the officer minimum

The insurance audit…

Rarely do we hear great stories about insurance audits. Seems policyholders often find some unpleasant rules post audit. One of them is the officer minimum payroll. As insurance brokers or agents, of course we tend to think it’s a good practice to INCLUDE yourself on the WC policy for a host of reasons. After all, you know the rate, so it should be relatively easy calculate the total cost to include yourself or your ownership team in coverage.

But…

Then comes the audit. It’s only your first year in business and the agent persuaded you take the safe road and include yourself in coverage. After all, maybe you don’t have a health plan, you are actively working in the field, it’s the right call. You had anticipated paying yourself a modest income during the first few years of business if you could afford it, but really the first six months, it’s all hustle and no compensation to yourself. Of course, the goal is to make more, but step one is making the business profitable above all else. Your first 12 months are in the books and you only paid yourself $21,000.

The WC rate was $2.20.

$2.20 times your salary (WC rates are charged per $100 in payroll) gives you a final estimated premium for yourself of $462.

The audit bill comes in with an additional premium of $1,544.40 for JUST YOU as a single owner. What gives? You request the audit worksheets and the auditor shows your paryoll as $70,200!

Welcome to the officer minimum.

That’s right. There’s a minimum payroll in almost every state for Workers’ Compensation coverage for sole proprietors, corporate officers, LLC members, and partnerships. These minimums have gone up considerably in many states across the country. Again, what you don’t know can hurt you and throw your insurance premiums estimates out the window! To compound the pain, audits typically occur just after the policy renewal which may have had some hefty down payments.

See the table below for the breakdown. Take note, many states increase these figures annually! Know the details BEFORE it’s time for the audit, unless of course you don’t mind the additional premium surprises.

STATEOFFICER MINOFFICER MAXPARTNER MAXPOLICY EFF. AFTER
Alabama54,600213,20053,400 Flat3/1/2023
Alaska31,200119,60038,800 Flat1/1/2023
Arizona *******62,400249,60061,933 Max1/1/2023
Arkansas52,000202,80051,100 Flat7/1/2023
Californiaw57,200149,500149,500 Max9/1/2022
Colorado70,200 Flat70,200 Flat70,200 Flat1/1/2023
Connecticut78,000156,00078,500 Flat1/1/2023
Delaware ******64,168257,400257,400 Max12/1/2022
District of Columbia85,800338,00084,800 Flat11/1/2022
Florida*57,200171,60057,100 Flat1/1/2023
Georgia62,400254,80063,200 Flat3/1/2023
Hawaii52,000208,00051,600 Flat1/1/2023
Idaho46,800187,20023,600 Flat1/1/2023
Illinois67,600270,40067,700 Flat1/1/2023
Indiana46,800223,600223,600 Max1/1/2023
Iowa26,000218,400218,400 Max1/1/2023
Kansas52,000213,20053,000 Flat1/1/2023
Kentucky52,000202,80050,800 Flat1/1/2023
Louisiana54,600161,20053,400 Flat5/1/2023
Maine54,600213,20053,900 Flat4/1/2023
Maryland70,200280,80069,600 Flat1/1/2023
Massachusetts14,56073,32064,300 Max10/1/2022
Michigan30,264119,60023,900 Flat1/1/2023
Minnesota66,924267,696267,696 Max1/1/2023
Mississippi44,200145,60043,000 Flat3/1/2023
Missouri51,700 Flat51,700 Flat51,700 Flat1/1/2023
Montana*****10,40075,92075,920 Max7/1/2023
Nebraska52,000202,80051,100 Flat2/1/2023
Nevada **6,00036,0003,600 Flat1/7/1999
New Hampshire ****36,400286,00035,900 Flat1/1/2023
New Jersey41,080163,800163,800 Max1/1/2023
New Mexico52,000202,80051,300 Flat1/1/2023
New York *45,500135,200135,200 Max10/1/2022
North Carolina57,200114,40055,900 Flat4/1/2023
Oklahoma49,400197,60049,600 Flat1/1/2023
Oregon70,200275,60068,900 Flat1/1/2023
Pennsylvania******62,660156,000156,000 Max4/1/2023
Rhode Island59,800239,200Not Applicable8/1/2022
South Carolina26,000202,80050,100 Flat4/1/2023
South Dakota49,400192,40048,600 Flat7/1/2002
Tennessee ***57,200234,00058,300 Flat3/1/2023
Texas7,80062,40072,300 Flat7/1/2023
Utah59,800234,00058,800 Flat1/1/2023
Vermont28,600223,60027,800 Flat4/1/2023
Virginia33,800135,20067,100 Flat4/1/2023
West Virginia49,400197,60049,800 Flat11/1/2022
Wisconsin18,09690,42860,268 Flat10/1/2022

* FL Construction MIN 28,600; NY Construction codes MAX: 87,786. ** NV Sole proprietor or partner electing higher benefits: $21,600. *** TN Construction codes MIN $28,600; MAX $85,800. **** NH Officers of unincorporated assoc. MIN 18,200, MAX 145,600. *****MT Individual & Partner MIN $10,800 ****** DE for Individuals or Partners not on payroll MIN $64,170.08; PA for Individuals or Partners not on payroll MIN $66,196. ******* AZ Individual & Partner Min $7,200
State requires a signed waiver for officers to be excluded from coverage.

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