A final audit must be completed for each and every policy period. We will determine what type of audit you will receive:
Mail and physical audit information will be reviewed for accuracy and compared to information we have in our policy and loss files and/or other information we receive or discover about your business operations to verify consistency. We will contact you if we need more information or clarification. Once the review is complete, we will process and send a premium statement of your final audit adjustment.
You must timely return your completed mail audit forms and/or cooperate with the auditor to conduct the physical audit to avoid cancellation of your current policy and to remain eligible for Plan coverage.
Yes. The premium audits service two vital purposes:
We will initiate the audit process soon after your workers’ compensation policy expires or cancels. You will receive a letter and/or a phone call from us or our auditing firm to schedule and conduct the audit. The date scheduled should be far enough into the future to allow you adequate time to collect and organize the information that the auditor will need. To maintain compliance with the policy provisions and contractual requirements, all audits should be completed within 60 days after the policy ends.Records you will need
The auditor will need access to financial information for the policy period being audited. Here is the type of information you may be asked to provide:
Once you have collected the necessary data, you’ll need to organize it. Put all of your payroll records (such as W-2 forms, pay stubs, and overtime records) together so that the information is easily accessible. Likewise, keep all information related to subcontractors, including payment amounts and certificates of insurance, in one place. Your efforts will make the audit easier and faster.
Meeting with the auditor
To conduct the audit, the auditor will need to meet with you or a trusted representative of your firm. If you delegate this task to someone else, be sure that he or she knows the business well and has a good understanding of your firm’s payroll and financial records to answer questions for the auditor.
Like many businesses, your firm may hire an offsite payroll/bookkeeping firm to handle your accounting and payroll functions. Your payroll/bookkeeping firm should provide the auditor with the financial records needed to complete the audit. However, the auditor will still need to visit your premises to conduct the physical audit.
Subcontractors and state laws
Many states have laws that impose liability on contractors that hire uninsured subcontractors. These laws will apply to you if your business operates as a contractor and it subcontracts work to others.
For example, if you hire an uninsured subcontractor to do roofing work at a building you are renovating, and one of the subcontractor’s employees is injured on the job, in most states you are liable for the claim. The injured worker by law can seek benefits under your workers’ compensation policy, and you will be charged premium accordingly. The auditor will review your tax documents, cash disbursements journal, and 1099 forms issued to subcontractors, and will request certificates of insurance for each subcontractor used. If you fail to obtain valid certificates of workers’ compensation insurance from any of the subcontractors you hired, the audit will include payments made to these subcontractors, and an additional premium will be charged for that contractor’s insurance coverage based on all or a portion of the cost of the subcontracted work.
Limit your liability and avoid paying additional premium
Contractors should obtain proof of active workers’ compensation insurance, such as valid workers’ compensation certificates, from all subcontractors they utilize, before the work begins.
Misclassifying your employee as an "independent contractor" is illegal and considered tax evasion. Visit the IRS website and review Publication 1779 - IRS Subcontractor Rules for more information.