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Why is pay as you go workers’ comp insurance the right choice for so many businesses these days?

What is Pay as you Go?
In this video clip, CEO John Will Tenney was interviewed by a local real estate office and answers a few questions about Pay as you Go Payroll and Taxes, as well as Pay as you Go Workers’ Comp. Both of these business options can help reduce costly audits and large bills at the end of a fiscal quarter, or the fiscal year.

A big thank you to Rick Aguirre of Remax Realty of Avalon Park for his help with the video.

Pay as you Go for Workers’ Comp
A “standard” workers’ comp policy comes with some “baggage” that many business owners would like to avoid. Not only are there extra fees for a “standard” policy and a possibly expensive audit every year, there are also some added risks. Why else are so many employers now looking at alternative methods? In today’s economy and business environment it pays to be flexible and innovative.

You may be asking what kind of baggage there is. Have you ever asked these questions?

• Who wants to pay a large premium deposit?
• What is this “expense constant” thing they charge?
• Why is it an estimate?
• Why is there an annual audit that usually ends up costing the business owner more money?
• Why is the timing on the big payment always so bad?
• Why are they telling me I am “mis-coded”?

Does any of this sound familiar in your business? How about these?

• Have you ever wondered why they can’t just take the comp premium at the same time you do payroll?
• Did you even know there are “Pay as you Go” workers’ comp insurance programs available?
• Is the only reason you are NOT doing pay as you go because you think it gives up control of your money?
• What is Pay as you go workers’ comp?”

All good questions. Here are some basic answers. (Please contact us to get more answers.)

Workers’ Comp premium is figured as a percentage of payroll for each employee in each “class code.” A “class code” is based upon the job description of the employee. For example, clerical employees and roofers have a different class code and of course a completely different rate of premium. “Mis-coding” is when the people are actually working at, or have different duties than those described in the class code.

PEO Pros functions both as a licensed insurance agency and employer consultants to assist employers in this area. Usually this involves placing the employer with a payroll service, or even a PEO. In many cases the payroll service is optional. Yes, you can still enjoy the transferred liability of a PEO without giving up your payroll.

The advantages to pay as you go services are many but here a few headaches that go away:

• Workers’ Comp annual audit is no longer needed
• Tax forms will be filed by the payroll service
• Large premium deposits go away
• Fewer problems predicting cost of employees
• Easier to add employees without incurring insurance increases
• Since reporting is more frequent (each payroll) changes in job description will likely result in less “mis-coding”

If any of this addresses a problem with your business or company, you may want to give us a call at 800.788.8343 or use the form below to contact us with your inquiry:

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Comments - for PEO services it would be helpful to know how many employees you have, what states do they work, what do they do, and an rough idea of what your payroll is and how often (weekly, bi-weekly, etc)

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If you are shopping for workers’ comp insurance in the medium to large policy market, it’s a sure bet that you have heard the word “captive” at least once or twice.

In this article there are two types of workers’ comp “captives” that will be discussed.

The first is a group captive. There are many varieties of this flavor. This is a situation where a number of companies pool their resources and set up a small insurance company to insure some part of their risk. They can be shared or segregated. There must be some degree of risk sharing to meet legal requirements.

Some of these are often called a “rent-a-captive.” In some cases this captive is used to reduce the costs associated with a high deductible master policy. For example, if your company has a million dollar per claim deductible (a typical high deductible), you could use a “Buy Back Deductible Captive Policy” to assist with reducing the negative effect of high reserves.

For more information on one type of “buy-back-deductible-captive” – please take a look at Kris Delano’s article. Kris works with us on these type of captives.

Another breed is called a segregated portfolio fund. This is usually held “captive” by a carrier and the risk sharing comes between the captive owners and the carrier.

Both captive plans are designed to help entities with large premium recover some of the premium, based on a good loss ratio. They are also designed to recover some of the losses from the insured (in favor of the carrier of course.) In this way they resemble retroactive plans, also known as “retros.”

In all cases, the shared risk encourages both parties to concentrate more on safety and reduced accidents for a single motive: profit.

Both plans offer some tax advantages due to the increase in tax deductible premium paid up front. If there is underwriting profit, there are options as to when to declare the profit that allow the captive owners to be more selective as to how much tax they will have to pay every year.

Also, since the reserves set for claims will be stored in the captive, and NOT in the carrier’s bank account (reserves are not tax deductible), there is another tax advantage here.

If all this is confusing, please consider consulting with a captive expert before proceeding in to one of these agreements. There are many options to consider, and many steps that require negotiation.

At PEO Pros we do not offer “retail captives.” All of our captive arrangements are negotiated individually, tailored to fit the needs of the client. It is very likely that captive clients will save money by having us negotiate the captive agreement for them.

Please use the form below if you would like more information on a captive situation.

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