A critical workers' comp business deadline occurs when an ownership change happens. One area that many businesses forget in the process of changing — for example, buying another company — originates with not letting the agent or rating bureau know about the change.

James Moore

The correct term is ownership change.

This subject often comes up with the many changes businesses experienced during and after the pandemic. Each rating bureau has its own set of requirements. I know — one more thing to remember, but it can cost you big money in a few ways.

Let us look at how each rating bureau requests the business change info. Each bureau’s request revolves around almost the same information.

NCCI

The National Council on Compensation Insurance requires the reporting of certain business changes by using its online portal or by filling out almost the same information on an ERM-14 form. I am going to borrow from the form — you can find it here — to cover some of the changes that require notification. Even if you may not know exactly what boxes to check and what to say, the main concern can be seen in the last part of this article.

• Name and/or legal entity change. The name and/or legal status of the entity has changed. DBA name changes do not need to be reported.
• Sale, transfer or conveyance of all or a portion of an entity’s ownership interest. Complete or partial sale of the business entity’s ownership interest.
• Sale, transfer or conveyance of an entity’s physical assets to another entity that takes over its operations. An entity’s assets have been sold or transferred. The acquiring entity has taken over the operations, and the selling entity retained its legal business name.
• Merger or consolidation. Two or more entities have merged or combined to form a single entity.
• Formation of a new entity that acts as or, in effect, is a successor to another entity that has:
  • Dissolved.
  • Is nonoperative.
  • May continue to operate in a limited capacity.
• Formation of a new entity. A new entity has formed that is not a successor to another entity. Report this change only to determine combinability with another entity.
• An irrevocable trust or receiver, established either voluntarily or by court mandate. A change has occurred to the business, either voluntarily or by court mandate, requiring the entity to be put in a trust or receivership.
• Determination of combinability of separate entities. Two or more entities may need to be combined or separated based on their ownership interest.

NCCI has a great video series on the ERM-14 form. Note: This document is not accepted in New Jersey or California.

California’s WCRIB, online only 

The critical workers' comp business change for California is online only. As with NCCI, it has many videos on how to accomplish the task. The Workers' Compensation Insurance Rating Bureau, as do all the rate bureaus, has one critical requirement and covers many topics when an ownership change occurs.

The WCIRB usually allows only agents/brokers to submit the ownership change. Letting your carrier and agent know about the ownership change is part of the critical workers' comp business requirement.

Reporting time requirement

Being late with this filing to the rating bureaus will cost you dearly. Each rating bureau has a section on when failure to report ownership changes becomes a big problem. The bureaus refer to them as experience mod evasion rules. All of the rating bureaus have a common requirement — 90 days. If a critical workers' comp business change or ownership change occurs on July 1, for example, you must notify three entities: the rating bureau, your agent broker and the carrier.

As with tax reporting, timeliness covers everything. The 90-day rule counts through weekends and holidays. Use this website to add 90 days to the ownership change date.

The most critical workers' comp business change reporting requirement should come as no surprise. Report the change of ownership — the sooner, the better.

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.