Workers Compensation protects you and your employees.
If an employee is injured and you do not have work comp coverage, you face the possibility of paying expensive medical bills, their lost wages, as well as punitive penalties for not being in compliance with your state work comp laws. Your company might be shut down (stop work order) until you buy a workers comp policy.
The premium audit protects the business owner and workers compensation insurance carrier.
Perhaps, you, your agent or the insurance carrier made a mistake either during the underwriting process or during the policy term?
The audit is a light that shines on the past. In turn, the premium audit results will reveal if either premium money (credit) is due or an employer owes more money (debit). Believe it or not, more often than not, we see that business owners receive premium money back more often than them having to pay more premium.
If the business owner does not like the findings of the premium audit, the findings can always be disputed.
Learn more about aWorkers Compensation Insurance Audit
Workers compensation is NOT taxable.
As per page 19 of Pub 525, under header, “Workers Comp,” “Amounts you receive as workmanscomp for an occupational sickness or injury are fully exempt from tax if they are paid under a workers’ compensation act or a statute in the nature of a workers’ compensation act.”
Three Primary Reaasons:
1. The State(s) your employees work
2. The more injuries (claims) employees in your business category have, the higher your workers comp rate will be
3. Work Comp claims can be very expensive as insurance companies can pay for medical expenses, lost wages and several other miscellaneous items. Therefore, workerscomp insurance can be expensive and/or difficult to secure.
Employers should first learn which factors determine which factors determine workers comp insurance premiums.
Premiums are computed with respect to how employees are coded (classified by type of work they do) and the rate assigned to each employee class code. The workers comp premium rate is expressed as dollars and cents per $100 dollars of payroll for each classification code.
Work Comp Insurance Premiums are calculated using the following equation:
100 X Class Code Rate x MOD (if applicable) = Work Comp Premium
Most business owners do not think about workcomp insurance until an employee gets hurt. And when a claim happens, they are usually not sure how it works. Each state has different workers comp rules, and employers should know what’s covered before an injury happens.
So, first — what is workers’ compensation insurance
It is a state-mandated and regulated system that pays medical bills and lost wages (66 2/3%) to employees injured “during the course and scope of their work” or sustain a work-related disease/illness. Employees receive benefits predicated on the injury/illness category and severity. (Federal employees are subject to different workers’ compensation rules)
Injuries/illnesses that happen during work hours. Injuries inlcude: traveling, running errands, attending business seminars/meetings/etc, repetitive motion action (i.e. carpal tunnel) or unending exposure to harmful chemicals, pollution, etc.
What does workmans comp cover?
– Medical care due to injury/illness
– Replacement Income
– Retraining costs
– Permanent injury Compensation
– Benefits to survivors of workers killed while working
Please note: If an employee collects workerscomp benefits, that employee cannot sue their employer.
Also, work comp does NOT cover pain and suffering.
It depends on the state. You are likley to receive compensation benefits if you are unable to work as a result of your workplace injury. 66 2/3% of your average weekly wage (AWW) is generally the wage benefits granted.
Paid to employees with severe workplace injuries that prohibit the employee from working again, either temporarily or permanently.
The benefits an injured worker receives depends on three things:
1. The state the injured employee lives
2. Whether the injured worker can return to work
3. Workplace injury severity
Workers eligible for BOTH Social Security Disability benefits may also be eligible to get work comp benefits if he/she has work-related injury/illness. However, individuals are not able to simultanteously receive BOTH the full amount of Social Security benefits and workcomp benefits.
A “Work Comp Offset” is the process of Social Security reducing disability benefits to account for workmanscomp.
Workers’ Compensation Laws in Florida
If a non-construction company has 4 or more employees,part/full-time, the employers MUST buy a Florida Work Comp Policy.
A excluded corporate officer or LLC Member is not considered an employee.
Florida Sole Props & Partners are auto-excluded from a work comp policy, but he/she can still be incuded on the policy if he/she submits an Election of Coverage with the Florida Division of Workers Comp.
Construction company with three Corporate Officers or less may be excluded from coverage. Each Officer must have at least 10% ownership.
Florida Construction Sole Proprietors and Partnerships are not allowed to be excluded from workers comp insurance in Florida.
Additional information regarding Florida Workers Compensation Rules
Texas, unlike all the other 49 states, does NOT require an company to buy a work comp policy. However, Texas business owners are still on the hook if an employee is injured.
Please visit Texas Workers Compensation Department of Insurance to learn more.
A New Jersey employer with 1 or more employees, and any NJ employer not covered by federal programs must buy workerscomp coverage. Out-of-state companies might need workerscomp coverage if they execute an employment contract in New Jersey or if any work is done in NJ.
Sole Props with zero employees are not required to have a workers comp policy, but may elect to buy a NJ workers comp policy.
Go here to learn more details regardingNew Jersey Workers Compensation Rules
Workmans comp benefits are funded by the business owners of each state.
Worker’s comp programs differ from state to state, but employers pay for workcomp usually in one of the following 3 ways:
1. a state-run insurance program
2. an insurance company
3. directly to employees
Workers Compensation provides employees with benefits if an injury or illness happens in the workplace.
Workmanscomp pays 4 benefit types:
1. Medical benefits
2. Disability benefits
3. Death benefits
4. Rehab benefits
Employees injured/disabled on the job receive a fixed amount. In turn, they reliquish the right to sue their employer.
You MUST notify your employer of your injury ASAP. States have radically varying limits on the # of days you have to alert your employer. Generally, the limit is one month — but it varies from a couple days to two years.
Generally, your employer will have workers comp claim forms for you to execute and submit. In turn, it becomes your employer’s responsibility to file the documents to their workers compensation insurance carrier.
It depends on the state. The type of injury can also impact how long you must retain these workers comp claim records. Medical-only/first-aid injuries generally can be closed/records archived sooner than indemnity cases — sometimes indemnity cases take years before the case closes/settles. Please keep in mind, even after a work comp case is closed, it can be reopened.
Work Comp injuries are monitored/tracked by 2 organizations: 1. OSHA (Fed Goverment) and 2. a state’s workers’ comp division.
OSHA mandates that regular reporting of claims on a document, OSHA 301 Incident Report, summarized by the OSHA 300 log. These records must be retained for at least 5 years.
Companies must retain medical records for workers exposed to toxic elements or blood-borne pathogens for at least 30 years after the employee’s termination.
The IRS allows employers to deduct the costs of required workers comp insurance premium payments. As per the federal tax code, insurance payments are deductible expenses for companies as costs incurred during the course of business. Employers can deduct the costs of their workers comp premium payments on their Schedule C, Profits & Losses.
If the work comp policy is required, the premiums can be deducted form both federal and state taxes.
Taxpayers may exclude their workmans comp benefits from their tax returns, but may not use a deduction. The IRS permits injured employees to exclude their wage replacement workcomp benefits if they were paid as per your state law.
Tax laws often change. Consequently, do not utilize this information in lieu of legal advice. Seek counsel from an attorney licensed to practice tax law in your state.
Over 100 years old!
The first constitutional workers compensation law was signed on May 3, 1911 and took effect on September 1, 1911. The Worker Compensation Insurance Industry celebrated its 100 year anniversary back in 2011.
Worker Compensation was a recognition of society’s responsibilities to the workplace, establishing workers compensation as the first form of social insurance in American history.
Workers Compensation Insurance is elective if the company has LESS than their state’s required minimum number of employees to insure. These states include: AL, AR, FL, GA, MS, MO, NM, NC, SC, TN, VA, and WI. (Minimums differ from state to state). Stringent employee reporting requirements are on the employer with puntive penalties for non-compliance. Please refer to these workers compensation state rules to learn if you need to buy a workers comp policy.
Texas businesses are not required to carry workerscomp insurance. However, Texas employers are “on the hook” for medical and all ancillary expenses when a work injury or work illness occurs.
Ohio, Wyoming, Washington and North Dakota. Employers must buy work comp insurance from a state-operated insurance fund in each of these states. Private workers compensation insurance is prohibited in these 4 states. Therefore, these “government-run” workers comp insurance states are known as monopolistic — no private competititon allowed.