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OhioBWC - Basics: (Policy library) - File

Employer Policy

 

Successorship Liability

 

Policy Effective Date: September 14, 2006

Revision Date: May 3, 2008

 

 

Purpose/Benefits

 

·        The purpose of the policy is to assure employers participating in the State Insurance Fund receive fair and equitable treatment in accordance with the parameters of BWC Rule OAC 4123-17-02 Basic or Manual Rate effective July 27, 2006.

 

·        BWC upholds its fiduciary responsibility as steward of the State Insurance Fund by assuring that all employers pay their fair share of the costs associated with workplace injuries thereby avoiding subsidization by other employers.

 

·        Through review and associated adjustment of accounts in which there is a Predecessor/Successor relationship contributes to rating system integrity. (For purposes of this policy, Predecessor refers to the employer associated with the business prior to the succession and Successor refers to the employer associated with the business after the succession).

 

·        When an experience transfer is appropriate, the effective date shall be the beginning date of the next payroll reporting period.  In cases where the Successor employer does not have coverage or where the date of succession is January 1 or July 1, the effective date of the experience transfer shall be the actual date of succession.

 

·        When an employer wholly succeeds another in the operation of a business, all the rights, obligation, and experience associated with the Predecessor employer are transferred to the Successor employer.

 

·        When an employer succeeds another in only a portion of the business, the rights and obligations of the Predecessor are not transferred to the Successor.  However, BWC transfers that portion of the Predecessor’s experience to the Successor for rate making purposes.

 

·        Invoice/statements statements generated for the Predecessor will be the responsibility of the Successor employer resulting in improved collection of debts owed to BWC.

 

·        A Succeeding employer must preserve the Predecessor’s payroll records for at least the five years preceding the date of succession.

 

·        When an employer from another state purchases an existing Ohio operation, BWC may use the experience the Successor employer established in that state in determining the Successor employer’s experience modifier (EM).

 

·        BWC will assign only one policy to a legal entity.  Where an employer having one legal entity succeeds one or more employers, BWC will combine the policies to ensure the Successor employer is assigned only one workers’ compensation policy.

 

 

Policy

 

·        When an employer wholly or partially succeeds another employer in the operation of a business, BWC will transfer the appropriate experience of the Predecessor employer to the Successor employer for calculation of the Successor employer’s rate(s).  For all successions taking place on or after September 1, 2006, in situations where an employer wholly succeeds another employer: the Predecessor employer’s financial rights, obligations, and experience under Ohio Workers’ Compensation Law will be transferred to the Successor employer by BWC.

 

·        The Predecessor employer is responsible for reporting payroll under its policy up to the effective date of the succession and the Successor employer is responsible for reporting payroll under its new or existing policy from the date of succession forward.  However, the Successor employer is ultimately held responsible for any unpaid billing or premium obligations posted on the Predecessor employer’s policy.

 

·        Multiple criteria and the preponderance of the facts are used by BWC in the determination of whether or not a Successor employer “wholly succeeds” a Predecessor employer.  Criteria such as, but not limited to, the following are examined:

 

·        Business Ownership

 

·        Continuity of business operations

 

·        Real Estate, plant and equipment, material inventories, and other real property

 

·        Customer profiles

 

·        Industrial pursuit

 

·        Employee Roster

 

·        The criteria listed above may be found through examination of records to include, but not limited to, the following:

 

·        Purchase or sales agreements

 

·        Federal Tax and OBES records (to include W-2’s and 1099’s)

 

·        Receipts, invoices or transfer documents relating to real estate, equipment, vehicles, material inventory and other real property

 

·        List of customers and supporting invoices

 

·        Account receivable ledgers

 

·        Payroll records

 

 

In situations where the Successor employer wholly succeeds the Predecessor employer:

 

·        The Predecessor employer’s policy will be combined into the Successor employer’s policy effective the date of the succession where the Successor employer has workers’ compensation coverage prior to the date of succession.  For employers not having workers’ compensation coverage prior to the date of succession the Predecessor employer’s policy will be combined into the Successor employer’s policy effective the date of the succession or the effective date of the Successor employer’s new policy.

 

·        For Successor employer’s not having workers’ compensation coverage prior to the date of succession, BWC will grant continuous coverage under certain circumstances which are as follows:

 

·        Successor employer submits Application for Ohio Workers’ Compensation Coverage (U-3) and appropriate minimum security deposit prior to the next payroll reporting period due date after the date of succession or 30 days from the date of succession whichever is greater.

 

·        Predecessor policy has active coverage on the date of succession.

 

·        The Predecessor employer’s rights and obligations under Ohio Workers’ Compensation Law are transferred to the Successor employer.

 

·        The payroll and claims experience of the Predecessor employer are transferred to the Successor employer.  When the Successor employer has existing BWC coverage, experience transfers become effective on the beginning date of the next payroll period.  When the Successor employer does not have existing BWC coverage or the date of succession is January 1 or July 1, the experience transfer takes place on the date of succession.

 

·        The Successor employer receives any and all rights and liabilities of the Predecessor employer, including but not limited to the Predecessor employer’s advance Premium Security Deposit (PSD).

 

·        The Successor employer is required to preserve the Predecessor employer’s payroll records for the five years preceding the date of succession.

 

·        Successions involving a bankrupt employer are forwarded to BWC Legal Department for advice.

 

·        Request for retention of its policy number by a Predecessor Employer will be denied.  Predecessor employer must complete an Application for Ohio Workers’ Compensation Coverage (U-3) to apply for coverage for its new/future business operation.

 

·        Ohio Administrative Code (OAC) 4123-17-02 requires the Successor employer to notify the bureau of the succession.

 

·        Pursuit to this rule, the bureau shall provide to the parties the necessary forms and instructions to notify the bureau of the succession (Notification of Business Acquisition/Merger or Purchase/Sale (U-118)).  The certification section of the form requests a signature from the Predecessor and Successor employer.  However, the bureau has the right to proceed with processing a transaction to transfer the Predecessor’s experience and the liabilities when the Successor wholly succeeds another employer in the operation of a business without either party’s signature or approval.  The bureau shall review the completed forms and if any questions arise, the bureau may conduct a premium audit on each employer’s policy.

 

·        The effective date entered into BWC’s policy management system may be the effective date of succession plus 1 day to ensure the Predecessor employer has coverage through the date the Predecessor employer last had employees.

 

·        This policy does not address the impacts of other alternative rating programs in which an employer may be participating (The rules for the specific alternative rating plans apply; e.g., group-experience rating, group-retrospective rating, Drug-Free Safety Program, One Claim Program, etc.)

 

 

Customers Impacted

 

Internal

 

·        Policy Processing Department personnel need to be aware of the new Successorship Liability policy.

 

·        Customer Contact Center and walk-in employer areas within field offices and field representatives need to be knowledgeable when discussing with employers.

 

External

 

·        Employers and Employer Representatives involved in cases where a succession occurs.

 

 

Scenarios

 

Scenario 1:  Successor Applies for Coverage On or Before Date of Succession

 

Employer B, not having established coverage wholly succeeds Employer A which has established Ohio workers’ compensation coverage.  Application for Ohio Workers’ Compensation Coverage (U-3) and Notification of Business Acquisition/Merger or Purchase/Sale (U118) forms returned to BWC indicate Employer B wholly succeeded Employer A on 10/04/06.  Employer B applied for coverage and paid the minimum premium security deposit on 10/04/06.

 

BWC Action

 

Preponderance of the facts show that Employer B wholly succeeded Employer A.  Successor Employer B’s coverage is effective 10/04/2006.

 

·        Predecessor Employer A’s existing policy is combined into Successor Employer B’s policy effective 10/04/06.

 

·        All workers’ compensation rights and obligations of Predecessor Employer A are transferred to Successor Employer B.  Successor Employer B will receive all future invoice/statements associated with Predecessor A’s policy.

 

·        Experience of Predecessor Employer A is transferred to Successor Employer B effective 10/04/06.

 

·        Correspondence sent to Predecessor Employer A and Successor Employer B advising of actions taken by BWC.

 

·        Successor Employer B reports payroll and pays premium under its new workers’ compensation policy.  Employer A is responsible for reporting payroll for the period 7/01/06 – 10/03/06.  Employer B becomes responsible for paying the premium for the 7/01/06 – 10/03/06 period if the premium is not paid by Employer A.  Employer B is responsible for reporting and paying the premium for the 10/04/06 – 12/31/06 period and subsequent periods.

 

 

Scenario 2:  Successor Applies for Coverage After Date of Succession

 

Employer B, not having established coverage wholly succeeds Employer A which has established Ohio workers’ compensation coverage.  Application for Ohio Workers’ Compensation Coverage (U-3) and Notification of Business Acquisition/Merger or Purchase/Sale (U-118) forms returned to BWC indicate Employer B wholly succeeded Employer A on 10/04/07.  Employer B applied for coverage and paid the minimum premium security deposit on 12/01/07, prior to the due date of the next reporting period after the effective date of the succession.

 

BWC Action

 

Preponderance of the facts show that Employer B wholly succeeded Employer A.

 

·        Successor Employer B’s coverage is effective 10/04/07

 

·        Predecessor Employer A’s existing policy is combined into Successor Employer B’s policy effective 10/04/07.

 

·        All workers’ compensation rights and obligations of Predecessor Employer A are transferred to Successor Employer B.  Successor Employer B will receive all future invoice/statements associated with Predecessor A’s policy.

 

·        Experience of Predecessor Employer A is transferred to Successor Employer B effective 10/04/07.

 

·        Correspondence sent to Predecessor Employer A and Successor Employer B advising of actions taken by BWC.

 

·        Successor Employer B reports payroll and pays premium under its new workers’ compensation policy.  Employer A is responsible for reporting payroll for the period 7/01/07 – 10/03/07.  Employer B becomes responsible for paying premium for the 7/01/07 – 10/03/07 period if the premium is not paid by Employer A. Employer B is responsible for paying the premium for the 10/04/07 – 12/31/07 period and subsequent periods.

 

 

Scenario 3:  Business Transaction Effective First Day of a Six Month Rating Period

 

Employer B, having established coverage wholly succeeds Employer A which has established Ohio workers’ compensation coverage.  Notification of Business Acquisition/Merger or Purchase/Sale (U-118) form returned to BWC indicates Employer B wholly succeeded Employer A on 1/01/07 (effective first day of a six month rating period).

 

BWC Action

 

Preponderance of the facts show that Employer B wholly succeeds Employer A.

 

·        Predecessor Employer A’s existing policy is combined into Successor Employer B’s existing policy effective 1/1/07.

 

·        All workers’ compensation rights and obligations of Predecessor Employer A are transferred to Successor Employer B.  Successor Employer B will receive all future invoice/statements associated with Predecessor A’s policy.

 

·        Experience of Predecessor Employer A is transferred to Successor Employer B effective 1/01/07 (1st day of a six month rating period).

 

·        Correspondence sent to Predecessor Employer A and Successor Employer B advising of actions taken by BWC.

 

·        Successor Employer B reports payroll and pays premium under its existing workers’ compensation policy.  Employer B is responsible for reporting payroll and paying the premium for the 1/01/07 – 6/30/07 period and subsequent periods.

 

 

Scenario 4:  Business Transaction Effective During a Six Month Rating Period

 

Employer B, having established coverage wholly succeeds Employer A which has established Ohio workers’ compensation coverage.  Notification of Business Acquisition/Merger or Purchase/Sale (U-118) form returned to BWC indicates Employer B wholly succeeded Employer A on 10/01/06 (effective during a six month rating period).

 

BWC Action

 

Preponderance of the facts show that Employer B wholly succeeds Employer A.

 

·        Predecessor Employer A’s existing policy is combined into Successor Employer B’s existing policy effective 10/1/06.

 

·        All workers’ compensation rights and obligations of Predecessor Employer A are transferred to Successor Employer B.  Successor Employer B will receive all future invoice/statements associated with Predecessor A’s policy.

 

·        Experience of Predecessor Employer A is transferred to Successor Employer B effective 1/01/07 (1st day of a six month rating period).

 

·        Correspondence sent to Predecessor Employer A and Successor Employer B advising of actions taken by BWC.

 

·        Successor Employer B reports payroll and pays premium under its existing workers’ compensation policy.  Employer A is responsible for reporting payroll for the period 7/01/06 – 09/30/06.  Employer B becomes responsible for paying the premium for the 7/01/06 – 09/30/06 period if the premium is not paid by Employer A.  Employer B is responsible for reporting and paying the premium for the 10/01/06 – 12/31/06 period and subsequent periods.

 

 

Scenario 5:  Successor Applies for Coverage Near the Due Date but Within 30 Days of the Succession

 

Employer B not having established coverage wholly succeeds Employer A which has established Ohio workers’ compensation coverage.  Application for Ohio Workers’ Compensation Coverage (U-3) and Notification of Business Notification of Business Acquisition/Merger or Purchase/Sale (U-118) form returned to BWC indicates Employer B wholly succeeded Employer A on 08/20/07.  Employer B applied for coverage and paid the minimum premium security deposit on 09/05/07, after the due date of the next reporting period but within 30 days following the effective date of the succession.

 

BWC Action

 

Preponderance of the facts show that Employer B wholly succeeded Employer A.

 

·        Successor Employer B’s coverage is effective 08/20/07.

 

·        Predecessor Employer A’s existing policy is combined into Successor Employer B’s policy effective 08/20/07.

 

·        All workers’ compensation rights and obligations of Predecessor Employer A are transferred to Successor Employer B.  Successor Employer B will receive all future invoice/statements associated with Predecessor A’s policy.

 

·        Experience of Predecessor Employer A is transferred to Successor Employer B effective 08/20/07.

 

·        Correspondence sent to Predecessor Employer A and Successor Employer B advising of actions taken by BWC.

 

·        Successor Employer B reports payroll and pays premium under its new workers’ compensation policy.  Employer A is responsible for reporting payroll for the period 7/01/07 – 08/19/07.  Employer B becomes responsible for paying premium for the 07/01/07 – 08/19/07 period if the premium is not paid by Employer A.  Employer B is responsible for reporting and paying the premium for the 08/20/07 – 12/31/07 period and subsequent periods.

 

 

Scenario 6:  Successor Applies for Coverage After the Due Date but more than 30 Days past the date of the Succession

 

Employer B, not having established coverage wholly succeeds Employer A which has established Ohio workers’ compensation coverage.  Application for Ohio Workers’ Compensation Coverage (U-3) and Notification of Business Acquisition/Merger or Purchase/Sale (U-118) form returned to BWC indicates Employer B wholly succeeded Employer A on 08/20/07. Employer B applied for coverage and paid the minimum premium security deposit on 10/10/07 after the due date of the next reporting period more than 30 days following the effective date of succession.

 

BWC Action

 

Preponderance of the facts show that Employer B wholly succeeded Employer A.

 

·        Successor Employer B’s coverage is effective 10/10/07.

 

·        Predecessor Employer A’s existing policy is cancelled effective 08/2/2007 and combined into Successor Employer B’s policy effective 10/10/07.

 

·        All workers’ compensation rights and obligations of Predecessor Employer A are transferred to Successor Employer B.  Successor Employer B will receive all future invoice/statements associated with Predecessor A’s policy.

 

·        Experience of Predecessor Employer A is transferred to Successor Employer B effective 10/10/07.

 

·        Correspondence sent to Predecessor Employer A and Successor Employer B advising of actions taken by BWC.

 

·        Successor Employer B reports payroll and pays premium under its new workers’ compensation policy.  Employer A is responsible for reporting payroll for the period 7/01/07 – 08/19/07.  Employer B becomes responsible for paying premium for the 07/01/07 – 08/19/07 period if the premium is not paid by Employer A.  Employer B is responsible for reporting and paying the premium for the 10/10/07 – 12/31/07 period and subsequent periods.  The period 8/20/07 – 10/09/07 is a prior to coverage period in which Employer B is responsible for any non-compliance claims that may occur, in addition to the premium due for this prior to coverage period.

 

 

Scenario 7:  Partial Transfer

 

Employer B not having established Ohio workers’ compensation coverage takes over a portion of the operations of Employer A which has established Ohio workers’ compensation coverage.  Application for Ohio Workers’ Compensation Coverage (U-3) and Notification of Business Acquisition/Merger or Purchase/Sale (U-118) forms returned to BWC indicate Employer B took over a portion of the operations of Employer A on 4/1/06.  Employer B applied for coverage and paid the minimum premium security deposit on 4/01/06.

 

BWC Action

 

Preponderance of the facts show that Employer B took over a portion of the operations of Employer A on 4/1/06.

 

·        Successor Employer B’s coverage is effective 4/01/07.

 

·        Predecessor Employer A retains its existing BWC policy number.

 

·        Partial Transfer Audit assignment generated to determine what portion of the payroll and claims transfer to Successor Employer B for rate making purposes.

 

·        Partial transfer adjustment complete upon submission of audit findings.

 

·        Successor Employer B reports payroll and pays premium under its new workers’ compensation policy.  Employer A is responsible for reporting payroll and paying premium for the 1/01/06 – 3/31/06 period.  Successor Employer B is responsible for reporting and paying the premium for the 4/1/06 – 6/30/06 period for the portion of Employer A’s business operation Employer B took over on 4/1/06.

 

·        Correspondence sent to Predecessor Employer A and Successor Employer B advising of actions taken by BWC.

 

 

Scenario 8:  Multiple Successions

 

Employer A having established Ohio workers’ compensation coverage was combined into Employer B having established Ohio workers’ compensation coverage effective 6/10/98.  Employer B sells entire business operation to Employer C not having established coverage.  Application for Ohio Workers’ Compensation Coverage (U-3) and Notification of Business Acquisition or Purchase/Sale (U-118) forms returned to BWC indicate 100% of business operation purchased by Employer C on 03/08/07.  Employer C applied for coverage and paid the minimum premium security deposit on 2/15/06.

 

BWC Action

 

Preponderance of the facts concludes that Employer C wholly succeeds Employer B.

 

·        Successor Employer C’s coverage is effective 02/15/06.

 

·        Predecessor Employer B’s existing policy is combined into Successor Employer C’s new policy effective 03/08/07.

 

·        All workers’ compensation related rights and obligations of Predecessor Employers A and B are transferred to Successor Employer C.  Successor Employer C will receive all future invoice/statements associated with Predecessor A and B’s policy.

 

·        Experience of Predecessor Employer B is transferred to Successor Employer C effective 7/01/07. (1st day of a six-month rating period).

 

·        Correspondence sent to Employers B and C advising of actions taken by BWC.

 

·        Successor Employer C reports payroll and pays premium under its new workers’ compensation policy. (Employer B is responsible for reporting payroll for the period 1/01/07 – 03/07/07.  Employer C becomes responsible for paying the premium for the 1/01/07 – 03/07/07 period if the premium is not paid by Employer B.  Employer C is responsible for reporting the payroll and paying the premium for the 03/08/07 – 06/30/07 period and subsequent periods).

 

 

Scenario 9:  Employer Applies for Coverage Without Submitting Notification of Business Transaction

 

Employer A having established Ohio workers’ compensation coverage sells entire business operation to Employer B not having established Ohio workers’ compensation coverage.  No Notification of Business Acquisition/Merger or Purchase/Sale (U-118) form sent to BWC. Employer B submits Application for Ohio Workers’ Compensation Coverage (U-3) to BWC indicating startup date of 8/17/07.  BWC received information indicating Employer B might have succeeded in the business operation of Employer A.

 

BWC Action

 

·        New application for coverage of Successor Employer B reviewed by BWC. Notification of Business Acquisition/Merger or Purchase/Sale (U-118) form is forwarded to Successor Employer B requesting information regarding business transaction.

 

·        Application for Successor Employer B is held in pending status until all required information is received or supervisor determines it is appropriate to finalize the application.


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