Min-Max Private State Fund Payroll Limitations

 

Policy Effective Date:  June 21, 2007

 

 

Purpose/Benefits

 

The purpose of this policy is to address how Rule 4123-17-07  and 4123-17-30  apply minimum and maximum payroll reporting limits to active executive officers and those electing coverage.  Previously, neither the $100 per week minimum payroll reporting limit (not previously applicable to officers) nor the $800 per week maximum had equated to indemnity benefit eligibility.  The min-max limits tied to 50% and 150% respectively of State Average Weekly Wage (SAWW) better equate payroll reportable by employers to the indemnity benefits payable to injured workers.

 

 

Policy

 

Both the minimum and maximum payroll reporting limits will be tied to the Statewide Average Weekly Wage (SAWW) wage each year.

 

·         The minimum payroll reporting limit will be 50% of the SAWW

 

·         The maximum payroll reporting limit will be 150% of the SAWW

 

·         Reporting Min at 50% and Max at 150% of SAWW are both now set at levels that equate to minimum and maximum benefits changing each January 1.

 

·         Actual payroll within the minimum and maximum payroll reporting limit should be reported.

 

·         If BWC allows a claim on an executive officer of a corporation whose payroll has not been reported, BWC will retroactively adjust the associated payroll and premium.  BWC will take the position that the injury is evidence of the executive officer's active status.  (Note: This situation might be fraudulent in nature.  This policy outlines an administrative remedy only.  This situation should be referred to SID/PETF to investigate intent to defraud.)

 

The minimum and maximum payroll reporting limits apply to:

 

·         Active executive officers of a corporation, i.e. those individuals such as president, vice president, secretary, treasurer and any other executive officer enumerated in the corporate charter/minutes.

 

·         Those individuals electing coverage including ministers who are not covered through their church but elect coverage as an individual, sole proprietor, partners, individuals incorporated as a corporation, and officers of family farm corporations.

 

·         Covered members of Limited Liability Companies (LLC).

 

·         For active executive officers, the maximum payroll limitation is applied at the highest aggregate level up to an annual basis, i.e., weekly/semi-annually/annually (unlike the construction cap that is applied on a weekly basis).  The practice of “rolling back and carrying forward” wages will continue. 

 

The minimum and maximum payroll reporting limit does not apply to:

 

·         Ministers covered by their church. (Those not covering themselves via elective coverage).

 

·         Corporate executive officers and the payroll of family farm officers, ordained ministers, sole proprietors, partners, individuals incorporated as a corporation as a client employer electing coverage who are PEO clients reported in the PEO policy number (see Rule  4123-17-15(B)(7) )

 

·         Federal workers’ compensation programs such as Longshore & Harbor worker’s Jones Act and FELA (see Rules 4123-20-05  and  4123-21-04 ).

 

 

Administrative Guidelines Regarding “Active” Corporate Officers

 

·         BWC does not consider any minimum number of hours worked as a threshold to making its determination of what constitutes “Active”.  BWC considers any amount of work by the executive officer makes them “active” and subject to the min/max reporting regardless of pay received.

 

·         “Active” as used by BWC considers 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 nor any minimum time requirement”.

 

·         Individuals holding positions not enumerated in the corporate charter/minutes or not meeting BWC guidelines of “Active officer” will be considered employees. 

 

·         In the event an active executive corporate officer holds the same or other active officer position(s) enumerated in the charter/minutes of commonly wholly owned corporate subsidiaries and where all officer payroll is being reported in one or more of said commonly wholly owned multiple policies, BWC permits the reporting of a single limit per reporting period for each such active officer up to the Maximum limit applicable to all such position(s) held provided such policyholder will report payroll of each officer performing any operational duties to the manual number(s) assigned in the commonly wholly owned policy(ies) using the standard NCCI guidelines regarding multiple classification duties of each such officer(s) even if such manual number(s) have to be added to the reporting policy.

 

Note: It is recommended that an audit be conducted of allrelated policies of commonly wholly owned companies to make sure the officer payroll being reported to a “reporting policy” is being done using the standard NCCI guidelines regarding multiple classification duties performed by each officer – not the governing class reporting the most payrolls. 

 

·         In the event an active executive corporate officer holds the same or other active officer position(s) in corporations neither-commonly nor wholly owned by the same parent company (whether a subsidiary or not), all active executive officer payroll is to be reported per officer per reporting period subject to the Min-Max of each policy using the standard NCCI reporting guidelines regarding multiple classification duties.

 

·         Claims of any of these officers should be filed against the “reporting policy” rather than the policy where the injury occurs unless circumstances warrant a partial or other transfer.

 

·         Payroll classed to “standard exception” non-operational manuals (i.e.; 8810, 8742) cannot be segregated and reported with officer payroll earned in performing operating classifications duties of the common employer unless reported to another of the commonly owned policies not used as the officer reporting policy. In which case, payroll may be subject to a separate Min-Max limit than the one used in a single reporting policy.

 

·         In the event of injury occurring to active officers in a policy to which officer operational payroll and loss has/has not been reported, payroll prior to the date of injury should also be properly classified and reported using the standard NCCI guidelines regarding multiple classification duties performed by each officer “as if” it had been reported to the respective manuals of the policy location incurring the loss and a Notepad WCIS entry made in each Policy so affected.

 

·         The Min-Max limitations will apply to both “for profit” and/or “not for profit” corporate organizations as determined by their filing(s) with the Secretary of State.  This will include active officers of fraternal organizations and clubs including but not limited to Elks, Moose, AMVETS, American Legion, Parent Teacher Org. (PTO), Music Parents Org., Little League or other Organization whether School, Parent or other groups.

 

 

Customers Impacted

 

Internal

 

·         Notifications on Payroll Reports, BWC Website and InfoStation

 

·         Changes to U-3 and U-3S Coverage Applications

 

·         Setting of Premium Security Deposit

 

·         Claims Service Specialist verification of payroll reporting in setting wages.

 

External

 

·         “Active” executive officers of corporations now have minimum as well as maximum payroll reporting requirements that are adjusted annually. 

 

·         Employers electing coverage have minimum and maximum payroll reporting requirements that are adjusted annually.

 

·         Payroll Services, Third Party Administrators, PEO and accountants need to be aware so system changes within their operation can be made as needed.

 

 

Scenarios Illustrating Active Corporate Officers

 

Scenario 1:  Common standard exception duties - commonly wholly owned corps

 

·         An active corporate officer for a group of McDonald's operations visits his five stores on a regular and frequent basis.  These stores are five separate entities, commonly and wholly owned, but each with its own policy all doing basically the same operation.  This officer is paid out of one and only one account. BWC applies up to the single payroll Max limit to that policy only and does not pick up any payroll for this officer through the other policies with similar operations. 

 

·         Should this officer later have “operational” duties in one of these businesses, his entire payroll would be reportable to the operation manual which would have to be added to the “reporting policy” based on duties of the officer in the “exposure policy”. Standard exception payroll previously reported by the policyholder to these manuals could no longer be used in reporting all common officer payrolls to that policy.  The basis for this reporting should be documented in the event of future audit or claim which would be filed against the “reporting policy”.

 

 

Scenario 2:  Various standard exception duties - commonly wholly owned corps

 

·         An active corporate officer performs various functions for two commonly wholly owned businesses each with a policy.  One is a bowling alley and the other is a machine shop. Officer is involved in administrative decision making regarding day to day operations of both pursuits. Officer is paid out of one and only one account. 

 

·         BWC applies only a single limitation to the “reporting policy” and does not pick up any additional payroll for this officer through the other policy.  However, because of the dissimilar operations, BWC policy requires the officer’s Max limit reportable to the reporting policy be based upon otherwise allowed separation of classification duties.  Should this officer have “operational” duties in one of these businesses, his entire payroll would be reportable to the operation manual of the reporting policy and the basis for this reporting should be documented in the event of future audit or claim which would be filed against the “reporting policy”.

 

 

Scenario 3:  Various-and non-standard exception duties – commonly/wholly owned

 

·         An active corporate officer performs various functions for several commonly wholly owned businesses each with a policy.  One C Corp policy is administrative only but it owns two S Corps, a bowling alley and a machine shop.  Active officer is involved in decision making of day to day operations in each of the three policies but is paid out of one and only one account (the C Corp).  

 

·         This officer does only clerical administrative functions in the C Corp but does outside sales for the S-Corp machine shop and actually helps out operationally in the S Corp bowling alley in addition to the administrative and sales duties.  Officer is being paid out of the C Corp but is misreported to 8810.

 

·         Officer should amend report with single max limit earnings for the period (Max limit x 26 weeks) to manual 9093 added in the C-Corp reporting policy representing the operational exposure of the Bowling Alley.

 

·         In the event of audit, earnings of this officer erroneously reported to 8810 in the C Corp or if 8742 to the S Corp Machine shop policy would be found to be “all” reportable operationally to the C-Corp reporting policy representing the operational exposure of the bowling alley as standard exception payroll can not be allocated.

 

·         In the event a claim was filed prior to an audit for the officer being injured while working in the bowling alley, the officer’s reported payroll subject to Max should be reported to 9093 Bowling Alley manual but within the C Corp “reporting policy” to which the officer payroll is being reported.

 

 

Scenario 4:  Non-similar Operational duties, multiple commonly wholly owned corps 

 

·         An active officer working in operational manuals in commonly wholly owned Corporations reports his entire payroll based on his duties to the class code of the manual using the standard NCCI guidelines regarding multiple classification duties which has been added to the Corp from which he is paid based upon the officers duties in the operations of the corp. to which his payroll is not being reported. 

 

·         However, if he also has other non-similar operational and/or standard exception duties within other corps, commonly wholly owned by this same company, his payroll for those non-similar duties may be reported in the appropriate manual classification(s).  Portions of his payroll earned from his work in the operational manual of the S-Corp may be broken out provided he can document his segregation of payroll to the operations manual of each policy even though no payroll is being paid through the other corporation. 

 

·         Payroll from the Corp would have to be reported using the standard NCCI guidelines regarding multiple classification duties performed and his actual earnings reportable to the appropriate operational classifications in the reporting policy.  This would still be subject to up to the single Maximum limit with detail of this information documented.

 

 

Scenario 5:  Active Corporate Officer Paid from multiple Non-commonly wholly owned corps

 

·         An active officer working in operational manuals for several corps unrelated by common/wholly ownership must have his entire payroll subject to both the Minimum and Maximum limits reported to each such policyand based on his duties to the class code using the standard NCCI guidelines regarding multiple classification duties in the policy from which he is paid. 

 

·         However, he may report portions of his payroll earned from his work in more than one operational manual of the policy provided he can document the segregation of payroll to the operational manuals of each policy.  Payroll from each such Corp would have to be segregated and reported still subject to the Min-Max limit of each policy with detail of this information documented.

 

 

Scenario 6:  Ohio Subsidiary with a non-Ohio officer

 

·         An Out of State corporation has an Ohio subsidiary with an Ohio BWC Policy for which they list one of their outside of Ohio officers as an Active Officer of the Ohio subsidiary (a Jurisdiction issue).  Even though this officer is actively involved in the decisions affecting the operations of the Ohio location, his travel back and forth from his out of state office may cause this officer to not be reportable.

 

·         It first needs to be determined whether the officer is subject to Ohio law before applying the Min-Max limit as this officer may be fully covered by the other state policy. However, if Ohio jurisdiction is determined, payroll should be picked up subject to Min-Max limit.

 

 

Scenario 7:  Out-of-State Corp with no Ohio officers physically in Ohio

 

·         An out-of-state corporation has full-time non-officer managers handling the daily operations of their Ohio business location.  No officers are physically involved in the daily operations of the business from within the State of Ohio.  None of the corporation officers would be subject to the min/max limits.  All payrolls of the local managers would be subject to full reporting requirements not subject to any Max limitation.

 

 

Scenario 8:  Employees with only “officer sounding” title not listed in Corp. Charter

 

·         An Ohio corporation that owns several Ohio subsidiary corporations with their active officers involved in the daily decisions would subject each of the officers to the Min-Max requirements provided each of the individuals are enumerated as corporate officers in the corporate charter/minutes. 

 

·         However, employees simply titled Vice President, Director or similar “officer sounding” title but not enumerated as officers in the corporate charter/minutes, are not active executive officers.  All such earning of these non-active officers are required to be reported as would any other employee not subject to min/max limitation with the possible exception of any subject to Construction Caps.

 

 

Scenario 9:   Spouse listed as Officer in Corporate Charter working limited hours

 

·         An owner/Operator of a small machine shop incorporates his business listing himself as President and his wife as Treasurer in the corporate charter/minutes.  His wife works only a few hours weekly in the business ordering stock, generating invoices and paying bills for which she is paid $200 weekly.  BWC considers any amount of work by the listed officers makes them “active” and subject to the min/max reporting regardless of hours worked or pay received.

 

 

Other Scenarios Involving Min–Max Reportable Calculation Examples:

 

Note: All scenarios reflect a maximum of $800 per week for the first half of 2006 with no minimum for corporate officers.  A maximum of $1,056 per week ($704 SAWW times 150%) and a minimum of $352 per week ($704 SAWW times 50% rounded up to the next dollar) is reflected in the second half of 2006.  Both the Min and Max weekly amounts will change annually on January 1 based on the new 50% and 150% of the respective SAWW each year set by ODJFS.

 

 

Scenario 1:  ICORP hiring employee is immediately responsible for Corp Min-Max limit

 

·         An ICORP officer having previously elected no coverage is not eligible for non-coverage elective status as soon as they hire an employee.  Such owner is now a corporate officer subject to Min-Max reporting from the date of hiring said employee.  Therefore, an ICORP officer making $2,000 per week for 52 weeks in 2006 and 2007 or $104,000 annually who had hired an employee in early 2006 must report wages of new employee plus appropriate portion of officer $20,800 as may be reportable from the date of hiring said employee forward in the first half and $27,456 reportable in the second half 2006.  However, $28,470 is reportable in each half of 2007.

 

·         Total 2006 reportable = {($800 Max. x 26) + ($1,056 Max. x 26)} = ($20,800 + $27,456) = $48,256 based on date of hire plus reportable wage of employee.

 

·         Total 2007 reportable = {($1,095 Max. x 26) + ($1,095 Max. x 26)} = ($28,470 + $28,470) = $56,940 plus reportable wage of employee.

 

 

Scenario 2:  Active Corporate Officer

 

·         An active corporate officer receives $300 per week in 2006 and 2007 or $15,600 annually.  $7,800 is reportable in the first half of 2006 and $9,152 is reportable in the second half.  However, $9,490 Minimum is reportable in each half of 2007.

 

·         Total 2006 reportable = {($300 x 26) + ($352 Min. x 26)} = ($7,800 + $9,152) = $16,952.

 

·         Total 2007 reportable = {($365 Min. x 26) + ($365 Min. x 26)} = ($9,490 + $9,490) = $18,980.

 

 

Scenario 3:  Church elects to cover its non-employee minister

 

·         A minister receives $200 per week or $10,400 annually in 2006 and 2007.  The church has elected to cover the minister and report his pay as if he is an employee.  $5,200 is reportable in the first half and $5,200 is reportable in the second half of each year. 

 

·         Ministers covered through the church are not subject to the minimum payroll reporting limitation because Ministers are not employees (see Rule  4123-17-07 ) but the church may elect to cover them as if an employee.  Housing allowance may also be reportable.

 

·         Total 2006 and 2007 reportable = {($200 x 26) + ($200 x 26)} =   ($5,200 + $5,200) = $10,400 each year.

 

 

Scenario 4:  Minister not covered by his church elect’s coverage as sole proprietor

 

·         A minister receives $200 per week or $10,400 annually.  The church decided not to cover the minister but the minister opted to cover himself via elective coverage and new minimum reporting would apply.  $5,200 is reportable in the first half and $9,152 is reportable in the second half 2006.   

 

·         Since ministers are not an employee, their individual coverage would be sole proprietor coverage subject to the 7/1/06 $9,152 Minimum. However, the $9,490 Minimum is reportable in each half of 2007.  Housing allowance may also be reportable.

 

·         Total 2006 reportable = {($200 x 26) + ($352 Min. x 26)} = ($5,200 + $9,152) = $14,352.

 

·         Total 2007 reportable = {($365 Min. x 26) + ($365 Min. x 26)} = ($9,490 + $9,490) = $18,980.

 

 

Scenario 5:  Sole Proprietor/Partner with elective coverage

 

·         A sole proprietor/partner opting to have elective coverage reports net income of $4,000 for the year of 2006 and 2007.  $2,600 is reportable for the first half and $9,152 is reportable for the second half 2006.  However, $9,490 Minimum is reportable in each half of 2007.

 

·         Total 2006 reportable = {($100 x 26) + ($352 Min. x 26)} = ($2,600 + $9,152) = $11,752

 

·         Total 2007 reportable = {($365 Min. x 26) + ($365 Min. x 26)} = ($9,490 + $9,490) = $18,980

 

 

Scenario 6:  Outside Counsel serves as Corporate Officer as an independent contractor

 

·         An employer’s outside attorney is designated as corporate secretary, an 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 officer and the Min-Max limit would not apply

 

·         Payments to this Non-Active Officer would probably be considered professional fees not reportable to BWC by this corporation unless paid as a 1099 which would be reportable by the Attorney firm. 

 

 

Scenario 7:  Active Officer receiving Annual Bonus applicable to entire year

 

·         An active corporate officer receives $800 per week or $41,600 annually.  Additionally, ordinary income of $20,000 is indicated on their 2006 tax return for a total of $61,200.  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 in ordinary income attributable to the 2nd half of 2006 is used to bring the reporting up to the maximum payroll limit (at the highest aggregate level) of $27,456. 

 

·         Total 2006 reportable = {($800 Max. x 26) + ($1,056 Max. x 26)} = ($20,800 + $27,456) = $48,256 of $61,200 income. 

 

 

Scenario 8:  Active Officer receiving Pay in one half and roll-back applicable to year

 

·         An active corporate officer receives $10,000 pay in the 1st half of 2006 and no pay in the 2nd half 2006.  In 2006, $19,152 is reportable as a result of the Min-Max limitation effective 7/1/06

 

·         Total 2006 reportable = {($10,000 in 1st half) + ($9,152 Min in 2nd half)} = ($10,000 + $9,152) = $19,152 income. 

 

·         In 2007, officer receives $20,000 pay the 1st half of 2007 and no regular pay in the 2nd half of 2007 but does receive a $35,000 K-1 ordinary distribution in the 2nd half 2007.  In this case, the $35,000 in K-1 income is used to bring the reporting up to the maximum payroll limit in 2nd half 2007 with the excess being rolled back (at the highest aggregate level) of $1,095 per week in each half of 2007. 

 

·         Total 2007 reportable = {($20,000 in 1st half) + ($28,470 Max in 2nd half)} = $48,470 for regular earnings. 

 

·         However, $6,530 rolled-back from $35,000 K-1 income in 2nd half less 2nd half Max ($35,000 – $28,470) when added to $20,000 previously reported 1st half = $26,530 1st half adjusted reportable (still less than 1st half Max) + $28,470 Max in 2nd half = $55,000 total reportable income for 2007.

 

Note:   Rule 4127-17-07  is effective July 27, 2006.  This rule is considered a reference rule.  Therefore, the effective date of this rule has no impact on the fact that Rule 4123-17-30  is effective July 1, 2006.