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Milwaukee's Daily Magazine for Saturday, Aug. 2, 2014

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Readers Blog: Wisconsin Insurance Solutions

Preparing for your Workers Compensation Audit

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For many business owners this process has never been correctly explained. Over the next few minutes I will try to clarify the process, its impotence and a few helpful suggestions that you can use when working with your insurance companies auditor.

The first thing you need to know is why an audit is being requested. Workers compensation is an auditable exposure. Meaning premiums are based on projections at the start of each policy year. In order to make sure you are not over paying or the insurance carrier isn’t being paid adequately for the true exposure audits are done at the end of each year.

For your workers compensation policy the premium is based on estimations of the upcoming year’s payrolls. Once the audit is completed the insurance carrier will prepare and send a policy adjustment statement based on any discrepancies. This statement will indicate any additional premium you owe or any credit they may owe you.

The auditor is looking for any payroll or any increase in exposure (payroll) and may include payment to others such as uninsured subcontractors. When working with subcontractors always request a certificate of insurance showing they have their own workers compensation. You will need to have this on file or the Auditor will assume these payments on your payroll / premium.

This is a good transition into what you need when preparing for your workers compensation audit. This is a balance of being prepared but not sharing more information then you need to. Again the auditor works for the insurance company and is there to make sure they are receiving a fair premium for the true exposure. Make available to the auditor only the items they request. There is no need to volunteer more information unless you feel you can show savings. Most auditors are paid by the audit not the hour. If you are prepared and have the information they need the quicker they can move onto the next audit / paycheck. The quicker an auditor can finish the job and move to another audit the better it is for you!

Most auditors at a minimum will request;

  • Employee Records including job description
  • Payroll Records / overtime if any
  • Payroll verification records including 941's, 940, W-3, Unemployment Tax Reports or Schedule C.
  • Cash Disbursements
  • Certificates of Insurance (subcontractors)
  • Detailed description of your business operations
  • You may be asked for additional information or more detailed information.

Working with several auditors over the years here are a few helpful hints/ tips that can help you be better prepared for your audit; being organized is critical. Some of these things may seem like work for someone in your office but if managed correctly over a policy year should be fairly easy to provide.

  • To streamline the process, assign one person as the sole contact for the auditor. This will eliminate mis-communication. Choose someone who is familiar with all departments and employees, as well as the payroll records. (if this is their first time you should request the previous year’s audit worksheets as a point of reference (ask your agent))
  • Separate any overtime paid to your employees in your payroll records. This is so auditor can discount it back to normal pay
  • Have CURRENT certificates of insurance (showing workers compensation coverage) on file for each subcontractor used during your policy period.
  • Payroll Separation is tough but can be done on some cases. This is when a single employee's payroll may be divided over different class codes based on their various day to day activities. But you must keep proper records and they must be kept in dollars, not percentages.
  • You do not want the auditor to make any assumptions. If your should break down payroll by different workplace exposures, the auditor will classify it under the most expensive classification applicable. Be prepared to answer questions on employee job descriptions
  • Help keep the auditors job simple. Remember the easier your audit is for them the fewer questions they have and the quicker they can move on to their next audit. So be prepared. Don't blow the auditor off and make them have to reschedule. Have all the information the auditor requested organized and ready.

Before most auditors leave your office you will be asked to sign the worksheet. NEVER sign an incomplete worksheet and don’t be afraid to ask questions or to ask for time to review if you feel there is a large discrepancy.

For more hints and tips about workers compensation audits, check with the state of Wisconsin’s Department of workforce development (http://dwd.wisconsin.gov/wc/)

So in summary it is important to remember the audit is nothing to be scared of. It is contractually obligated with you policy and just makes sure the premium paid is accurate (in both parties favor). In many cases additional premium can be absorbed in the form or you companies dividend if you are eligible. So remember

  • Do your best to get the audit finished on time.
  • Work with the auditor and get what they need to do their job.
  • Make sure you understand the process before it begins!
  • Seek professional help when you need it.

If you feel you've been overcharged or that your audit included mistakes or errors or just need help with your audit, don’t feel like you don’t have a voice. Ask your agent to work with the State Bureau to clarify any class codes, employee job descriptions and review of the audit worksheets. I hope this helps relieve some of the stress of an audit and gave you some helpful hints. Good luck with this year’s Audit.

Tony Matera is a licensed independent insurance advisor with Ansay & Associates out of Port Washington WI and is the Servicing Agent for ONMILWAUKEE.COM. For more information contact him at tony.matera@pw.ansay.com or call directly at 262-376-3248 www.linkedin.com/in/TONYMATERA

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