Montana Administrative Register Notice 2-55-45 No. 13   07/10/2014    
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In the matter of the amendment of ARM 2.55.502 pertaining to the individual loss sensitive dividend distribution plan








TO: All Concerned Persons


1. On September 19, 2014, the Montana State Fund proposes to amend the above-stated rule.


2. The Montana State Fund will make reasonable accommodations for persons with disabilities who wish to participate in the rulemaking process and need an alternative accessible format of this notice. If you require an accommodation, contact the Montana State Fund no later than 5:00 p.m. on August 1, 2014, to advise us of the nature of the accommodation that you need. Please contact Nancy Butler, Montana State Fund, P.O. Box 4759, 855 Front Street, Helena, Montana 59604-4759; telephone (406) 495-5138; fax (406) 495-5023; or e-mail nbutler@mt.gov.


3. The rule proposed to be amended provides as follows, deleted matter interlined, new matter underlined:



(1) through (9) remain the same.

(10) The State Fund has a security interest in all dividends to secure payment to the State Fund of any and all amounts owed to the State Fund by the policyholder, regardless of the policy years in relation to which the policyholder owes the State Fund, or to which the State Fund declares a dividend.


AUTH: 39-71-2315, 39-71-2323, MCA

IMP: 39-71-2323, MCA


REASON: This amendment to ARM 2.55.502 is reasonably necessary at this time for the following reasons: The board of directors of Montana State Fund may declare dividends. Dividends are not guaranteed, and are not payable until declared by the board. If a dividend is declared, a policyholder is then and only then entitled to its share of the dividend in accordance with statutes, rules, and board policies pertaining to the dividend declaration. Under the current rule, State Fund claims a security interest in any dividend. Under state law, for a security interest to attach to collateral, that is, the dividend in this case, it must be enforceable against the debtor. For a security interest to be enforceable, the debtor must have rights in the collateral. According to State Fund's dividend rule and policy, a policyholder debtor does not have a right to payment of a dividend. Thus, the debtor does not have rights in collateral against which a security interest is enforceable. Likewise, the dividend does not become property of a debtor's estate in bankruptcy. See 11 U.S.C. 541. The existing language in ARM 2.55.502(10) has the potential to complicate State Fund's application of a dividend to a debtor's account by confusing this application with a claim of a security interest, and so is being removed from the rule.


4. Concerned persons may submit their data, views, or arguments concerning the proposed action in writing to Nancy Butler, Montana State Fund, P.O. Box 4759, 855 Front Street, Helena, Montana 59604-4759; telephone (406) 495-5138; fax (406) 495-5023; or e-mail nbutler@mt.gov.  Any comments must be received no later than 5:00 p.m., August 8, 2014.


5. If persons who are directly affected by the proposed action wish to express their data, views, or arguments, orally or in writing at a public hearing, they must make a written request for a hearing and submit this request along with any written comments to Nancy Butler at the above address no later than 5:00 p.m., August 8, 2014.


6.  If the agency receives requests for a public hearing on the proposed action from either 10 percent or 25, whichever is less, of the persons who are directly affected by the proposed action; from the appropriate administrative rule review committee of the Legislature; from a governmental subdivision or agency; or from an association having not less than 25 members who will be directly affected, a hearing will be held at a later date. Notice of the hearing will be published in the Montana Administrative Register. Ten percent of those persons directly affected has been determined to be 2600 persons based on 26,000 policyholders.


7. The Montana State Fund maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request which includes the name, e-mail, and mailing address of the person and specifies that the person wishes to receive notices regarding the Montana State Fund. If you prefer to receive notices by e-mail, please indicate this in your request. Such written request may be mailed or delivered to Nancy Butler, Montana State Fund, P.O. Box 4759, 855 Front Street, Helena, Montana 59604-4759; faxed to the office at (406) 495-5023; e-mail nbutler@mt.gov; or may be made by completing a request form at any rules hearing held by the Montana State Fund.


8. An electronic copy of this notice of proposed amendment is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register. The Secretary of State strives to make the electronic copy of the notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that if a discrepancy exists between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. In addition, although the Secretary of State works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.


9. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.


10. With regard to the requirements of 2-4-111, MCA, the Montana State Fund has determined that the amendment of the above-referenced rule will not significantly and directly impact small businesses.




/s/ Nancy Butler                                        

Nancy Butler, General Counsel

Rule Reviewer



/s/ Elizabeth Best                                     

Elizabeth Best

Chair of the Board



/s/ Michael P. Manion                             

Michael P. Manion, Chief Legal Counsel

and Rule Reviewer


Certified to the Secretary of State June 30, 2014.


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