | means of assumption or bulk reinsurance or otherwise, and that | the domestic society's supreme governing body has approved the | termination and dissolution. The application shall contain any | other information required by the Director. Any limitation | related to reinsurance by a domestic society shall not apply to | reinsurance entered into in conjunction with the transfer of | members' certificate obligations as a part of a voluntary | dissolution. Upon approval of the application by the Director, | the domestic society shall be deemed dissolved and its | existence terminated as of the date set forth in the | application. |
Effective Date: 1/1/2015
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