Ethics

One of the reasons JIFs are distinctly different from insurance companies is that everyone connected to a JIF is subject to the Local Official’s Ethics Act (NJSA 40A:9-22.5 et seq.). For example, all officers of PERMA involved with JIFs and many fund professionals complete the annual filings required by any other local official. In addition, various provisions of the regulations adopted by the state pertaining to JIFs establish additional standards.

In 1984, the New Jersey Department of Community Affairs and the New Jersey Department of Banking and Insurance specifically decided that regulations would permit one firm or related firms to perform all of the functions required to operate a JIF except external audit. In insurance parlance, this is known as an “attorney-in-fact” and is quite common in the insurance industry. It is more efficient for one firm to perform multiple functions and is one of the reasons the non-claim costs of PERMA-administered JIFs are the lowest in New Jersey and equal to the lowest cost of JIFs in other parts of the country.

However, PERMA does not perform all of the services commonly administrated by similar firms around the country. For example, PERMA does not handle:

• Claims Adjusting: Most contract administrators in other states also serve as the claims adjuster. PERMA decided this function should be unbundled and provided by an unrelated company.
• Treasury: The Executive Director of almost all JIFs in other states fulfills the treasury function. In funds administered by PERMA, this service is provided by a separately appointed Treasurer to ensure stronger checks and balances of financial affairs.