Are You Overpaying For Workers Compensation Insurance?

If you happen to be a business owner, insurance agent, accountant or anyone who has seen the enigmatic “WPS charge” added to his/her annual premium, you might be interested in knowing more about it. This is exactly what this article will help you to do.

To start with, let us consider the source of this obfuscating charge. As you are undoubtedly aware, the New York State Department of Labor has imposed a plethora of regulations regarding the workplace.

Of particular interest is Regulation 59, which states that any employer based in the state of New York is obliged to undergo a workplace safety and loss prevention consultation if his experience modification is 1.20 or greater. He or she is supposed to do this within 30 days of notification by the NYS Department of Labor.

Uncertain of what constitutes “experience modification”? Well, there is no need to worry, for I have you covered in that regard!

An experience modification is essentially the adjustment made in the amount of money an employer has to pay an insurer for the coverage of worker’s compensation, i.e., the insurance policy that grants medical benefits and wage replacement to your employees when they get injured to prevent them from suing you for negligence. The adjustment is based on the losses that the insurer has incurred from the employer.

An experience modification of 1.0 denotes an employer whose performance has been actuarially expected. Greater than 1.0 indicates poor performance, while less than 1.0 indicates better performance.

What will the workplace safety and loss prevention consultation involve? In essence, a consultant will charge you a fee to inspect your workplace and making recommendations for how the overall safety can be improved. He or she will follow up with another inspection to ensure that the improvements have been implemented, and if that is indeed the case, the consultant will proceed to file a certificate of compliance with the NYS Department of Labor for yet another fee.

What are the consequences of not complying? This is where the WPS charge comes in. If you fail to comply with these instructions, you will be charged an additional 5% of your annual worker’s compensation premium, known as the Wage Protection System (WPS) charge. Furthermore, this surcharge will increase by 5% of your premium every year if you persist in your non-compliance.

If that sounded confusing, allow me to give you an example. If your premium is $1000, and you fail to comply, you will be surcharged $50 for the first year, $100 for the second year, $150 for the third year, and so on. Of course, in reality, these amounts will be much bigger since premiums can easily cross the $100,000 mark.

Therefore, you can get into the serious hot water for not being vigilant concerning your experience modification. You need to get it below 1.20 to avoid this messy issue of compliance. You can even get a premium refund if you decrease your experience modification sufficiently.

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