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Understanding The Premium Audit Process 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
What Is a Premium Audit?At the end of your policy periodState Fund conducts an audit toreview your payroll and ensure thatyou are charged the correct amountof premium for the policy term.Premium audits also update anydetails that may affect coverage andrates. 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
Audit RequirementsIt’s Part of Your Policy Your policy contractually requiresannual audits of any records thatrelate to the policy. State Fund conducts physical andvoluntary audits by review of payrollreports and other business records. 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
When Are Physical Audits Conducted?Annual premium is 10,500 or moreAnnual premium is less than 10,500 - at sufficient intervalsContractors holding a C-39 license (Roofing) - includes a site inspectionExposure in high-wage construction classes - at least every three (3) yearsAt any time when State Fund or the WCIRB decides it is necessary to review yourpayroll reports and other business records 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
What To Expect1. You will receive a letter scheduling your audit.2. The audit may be performed at your location or at another agreed upon site, or viaemail/mail.3. Auditor reviews your records, employee job duties, business operations andownership.4. State Fund will generate a final premium statement with a bill for premium due or arefund if you paid excess premium. 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
How Are Premium Audits Conducted?Telephone Audit - You will receive a letteroutlining what you need to submit to completethe audit. Audit documentation can besubmitted via mail, fax, email, or online portal.On Site Physical Audit – You will becontacted by one of our Field Auditors toschedule an appointment to visit your businessor your accountant’s office to conduct the audit. 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
State Fund Premium Audit VideosPremium Audit Video 2021 State Compensation Insurance FundConstruction IndustryPremium Audit VideoState Compensation Insurance Fund is not a branch of the State of California
What Is Required for an Audit?Required records include allyour payroll bookkeeping records. Tax returns and formsPayroll journalsOriginal time cards with start/stoptimes along with trade performedCash disbursementsCash paymentsOther records may be required. 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
What Is Considered Payroll? Gross wages/salariesCommissions and bonusesSick, vacation and holiday payOvertime paymentsMarket value of gifts Housing (when provided in lieuof wages) Employee contribution topension or retirement plans Any substitute for money 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
What Is NOT Considered Payroll? Tips Meals Overtime Excess Severance Pay EmployerContributoryPayments 2021 State Compensation Insurance FundAutomobiles &Travel ExcludedOfficers/Partners /Employees Employer matching fundsto pension/retirement/cafeteria plans Internal Revenue Code125 (IRC 125) Lodging (some lodgingmay be excluded) Prevailing Wage LawsState Compensation Insurance Fund is not a branch of the State of California
Overtime Excess Premium costs include the straight time portionof paid overtime Straight time portion of overtime payEmployee’s hourly wage 10/hourOvertime rate of pay 15/hour (time and a half)Overtime excess 5/hour Does not include extra pay for swing orgraveyard shifts 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
Overtime Excess ContinuedRYANNOVERTIME EXCESS CALCULATIONCHECK DATE 1/15HOURLY RATE OF PAY: 20OVERTIME PAY 300REGULAR HOURS:40OVERTIME HOURS:10DIVIDE 300/3 100REGULAR PAY: 800OVERTIME PAY: 300GROSS PAY: 1100 200 IS THE STRAIGHTWAGE 100 IS THE OVERTIME EXCESSREPORTABLE WAGE IS GROSS PAY LESS OVERTIME EXCESS 2021 State Compensation Insurance FundGROSS PAY 1,100LESS OVERTIME EXCESS( 100)WAGEState CompensationREPORTABLEInsurance Fundis not a branch of 1,000the State of California
Who Is Covered?California Labor Code § 3351California law provides that an“employee” include “[E]very personin the service of an employer underany appointment or contract of hireor apprenticeship, express or implied,oral or written, whether lawfully orunlawfully employed.” 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
The New ABC Test Changed the test on whether aworker is an employee orindependent contractor. Effective for Worker’s Compensationpurposes on July 1, 2020Employment Status Resource Centeron StateFundCA.com 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
Owner and Officer Coverage Corporate Officers/Partners/LLC Managersand Members Payroll must be assigned to the classificationthat best describes their duties If officers directly supervise any employee,the payroll is assigned to the classificationsupervised Payroll is subject to minimum/maximum forpolicy year 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
Standard Exception ClassificationsClerical Office Employees - 8810 Workers who are engaged 100% in clerical activitieswith no additional dutiesCannot divide a worker's payroll between 8810 and anyother classificationSalespersons, outside – 8742 2021 State Compensation Insurance FundEmployees who spend 100% of their work time in thefield calling on customersEmployees who act as outside salespersons on a parttime basis provided they perform strictly clerical workwhen working at their employer's locationNot applicable to employees who may work in a nonclerical areaState Compensation Insurance Fund is not a branch of the State of California
Family Member CoverageFamily members employed in thecourse of the trade, business, orprofession are employees (LC3351)Payroll for relatives who work forthe family business must bereported 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
Independent ContractorsIndependent Contractors status isdetermined on case by case basisDocuments to provide: Certificate of Workers’Compensation Insurance Contractor’s license numberand expiration date Business license Copy of contract 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
Waiver of SubrogationA Waiver of Subrogation is anendorsement that prohibits an insurancecarrier from recovering the money theypaid on a claim from a negligent thirdparty or other insurance carrier.State Fund offers: Specific Waivers of Subrogation Blanket Waivers of SubrogationAn audit picks up payroll for vendor-specific waivers of subrogation 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
Out-of-State EmployeesIf a California employer hiresan employee in California totemporarily work in anotherstate or country, the person isconsidered a Californiaemployee and payroll isincluded. 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
Common Payroll Reporting Errors Time Records Not reporting bonuses, sick time, vacation, and holiday pay Not reporting wages of family members Misclassifying covered officers and partners, managers, orsupervisors Miscalculating overtime excess Misidentifying of Clerical and Outside Sales classifications Not reporting unlicensed contractors 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
What If You Disagree With Your Audit? 2021 State Compensation Insurance Fund Contact your State Fund auditor Contact your Broker to assist with anyquestions You can also contact State Fund at:(888) 782-8338 Gather supporting documentationState Compensation Insurance Fund is not a branch of the State of California
State Compensation Insurance Fund Founded in 1914Not-for-profit, public enterprise fundCovering more than 100,000 employersCommitted to providing workers’compensation insurance to all CaliforniabusinessesTogether, we’ll keep California working 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
State Fund Services 2021 State Compensation Insurance FundClaims SpecializationMedical Provider NetworkToll-Free Claims Reporting CenterLoss Prevention ServicesOnline Safety Resource CenterAutomated BillingDedicated Online Account AccessOperations Support CenterAnti-Fraud ResourcesOnline Policyholder Resources onwww.StateFundCA.comState Compensation Insurance Fund is not a branch of the State of California
Thank you for choosingState Fund to be yourworkers’ compensationcarrier.Visit us at StateFundCA.com.Operations Support Center:(888) 782-8338 2021 State Compensation Insurance FundState Compensation Insurance Fund is not a branch of the State of California
2. The audit may be performed at your location or at another agreed upon site, or via email/mail. 3. Auditor reviews your records, employee job duties, business operations and ownership. 4. State Fund will generate a final premium statement with a bill for premium due or a refund if you paid excess premium.
