By Tim Kolacz
In the past 24 months there have been so many changes to the Workers Comp laws here in California that it has been hard for even the most astute business owner to follow. From the changes in the values of your losses affecting your Experience Mod, to ownership rules on exclusions, to another change in Mod calculation, it has been a whirlwind. Have no fear, however, the crew at HUB are here to help keep you informed.
Today, we are going to discuss the most recent change to the Officer Exclusion. This is where the owners of the business are able to exclude themselves from Worker’s Compensation coverage and, hence, remove themselves from the payment of Worker’s Comp premiums based on their payrolls. This allows the owners to lower their premiums since the owner is less likely to file a claim for worker’s comp. This can save potentially thousands of dollars in premiums that can be put back into the business.
The current level of ownership needed to exclude themselves from premiums is more than 15%. This has caused issues previously when there are multiple owners and only one or two are above that percentage. This is now changing.
The new minimum ownership requirement is 10%.
Additionally, if a director or officer with at least 1% ownership is also a direct relative of a director or officer with at least 10% ownership, they are now eligible for exclusion.
Both of these are dramatic and far reaching changes. What this now does is allows for an owner, say the majority owner of a woman owned business to provide ownership to her daughter, with 1%, who is getting into the business, to exclude their payroll and her from the Worker’s Comp premiums while they learn the business. This helps the cash flows as now you can exclude those owners who are the future of your business. Allowing the future generation, or the key-woman, in your operation to have additional capital to grow the business.
This is all a result of Senate Bill 189 and these changes are effective July 1, 2018.
There are additional owners that can be excluded under this Bill as well. Licensed Professional Corporations who have health insurance are eligible for exclusion. Also, a Trustee or Grantor of a trust if they are an employee of the Corporation, LLC or Partnership in which the trust has an ownership stake and they are eligible to elect exclusion as an officer, managing-member, or general partner of those entities.
There are even some more options to be excluded under the new law. Make sure that you are staying up-to-date either with your broker or insurance professional as these take effect. It will help your bottom line as well as your mental well-being knowing you know the latest and greatest.
Tim Kolacz works with his clients and prospects to find the Right Solution for their business. It helps them stay in business. Tim.firstname.lastname@example.org 951-779-8730