Mo. Acts to Minimize Impact of Workers’ Comp Changes for Business Owners

After a public forum and lengthy negotiations with the National Council of Compensation Insurance (NCCI), the Missouri Department of Insurance said it has prevented a substantial and immediate increase to the payroll basis for business owners covered by workers’ compensation insurance.

Workers’ compensation insurance premium is computed based upon payroll. Because businessowners are typically not paid ‘wages,’ the payroll basis is used to calculate premium for business owners. The NCCI assists the department in gathering, compiling and reporting relevant statistical information to make this calculation.

The NCCI proposed increasing the sole proprietor and partner payroll base from $15,600 to over $30,000 and proposed increasing the executive officer payroll base from $26,800 to over $119,000 to become effective January 1, 2006. After weighing the evidence, the department agreed that while an increase was warranted, it should not exceed the state’s average wage. In recognizing the potential impact to the business community, the department also sought a five-year transition period to minimize the effects of the change.

“The NCCI wanted to make changes that would have drastically affected Missouri businesses,” said Doug Ommen, director of the Missouri Department of Insurance, Financial Institutions & Professional Registration. “This department worked to find a more manageable solution to meet the concerns of the NCCI and numerous employers, industry groups and insurance carriers.”

Last month, the department approved the NCCI filing for Payroll Treatment of Sole Proprietor and Executive Officer Payroll, effective July 1, 2007, with three key changes.

First, the filing now includes a five-year transition period for the revisions to ease the changes into the Missouri marketplace.

Second, by simplifying the payroll basis for sole proprietors, partners, executive officers and LLC members, all businessowners, regardless of their legal organizational structure, will eventually be subject to the same payroll basis.

Third, the filing includes an automatic 10 percent offset of all businessowners’ payroll to the clerical or outside sales classification codes, depending on the actual duties of the owner.

The transition period will revise the payroll basis each year by approximately 20 percent, until reaching 90 percent of the State Average Weekly Wage (SAWW) as determined annually by the Missouri Department of Labor and Industrial Relations. It is estimated that the transition will be complete by 2011. After 2011, the payroll basis will be indexed to the same 90 percent of the SAWW and revised annually.

For more information regarding these changes, please contact Workers Compensation Specialist Angela Nelson at 573-751-1926.

Source: Missouri Department of Insurance, Financial Institutions & Professional Registration

Topics Workers' Compensation Missouri