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Purchasing Workers’ Compensation Insurance: 14 Payroll Adjustments Effecting Workers’ Comp Insurance Premiums

Estimating payroll  is an all-important feature of workers’ comp insurance  as your premium payment is pegged to figures. Part of the audit process determines whether an employer’s payroll figures were accurate. If you under-estimated, there are additional premiums to pay. On the other hand, if you over-estimate, you may receive a refund. However, it’s better to estimate payroll figures as close to actual figures as possible.

 

14 Common Adjustments

1.  Pretax deductions,  also known as section ,125/129 deductions are deducted from the premium base in California ONLY. Other states include section 125 in premium base. California employers should be sure to have this information summarized so it can be deducted from the exposure totals for their policy.

2.  Tips paid  are a form of third party pay and is excludable from the premium base in many states. Remember tips and service charges are different – tips are paid directly to employees by customers, where service charges are paid to the employer. Only tips can be excluded. 

                         

3.   Severance paid  is excludable from the premium base in many states.

         

 4.  Overtime dollars  paid are excludable from the premium base in many states.

                    

5.   Value of Group term life  over $50,000 are IRS imputed income and excludable from the premium base in many states.

 

6.  Fringe benefits  that are IRS imputed income, such as personal use of an auto, are excludable from the premium base in many states.

 

7.  3rd party sick pay  is excludable from the premium base in many states, because the payments are made directly from the 3rd party payer to the employee - the employer does not make these payments, although in some cases they are included in the employers’ records. If included in the gross wages, these can be deducted.

 

8.  Reimbursed expenses  shown in income with actual records of the expense submitted is excludable from the premium base in many states. IRS rules often require including certain expenses the insurance industry does not include, so let the auditor know about such reimbursements so allowable deductions can be excluded. 

 

9.  Military pay  is excludable from the premium base in many states, so if you continue to pay employees who are in the service document these payments so the auditor can review them.

 

10.  Stock options  are excludable from the premium base in many states.

 

11.  Holiday/vacation/sick pay  are excludable from the premium base in some states such as Kansas, as long as actual amounts are documented for specific pay that is vacation pay. 

 

12.  Residuals  from commercials and motion pictures can be excluded in most states.

 

13.  Expense reimbursements reported as income is excludable from the premium base in many states.

 

14.  Stock bonuses  are included in the premium base in many states, so if these amounts are available the auditor can review them. (workersxzcompxzkit)

 

As you see , there are many different rules in each of the 50 states offering some significant opportunities to reduce your workers’ compensation premiums. Work very closely with your auditor to make your audit as accurate as possible! 

 

Resources:  State’s laws:  http://reduceyourworkerscomp.com/laws_and_regulations.php 

Visit:  http://www.workerscompkit.com/gallagher/QuoteCenter/workers-compensation-insurance.php for more help and information.

 

Extracted from Workers’ Comp Kit® Blog.

About the Author

Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers' Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: Robert_Elliott@ReduceYourWorkersComp.com or 860-553-6604.

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