Workers Compensation

Health Insurance

About Navigating Workers Compensation

What makes this insurance so complicated?

The final premium is unknown. It will be determined at the end of the insurance period: 12 months or less, if the policy is cancelled earlier.
The final premium will reflect the following: If the audit finds a larger premium, you should start with the same amount for the new policy period. The 3^rd policy can correct the premium, if the second audit proves less pay for labor.
The final premium is calculated based on payroll and uninsured subcontracted costs (keep receipts for materials under your company name, or they will be included as a base for premium calculation), exclusion for owners, officers etc.
Class codes have a large price differentiation. They might vary and be numerous, and also interconnected. Mistakes with a class code selection could cause overpayment or underpayment of premiums.
Your records (bank, tax, projects, receipts, etc.) are the only proof for agreement or disagreement with the audit’s results.

If you are prepared, you’ll know what to expect. To apply, click this form

Few Slides about WC insurance

I am a sole proprietor/business partner/corporate officer/member of a limited liability company.

Do I have to buy w.c. insurance?

"The short answer is no, but the full answer is a bit longer. In summary, sole proprietors* and business partners may elect to come under the Act or they may choose not to.

There is a twist, though, in Section 3 of the Act. It provides that employees who engage in extra hazardous* occupations must be covered under the law--but then subsections 3(17) and 3(20) allow sole proprietors, corporate officers, business partners, and members of limited liability companies to opt out.

In summary, if you are a sole proprietor, business partner, corporate officer, or member of a limited liability company, and...

...

you want to come under the Act, you must purchase insurance for yourself to be covered for a work-related injury or illness.

...

you don't want to be covered, and you have an insurance policy for other employees, you must notify your carrier in writing of your intention to opt out, following the instructions in Section 3(17)(b). The Commission does not have an opt-out form and does not require individuals to use an opt-out form.

If your company is in the construction business, trucking business operating at a construction site, or other extrahazardous occupations, you should be aware that new law (see 820 ILCS 185, Employee Classification Act) requires that, in almost all instances, you must obtain insurance.

Also, a recent decision by the Illinois Supreme Court, Roberson v. Industrial Commission, states that referring to a trucker as an independent contractor, even in a written lease agreement, does not remove the trucking company's obligation to provide workers’ compensation insurance for those drivers.

Contact the Insurance Compliance Unit, an attorney, or a C.P.A. for more information concerning these businesses." http://www.iwcc.illinois.gov/insurance.htm#sole

Do I need workers compensation insurance?
Employers have a legal responsibility to their employees to make the workplace safe. However, accidents happen even when every reasonable safety measure has been taken.

To protect employers from lawsuits resulting from workplace accidents and to provide medical care and compensation for lost income to employees hurt in workplace accidents, in almost every state, businesses are required to buy workers compensation insurance. Workers compensation insurance covers workers injured on the job, whether they're hurt on the workplace premises or elsewhere, or in auto accidents while on business. It also covers work-related illnesses.

Workers compensation provides payments to injured workers, without regard to who was at fault in the accident, for time lost from work and for medical and rehabilitation services. It also provides death benefits to surviving spouses and dependents.

Each state has different laws governing the amount and duration of lost income benefits, the provision of medical and rehabilitation services and how the system is administered. For example, in most states there are regulations that cover whether the worker or employer can choose the doctor who treats the injuries and how disputes about benefits are resolved.

Workers compensation insurance must be bought as a separate policy. Although in-home business and business owners policies (BOPs) are sold as package policies, they don't include coverage for workers' injuries.

Information about Workers Compensation policy audit

Many from you will face or already have some experience with it and learning from experience is not what you want to happened to you.

Before audit, you may have in hand 2 or 3 tools to legally decrease the amount of premium you owe. When you were applying for coverage, you were billed on presumable pay roll. After 12 months, numbers could have dramatically changed based on how you paid for labor and subcontracted costs.

At a time of an application, please ask me about these tools. They have to be used far before the time of audit – during the policy year.

The following information how an audit is performed is from Barkley Assigned Risk Services:

What are the types of audits?

Usually Insurer performs audits in two ways: either as a "Mail Audit" or as a "Physical Audit"
- A Mail Audit requires the client to complete a form, collect additional documentation, and return all documentation to the Insurer. (Usually how much you paid to subcontractors, how much you paid to employees, was there overtime pay..etc.)
- A Physical Audit is performed by auditor visitingther client's office to review specific records and business documentation. This may bo done at the accountant office, or insurance agent office.
- Lately I see a survey, sent to insured just after the policy is issued. I call it preliminary audit.

Preparing your for a "Mail Audit"

If you have been selected for a Mail Audit, the insurer will mail a form to you:
- you need to complete the form and return it to the Insurer along with any additionally requested supporting documentation
- the completed form and documentation can be returned several ways to the insurers:
  - via e-mail
  - via fax
  - via mail
There is a deadline for completing a Mail Audit. Mail Audits are due within 60 days of the expiration date of your policy.
If the form is lost, a new form can be emailed or faxed or mailed. You have to request it.

Note: If you are scheduled for a Physical Audit, the Mail Audit options listed above will not be available.

Preparing your for a "Physical Audit"

If you have been selected for a Physical audit, the Insurer will notify you to expect an on-site visit by an auditor
- you will need to coordinate a time with the auditor for their on-site visit
- the auditor’s purpose will be to review your records and review other business materials, including:
  - Ownership information
  - Duties of employees (review and determination of job classifications)
you will be expected to have these records ready and to be available for the auditor to answer any questions

Supporting documentation for your legal status

For Legal Status of a Corporation

This list is not all inclusive but rather a guide to the typical forms filed by a Corporation. This documentation includes:
- 1120 and 1120S along with any reference statements
- W3
- 941’s
- State Quarterly Reports
- 940
- List of Contractors and/or Laborers along with proof of Insurance, Independent and/or Exemption
- 1099’s for each Contractor, General Ledger and the 1096
The following documentation can be sent in addition to the items listed above:
Quick Books Reports
Quicken Reports
ADP Reports
Transaction Detail

For Legal Status of a Partnership

This list is not all inclusive but rather a guide to the typical forms filed by a Partnership. This documentation includes:
- 1065, Schedule K and any statements referenced on the return
- List of Contractors and/or Laborers along with proof of Insurance, Independence and/or Exemption
- 1099’s for each Contractor, General Ledger and the 1096
The following documentation may be sent in addition to the items listed above:
Quick Books Reports
Quicken Reports
ADP Reports
Transaction Detail

For Legal Status of an Individual

This list is not all inclusive but rather a guide to the typical forms filed by an Individual. This documentation includes:
- Page 1 and 2 of both the 1040 and Schedule C along with any schedules referenced on the return.
- 941
- 940
- State Quarterly Reports
- List of Contractors and/or Laborer along with proof of Insurance, Independence and/or Exemption
- 1099’s for each Contractor, General Ledger and the 1096
The following documentation can be sent in addition to the items listed above:
Quick Books Reports
Quicken Reports
ADP Reports
Transaction Detail

For Legal Status of a Home Owners Association

This list is not all inclusive but rather a guide to the typical forms filed by an Association. This documentation includes:
- 1120 H along with any schedules referenced in the return
The following documentation can be sent in addition to the items listed above:
General Ledger
Quicken Reports
ADP Reports
Transaction Detail

Do I Have to Pay Workers Comp for Independent Contractors?

If they don't have insurance, and you announced you paid them: YES, you created an obligation to pay the particular rate for the amount you paid to them.

If they have proper insurance, and they arn't directed from you on a day to day operations: NO, you should do NOT pay.