Premiums

Premiums are established by applying the insurer’s rate for each classification (i.e., machine shop, clerical office, outside salesmen) to the payroll applicable to that classification. Overtime premium pay is not included, but meals, lodging, vacation pay and other forms of remuneration are. Officers’ and partners remuneration is applied to the appropriate classifications but is subject to maximums and minimums, currently $71,500 and $24,700 respectively. Officers, who are shareholders of a closely held corporation, and partners may elect to be excluded. Sole proprietors may not be covered, except under special circumstances. Deposit premiums are established by estimating annual premium and then applying a percentage, depending on audit frequency. Payroll reports are required periodically from the employer by the insurer. Report frequency (i.e., monthly quarterly, annually) will depend on the size of the estimated premium. At the end of the policy year an insurance company auditor conducts a final audit, either by mail for smaller accounts or by a physical visit. The auditor will ask to see the employer’s quarterly payroll tax reports (DE-6), payroll journal, federal 1099 forms and, sometimes, the general journal.