| Advisory Organization
An organization which compiles rating data (like NCCI) for use by member insurance companies.
An additional fee placed on Assigned Risk policies (In NCCI jurisdictions) with experience modification factors higher than 1.00.
A state designated program that ensures all employers can have access to workers' compensation insurance even if insurance companies are not willing to voluntarily write the insurance. Often the last resort option for companies with poor experience ratings. Assigned risk plans usually have higher rates than the voluntary market.
The final premium for the term of the policy, calculated by auditing actual payroll values for the type of work being performed. Employers using a Professional Employer Organization (PEO) or employee leasing company are not usually subject to audits since they are on a pay-as-you-go basis.
A hybrid PEO arrangement where the employers maintains their own work comp policy and does not obtain coverage through the PEO work comp master policy.
Also called work comp code or class code. Each type of work has risk of injury. Work comp codes are established that identify the type of work being performed and provide an associate code. Work comp premium rates are established by codes and are meant to be commensurate with the risk associated with that workplace exposure. Codes descriptions are maintained by NCCI in the SCOPES manual.
A certificate issued by a carrier or PEO that demonstrates work comp coverage. Used most often by contractors and sub-contractors to prove to their clients that they are covered for any injury claims and that the client is not liable for workplace injuries of employees of a subcontractor.
An insurance policy claim for payment due to an injury suffered by an employee.
The agreement page of a workers’ compensation insurance policy that defines the work comp codes in use. It defines all associated charges for the policy.
For standard work comp policies, a return of premium, calculated after policy expiration, based on the over-all performance (claims) of the policy holder or insurance company. Although Some PEOs may offer dividends plans, the return of premium cannot be guaranteed in advance.
In the Experience Modification Factor , the amount of loss for individual claims over $5,000.
An adjustment to manual insurance premium , calculated by an advisory organization or a rating bureau such as NCCI, based on a company’s historic workers’ compensation insurance claims. Click here for more information about understanding Experience Modification Factors.
The window of time for loss and payroll data used to calculate an experience modification factor for an employer. Traditionally a three year period, starting four years prior to the effective date of the experience modifier. Rating bureaus may not wait until three years before establishing an experience rating for an employer. If an employer reaches a certain, relatively low threshold of workers' compensation insurance premiums in any one of the three years in the experience period the employer is eligible for experience rating. Each state has different thresholds for premium amounts before a company is eligible for experience rating. For example, California’s threshold was $30,900 in 2004.
The classification code on an employer's workers' compensation insurance policy that generates the most payroll.
A work comp insurance policy that is cannot be adjusted due to losses that occur during the policy term. Only payroll values affect the premium charge. Most PEO arrangements are similar to guaranteed costs policies.
Paid losses plus additional loss reserves for anticipated future claims. Many loss sensitive insurance policies adjust premium based on incurred losses rather than solely on paid losses
An experience modification factor that applies across several states. Interstate ratings are calculated by a rating bureau (like NCCI) for employers operating in more than one stated. Most, but not all states (Michigan, Pennsylvania, and Delaware are exceptions), participate in the interstate rating system. Employers can have one experience modifier applying to their operations in most states but a separate modifier calculated by the stand-alone state rating bureau. The separate state modifier(s) apply only to workers compensation insurance premiums for the employer's operations in that stand-alone state.
A report prepared by the insurance provider or master policy holder (PEO) that details the cost associated with actual claims paid during a defined time period.
Workers' compensation premium calculated by multiplying payrolls by appropriate rates, before application of experience modifier, schedule credit, or premium discount. Manual rates are established by a ratings bureau.
Master Policy – Professional Employer Organization - PEO
A workers’ compensation insurance policy that covers worksite employees of a client of the PEO in a co-employment arrangement.
A premium adjustment used in some NCCI states for employers too small to qualify for an experience modification factor. It provides either a premium credit or a debit for such employers based on prior claims (or lack of them.)
Workers' Compensation premium calculated after application of experience modification factor.
State operated insurance company used in Workers Compensation Insurance in some states where the risks are so great that the commercial insurance companies cannot operate at affordable rates.
The organization responsible in many states for determining proper workers' compensation classifications, experience modification factors, and collecting data used for establishing work com rates. NCCI also writes the manuals used in many states to calculate Workers' Compensation premiums, and also administers the assigned risk plan in many jurisdictions. NCCI is a private company.
How does a Master Policy and PEO arrangement work?
When a company engages a PEO, a co-employment relationship is created between the company, PEO and the workers of the company. The company and the Professional Employer Organization contractually allocate employment responsibilities and liabilities. The Professional Employer Organization assumes responsibility for obligations related to human resources, workers' compensation, payroll, labor law compliance and employment taxes. If the company wants to make employee benefits available to the workers, the PEO will offer the workers health insurance, disability insurance and other expanded benefits under their overall corporate plan.
Why would a company use a Master Policy Provider or PEO?
It's simple. Using a Master Policy Provider or a PEO allows business owners and managers to focus on their core competencies... not worrying about the non-revenue related activities of employment. Many businesses don't have the internal expertise, capability or desire to handle regulatory compliance, risk management, payroll, employee benefits administration and other employment related activities.
How is it possible that PEO will save me money?
Most businesses can not get the discounts that larger companies realize. By "pooling" all of our clients' employees together, we are able to obtain those volume and premium discounts on various employee expenses such as:
1. Workers Compensation
2. Employee Health, Dental, Life and Disability Benefits
3. There are also possible tax advantages.
plus . . . because our PEO services include handling most employee related issues and paperwork, many clients are able to reduce and, in some cases, eliminate their in-house human resource department, thereby reducing operating costs, not to mention most business owners don't have the time to handle these day to day "aggravations".
So, how much DOES it cost to use Master Policy and PEO services?
A. Believe it or not, Master Policy and PEO services usually do not cost any more than you are already spending on employee related expenses!
Is this the same as temporary staffing?
No. PEOs typically do not recruit, train or provide staff to their client companies as do temporary staffing firms. A PEO arrangement usually involves all or most of the employees of the client company in a long-term employment relationship.
In a PEO arrangement, do I lose control of my employees?
No. PEO client companies and the PEO become partners in the co-employment relationship of their workers. The client retains responsibility for the day-to-day management of the workers. Clients maintain all "hire and fire" authority, handle promotions and provide workplace supervision as required.
What responsibilities are generally assumed by the Master Policy and PEO Provider?
PEOs and Master Policy Providers are responsible for maintaining compliance with all regulations regarding the reporting and payment of federal, state and local taxes on wages paid to the workers. The PEO is recognized by the Internal Revenue Service as the "employer of record" for liability for federal income and unemployment taxes and is responsible for these payments. Many states also recognize the PEO as the employer for purposes of providing workers' compensation coverage. In states that require workers' compensation coverage, the PEO is responsible for providing the insurance. The PEO is also responsible for compliance with the broad range of employment laws and regulations including: COBRA, Title VII, ADA, FMLA, HIPPA, Equal Pay Act, and Age Discrimination in Employment Act.
What will employees think?
Workers want the quality health benefits and the opportunities for retirement savings that a PEO can offer. Through a Professional Employer Organization, Fortune 500 quality benefits can now be available to small and medium size businesses.
What about Master Policy and PEO billing and accounting?
One of the best features of using a Master Policy Provider and PEO is the single payment made to the organization. One payment (usually made with each payroll cycle) is all that is required. The client company reports the amounts to be paid to each employee and the PAYG Provider or PEO does the rest.
Pay-As-You-Go-Work Comp Program
This program is designed to reduce, if not eliminate, audits - eliminate deposits - improve the clients cash flow. The client will pay for their work comp only as payroll is incurred.
A premium discount, based on size of the premium paid. A premium discount is usually at the discretion of the insurance provider.
In the experience modification factor, the total of the first $5,000 of each work comp claim (loss).
Some states maintain their own separate rating bureaus. Currently, the states of California, Delaware, Hawaii, Indiana, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, Texas, and Wyoming operate their own non-NCCI rating bureaus. Many of these largely follow NCCI rules for computing premiums and classifications, but California, Delaware, Texas, and Pennsylvania are notably different than NCCI in some aspects of classification and premium computation.
The basis (usually payroll) for calculating Workers' Compensation premium. Remuneration, but may also include other forms of employee compensation. Workers' Compensation premium is computed by applying varying rates for different work comp classifications per hundred dollars of remuneration.
Workers' comp written through an assigned risk plan.
A Workers' compensation insurance policy that adjusts the premium due, after policy expiration, based on actual losses generated during the policy period.
Document produced by NCCI which defines workplace exposures and assigns the particular workers' compensation classification codes.
A premium adjustment (rebated) after policy expiration, based on the actual loss experience of the insured business. The size of the dividend varies depends on the actual loss ratio of the insured.
An early policy cancellation penalty.
Work Comp classifications which are not normally included in the governing classification. These are clerical, outside sales, and sometimes drivers.
Premium after application of Experience Modifier and Schedule Credit/Debit, but before Premium Discount.
Workers' Compensation insurance written by private insurers outside of the Assigned Risk Plan.
An insurance policy required by law (in all states except Texas) to be purchased by all employers. Intended to provide benefits to workers who are injured in the course of performing their job.
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