News for Small Business - March 2007

News

‘Rate holiday’ means average savings of 34% on workers’ compensation

Gov. Chris Gregoire announced on March 12 that L&I will significantly reduce workers’ compensation premiums during the second half of this year, saving workers and employers about $315 million.

Dollar sign and arrow indicating 34 percent drop Here’s how it will work:

  • Employers will receive their normal quarterly reports this month (March) and in June. For those two quarters, the normal amount will be owed.
  • For work performed from July 1 through Dec. 31 of this year, employers and workers will not pay the “Medical Aid Fund” premium. That’s a 34 percent savings, on average, that will be split evenly between workers and employers because they each pay equally into this fund. The rate holiday is temporary and is scheduled to end for work performed after Dec. 31, 2007.

All employers who get their industrial insurance through L&I will receive a brochure that explains how the rate holiday will work. In June, L&I will send out more information, including a new rate notice that will detail exactly how much each employer will save. That information will be sent to each business’s owner, or their accountant or bookkeeper.

L&I Director Judy Schurke said the rate holiday was made possible by higher-than-expected earnings on workers’ compensation premiums that are invested, and the agency’s success at controlling health-care costs. She also noted that employers and workers continue to improve workplace safety, which reduces what L&I pays out in benefits to injured workers.

“All this means we can use some of the money to reduce premiums for our customers,” she said.

The rate holiday L&I adopted is slightly different than what was proposed in November. In response to concerns from some business groups and employers who participate in L&I’s retrospective rating, or “Retro,” program, the agency made some adjustments to ensure those programs continued to receive adequate revenues to cover their administrative costs, including the money they invest in workplace-safety programs.

As a result of that change, employers who don’t participate in the retrospective rating program between July 1 and Dec. 31 of this year will receive a small dividend in 2008.

For a better idea about how much you will save, please see the L&I web site at www.lni.wa.gov/ClaimsIns/Insurance/RatesRisk/Check/RatesHistory/default.asp

For general information about the rate holiday, please go to www.RateHoliday.LNI.wa.gov. If you have additional questions or concerns, please call L&I’s Small Business Liaison at 360-902-4205.


Rates adjusted downward for most claim-free customers

You or your bookkeeper may have recently received notice that your workers’ compensation rates were adjusted downward after they were mistakenly increased at the beginning of 2007.

About 37,000 businesses received a revised rate notice from L&I during the week of Jan. 29 along with a letter explaining the error and correction. The difference in rates is very small for some businesses, but ranges close to 10 percent for others. The average small employer with a claim-free discount will avoid about $100 per quarter in rate increases due to this adjustment.

The error occurred when L&I changed to the way it calculates all workers’ compensation rates to match industry standards. Because this change would raise workers’ compensation rates for some businesses and lower them for others, L&I promised business organizations that it would delay the increases until at least 2008 so that business owners will know well in advance if their rates are going up. The change took effect immediately only for employers who received lower rates.

That agreement also applied to employers with discounted claim-free rates, but increases in rates for those firms were mistakenly allowed to go through. The revised rate notices to those employers corrected that mistake. The revised rates are retroactive to Jan. 1, 2007. If your rates were revised, please talk with your accountant or payroll provider to make sure that you have corrected for any excess deductions taken for your employees for their portion of the workers’ compensation bill.

We are sorry for any problems this mistake has caused. If you have questions, please contact your L&I account manager team. You will find their phone number on your new rate notice. If you need help locating your account manager team, feel free to call the Small Business Liaison at 360-902-4205.

Stay tuned for 2008 rates

L&I will be talking with representatives from business and labor organizations about how the delayed changes will take effect in 2008, and what impact they would have on businesses of various types. Rates for 2008 will be announced in September, and all workers’ compensation customers will have a chance to comment on them before they are finalized.


Tools to save time and money

Payday requirements now found in one Person writing in a calendarplace

On March 1, L&I put into effect a new regulation that clarifies when and how employees are paid — putting all of the requirements into a formal regulation rather than requiring employers to rely on L&I policies. In some cases, employers were exposed to lawsuits because the rules covering pay periods were open to interpretation.

Essentially, the requirements haven’t changed from before. The regulation requires that wages be:

  • Paid at least once a month;
  • Paid by hand-delivery, mailed or electronically deposited on an established payday;
  • Paid no later than 10 days after the end of the pay period, except for monthly payroll periods.

One new item: The regulation allows employers to establish separate pay periods for overtime wages as long as workers are paid no later than the payday for the following pay period. This has been a problem for some employers because unexpected overtime can come up after the payroll for a specific pay period has been finalized.

For a complete copy of the new rule, please see: www.LNI.wa.gov/rules/AO06/01/0601Adoption.pdf.


FOCUS ON: Workers' compensation audits

L&I fraud and delinquent payment collections up sharply in 2006

L&I collected $135 million in payments on workers’ compensation fraud, abuse, and delinquent payments last year — a 29 percent increase over the previous year. That helps to control the cost of workers’ compensation insurance.

The improvement last year is part of a steady trend of increasingly effective anti-fraud and abuse efforts by L&I. In fact, L&I now collects about $10 for every $1 it spends on efforts to collect delinquent premium payments and track down fraud and abuse. Last year, L&I also referred 20 cases for criminal prosecution and avoided an estimated $16 million in costs by uncovering and stopping payments to injured workers who were abusing the workers’ compensation system.

Most employers applaud tougher anti-fraud and abuse collections, but what happens if you’re just late on your quarterly payment?

L&I contacts an employer within the first month after a missed reporting deadline to learn why the payment is late and encourages the employer to make the payment or arrange a payment schedule. Paying the bill within the month immediately following the quarterly reporting deadline adds a 5 percent penalty and 1 percent interest. The penalty rises to 10 percent in the second month after the deadline. We prefer to work things out before it gets too expensive for the employer.

Also, here are some tips on how to maintain your L&I account in good standing:

  • As your company changes, regularly review your risk classes and make sure your L&I coverage reflects what your workers are doing.
  • If you hire contractors or subcontractors, make sure they qualify under workers' compensation rules as an independent business:
    • For information, see “A guide to hiring independent contractors in Washington State” by selecting this link: http://www.LNI.wa.gov/IPUB/101-063-000.pdf.
    • Read the fact sheet entitled "Liability for your subcontractor's unpaid workers' comp premiums" by selecting this link: http://www.LNI.wa.gov/IPUB/262-262-000.pdf.
    • Use L&I’s online tools to make it easier to track your subcontractors. Select this link: https://fortress.wa.gov/lni/crpsi/. Be sure to read on this page the steps you must take to protect yourself from liability for a subcontractor’s unpaid workers’ compensation premiums.

Contact your L&I account manager for help. L&I also provides no-charge risk management consulting to help you manage your account and workers’ compensation claims. Contact your local L&I office to speak to a consultant, or call the Small Business Liaison at 360-902-4205 for a referral to a consultant in your area.


L&I Small Business Contact:

Ron Langley
Small Business Liaison
Phone: 360-902-4205
Fax: 360-902-5420
E-mail: SmallBusiness@LNI.wa.gov

Want to subscribe to L&I News for Small Business? Contact Ron via the contact information listed above.

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