Policy
Name:
|
Minimum
and Maximum Private State Fund Payroll Limitations
|
Policy #:
|
EP-13-01
|
Code/Rule
Reference
|
Ohio
Revised Code (ORC) 4123.01, 4123.62;
Ohio Administrative Code (OAC) 4123-17-07, 4123-17-30,
4123-17-15.
|
Effective
Date:
|
July 1,
2015
|
Approved:
|
Kevin R.
Abrams, Chief of Employer Services
|
Origin:
|
Employer
Policy
|
Supersedes:
|
Min-Max
Private State Fund Payroll Limitations policy effective June 21, 2007.
|
History:
|
Revised
June 30, 2016. New policy issued June 21, 2007.
|
Review
Date:
|
July 1,
2020
|
I. Policy Purpose
The
Ohio Bureau of Workers’ Compensation (BWC) will apply minimum and maximum
payroll reporting limits to active corporate officers and elective coverage
persons.
II. Applicability
This
policy applies to private employers (PA), authorized representatives, BWC
Policy Processing, Underwriting and Premium Audit, and Field Operations.
III. Definitions
A.
Corporate
officer: Corporate officers
include the president, vice president, secretary, treasurer, and any other
executive officers, which are specified in, and empowered by the charter or
regularly adopted bylaws or minutes of the corporation. Persons who are
elected, appointed, or empowered by the directors and perform duties for the
corporation must also be covered. A corporate officer may also be referred to
as “executive officer of a corporation,” “executive officer” or “officer.” With
exceptions noted in this policy BWC considers corporate officers employees of
the corporation and they are covered under the workers’ compensation policy.
If the corporation is nonprofit:
1.
The executive
director will be considered a corporate officer.
2.
A person who
volunteers his or her services as a corporate officer is not considered an
employee for workers’ compensation purposes.
B.
Elective coverage
persons: A sole
proprietor, a member of a partnership, a member of a limited partnership, an
individual incorporated as a corporation (ICORP) with no employees or
additional shareholders, an officer of a family farm corporation, or an
individual member of a limited liability company (LLC) filing a federal tax
form as a sole proprietor or partnership, an ordained minister not covered
under the church’s policy who elects coverage as a sole proprietor.
C.
Individual
incorporated as a corporation (ICORP):
A corporation that has one corporate officer who is the only shareholder (100%
ownership) and has no employees, casual labor, or spot labor.
D.
Statewide Average
Weekly Wage (SAWW): The
average weekly earnings of all workers in Ohio as determined annually by the
Ohio Department of Jobs and Family Services (ODJFS). See ORC 4123.62.
E.
Maximum: The maximum payroll reporting limit is
one hundred fifty percent (150%) of the SAWW.
F.
Minimum: The minimum payroll reporting limit is
fifty percent (50%) of the SAWW.
G.
Minister: A duly ordained, commissioned,
accredited, or licensed minister, member of the clergy, rabbi, priest, or Christian
Science practitioner.
H.
Rollback / roll
forward: Only applies
to policy periods prior to July 1, 2015, to officers who earn less than the
maximum in a six month period, report actual payroll and earn more than the
maximum in the other six month period. The exemption amount above the maximum
for the six month period will be rolled back or forward as applicable to the
other six month period up to the maximum. This insures that actual payroll for
the calendar year is reported up to the annual maximum.
IV. Policy
A.
Every PA employer is
required to file an annual payroll true-up with BWC at the conclusion of the
policy year. See the Payroll
True-Up policy for additional information.
B.
Operation of minimum
and maximum state fund payroll limitations. (The annual minimum and maximum
payroll limitations are maintained on BWC’s website).
1.
BWC establishes
minimum and maximum total payroll limitations based upon the SAWW.
a.
Effective July 1,
2015, BWC will enforce minimum and maximum payroll limitations for a PA
employer on a policy year basis (July 1 through June 30). Prior to July 1,
2015, BWC enforced minimum and maximum payroll limitations on a calendar year
basis.
b.
The payroll
limitation for each policy year will be based upon the SAWW that was in effect
on the first day of the preceding January.
2.
Employers are
required to report actual payroll if the amount falls between the minimum and
maximum payroll reporting limits.
3.
Bonus payments paid
during the policy year are included in a corporate officer’s total payroll for
the same policy year.
4.
The minimum and
maximum payroll reporting limits apply to:
a.
Active corporate
officers of a corporation. (See section C for guidelines on “active” corporate
officers.).
b.
Elective coverage
persons that elect coverage (not including ministers covered under the church’s
policy). See the Employer Services policy Elective
Coverage for guidelines on electing coverage and reporting
payroll.
c.
The individual
corporate officer of an ICORP, upon the hiring of an employee.
d.
The paid corporate
officers/directors of a nonprofit corporation.
e.
A minister electing
coverage as a sole proprietor.
5.
The minimum and
maximum payroll reporting limits do not apply to:
a.
Ministers covered by
their church policy.
b.
The payroll of
shared employees including ministers and elective coverage persons reported as
a client employer under the policy of a Professional Employer Organization
(PEO). See OAC 4123-17-15(D)(7).
c.
Federal workers’
compensation programs such as Longshore & Harbor Worker’s Jones Act and
Federal Employees Liability Act (FELA) (see Rules 4123-20-05 and 4123-21-04).
d.
Effective September
29, 2015, the uncompensated volunteer corporate officers of nonprofit
corporations.
e.
Employees with
“official sounding” titles who are not enumerated as corporate officers in the
corporate charter/minutes. These employees must be reported as any other
employee and are not subject to minimum and maximum limitations.
6.
The maximum payroll
limitation for construction industry employers is set forth in OAC 4123-17-57.
C.
BWC guidelines
regarding “active” corporate officers.
1.
BWC does not
consider any minimum number of hours worked as a threshold to making its
determination of what constitutes “active.” BWC considers that any amount of
work by the corporate officer makes him/her “active” and subject to the minimum
and maximum reporting regardless of type of pay received. However, if a
corporate officer only attends board meetings, then he/she is carrying out
board duties and those duties will not be considered in determining an active
corporate officer status.
2.
“Active” as used by
BWC considers any decision making affecting the “day to day operations” of the
business regardless of the number of hours or days devoted thereto. As used
here, “day to day operations” does not require “daily” or any minimum time
requirement.
3.
Individuals will be
considered employees (not subject to minimum and maximum) if they:
a.
Hold positions not
enumerated in the corporate charter/minutes, or
b.
Do not meet the BWC guidelines
for “active corporate officer.”
4.
The minimum and
maximum limitations will apply to officers of both “for profit” and “not for
profit” corporate organizations as determined by their filing(s) with the
Secretary of State. Examples include paid active officers of nonprofit
organizations and clubs such as Elks, Moose, AMVETS, American Legion, Parent
Teacher Org. (PTO), Music Parents Org., Little League or other school, parent,
or other social organization. NOTE: A person who volunteers his or her services
as a corporate officer to a nonprofit organization is not considered an
employee for workers’ compensation purposes.
5.
Wages of active
corporate officers from outside the state of Ohio who are not subject to Ohio
workers’ compensation rules and laws and will not be included in the reportable
payroll.
6.
If a corporate
officer does not meet the definition of “active” as outlined in this policy
then the corporate officer is not considered an employee and is not subject to
the payroll reporting requirement.
D.
Minimum-Maximum reporting
policy for corporate officers in multiple corporations.
1.
If a corporate
officer receives payroll under more than one policy, the payroll will be
subject to the minimum-maximum limitation of each policy. For a corporate
officer of an S corporation, pay includes ordinary income that has been deemed
reportable. Refer to the section
on Subchapter S (S Corp) Corporate Officer Reporting on BWC’s
website.
2.
When a corporate
officer of multiple corporations is paid under a single policy, the corporate
officer is subject to the minimum-maximum reporting requirement under the
policy for which the person is paid based on the classification rules for all
duties performed.
3.
When a corporate
officer of multiple corporations is not paid under any policy, the corporate
officer is subject to the minimum-maximum reporting requirements under the
policy for which the person is deemed to be active based on the classification
rules for all duties performed in all businesses.
Example: A company files a consolidated
tax return under an LLC partnership and the partners did not elect coverage.
This partnership provides administrative and managerial functions to a group of
fifteen (15) fast food restaurants, all of which are LLCs filing as
corporations. Each LLC corporation has its own Federal Employer Identification
Number (FEIN) and BWC policy number. Many of the same corporate officers are
providing services in more than one of the restaurant policies but none get
paid. Each corporate officer is subject to the minimum maximum reporting
requirement under ONE policy. If the corporate officer has exposure to the
operations, he is reportable to 9083 (Restaurant-Fast Food). In deciding which
of the fifteen (15) policies the wages would be reportable, consider the
location where the corporate officer spends the most time. If the corporate
officer has only administrative duties, reportable to 8810 Clerical, 8742 Travelling
Salesperson, or 8871 Clerical Telecommuter wages are reported under the policy
with the highest rate.
Using the same example above, if the
partners did elect coverage under the LLC partnership, they would not be
subject to the corporate officer reporting requirements under any of the LLC
corporation restaurant polices since their wages would be reported under the
parent company.
4.
If there is no
corporate officer pay and the corporate officer is deemed to be active in the
company, the officer will be subject to the minimum payroll reporting
requirement for that policy based on the definition of active as set forth in
OAC 4123-17-30 and BWC’s policy and procedures manual.
5.
Claims of any of
these corporate officers should be filed against the “reporting policy” rather
than the policy where the injury occurs unless circumstances warrant a partial
or other transfer.
E.
Rule change
scenarios.
1.
Effective July 1,
2015, BWC began enforcing minimum and maximum payroll limitations for a PA
employer on a policy year basis (July 1 through June 30). Prior to July 1,
2015, BWC enforced minimum and maximum payroll limitations on a calendar year
basis. There is no longer a rollback or roll forward.
2.
Effective July 1,
2006, BWC changed the minimum and maximum payroll limitations. The following
information spells out how to handle the split calendar year. For the first
half of 2006, the maximum is $800 per week, with no minimum for corporate
officers. For the second half of 2006, the maximum is $1,056 per week and the
minimum is $352 per week. Both the minimum and maximum weekly amounts change
annually on July 1 based on the new SAWW set each year by ODJFS. See the
following examples for guidance in this area:
a.
Active corporate
officer receiving annual bonus applicable to entire year.
i.
An active corporate
officer receives $800 per week or $41,600 annually. Additionally, a yearly
bonus outside of payroll of $20,000 is indicated on the officer’s 2006 tax
return for a total of $61,600. For 2006, $20,800 is reportable in the first
half and $27,456 is reportable in the second half. In this case, the $10,000
bonus attributable to the second half of 2006 is used to bring the reporting up
to the maximum payroll limit (at the highest aggregate level) of $27,456.
ii.
Total 2006
reportable = {($800 Max. x 26) + ($1,056 Max. x 26)} = ($20,800 + $27,456) =
$48,256 of $61,600 income.
b.
Active corporate
officer receiving pay in one half and rollback applicable to year (2006).
i.
An active corporate
officer receives $10,000 pay in the first half of 2006 and no pay in the second
half 2006. In 2006, $19,152 is reportable as a result of the minimum and
maximum limitations effective 7/1/06.
ii.
Total 2006
reportable = {($10,000 in first half) + ($9,152 Min in second half)} = ($10,000
+ $9,152) = $19,152 income.
iii. Then, in 2007, corporate officer
receives $20,000 pay the first half of 2007 and no regular pay in the second
half of 2007 but does receive $35,000 in K-1 ordinary income for 2007. In this
case, the $35,000 in K-1 income is used to bring the reporting up to the maximum
payroll limit in second half 2007 with the excess being rolled back (at the
highest aggregate level) of $1,095 per week in each half of 2007.
iv.
Total 2007
reportable = {($20,000 in first half) + ($28,470 Max in second half)} = $48,470
for regular earnings.
v.
However, $6,530
rolled-back from $35,000 K-1 income in second half less second half Max
($35,000 – $28,470) when added to $20,000 previously reported first half =
$26,530 first half adjusted reportable (still less than first half Max) +
$28,470 Max in second half = $55,000 total reportable income for 2007.
c.
Active corporate
officer receiving pay in one half and roll-back applicable to year (2014).
i.
In 2014, corporate
officer receives $20,000 pay the first half of 2014 and no regular pay in the
second half of 2014 but does receive $35,000 in K-1 ordinary income for 2014.
In this case, the $35,000 in K-1 income is used to bring the reporting up to
the maximum payroll limit in second half 2014 with the excess being rolled back
(at the highest aggregate level) of $1,274 per week in each half of 2014.
ii.
Total 2014
reportable = {($20,000 in first half) + ($33,124 Max in second half)} = $53,124
for regular earnings.
iii. However, $1,876 rolled-back from $35,000
K-1 income in second half less second half Max ($35,000 - $33, 124) when added
to $20,000 previously reported first half = $21,876 first half adjusted
reportable (still less than first half Max) + $33,124 Max in second half =
$55,000 total reportable income for 2014.
F.
Scenario: Outside
counsel listed as corporate officer with board duties only.
1.
An employer’s
outside attorney is designated as corporate secretary, a corporate officer
position in the corporate charter and minutes. The attorney attends Board
meetings as corporate secretary. The attorney is on retainer and/or invoices
the employer based on billable hours for legal services and performs no other
services relating to the operations of the business. This individual is
available to represent and provide legal services to the general public
provided there is no conflict of interest. This attorney would not be
considered an active corporate officer or employee and the minimum and maximum
limits would not apply.
2.
Payments to this
Non-Active Corporate Officer should be considered professional fees not
reportable to BWC unless paid by 1099 and reported by the Law firm.