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*NCCI rules are used in most, but not
all states.
Non-NCCI jurisdictions are:
California, Delaware, Indiana, Massachusetts, Michigan,
Minnesota, New Jersey, New York, North Carolina, North
Dakota, Ohio, Pennsylvania, Puerto Rico, Texas,
Washington (state, not D.C.) Wisconsin, & Wyoming
Rules defining remuneration can vary
in important details from state to state.
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In all states but one,
Workers' Compensation insurance uses
"remuneration" as
the exclusive basis for computing premiums. (Washington
State currently allows contractors to use hours worked
instead.) But although
payroll
is the most common component
of remuneration, it is not the only
one. In most
states, the rules about remuneration are written by the
National Council on Compensation Insurance, or
NCCI. But
keep in mind that some states are non-NCCI
jurisdictions, where there may be some significant
differences in how remuneration is defined. The primary
differences is that a few non-NCCI states (Delaware and
Pennsylvania) do not allow for the premium portion of
overtime pay to be excluded. Most other states, even
non-NCCI ones, follow NCCI rules in this regard pretty
closely. Please keep in mind that this information is
offered only as a general guide. We recommend that
employers check with their local state
regulators
to verify what specific rules and exceptions to these
general guidelines may apply.
Under NCCI rules,*
remuneration
includes:
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Wages or
salaries-including retroactive
wages or salaries;
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Total cash
received by an employee for
commissions and draws against
commission;
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Bonuses
including stock bonus plans;
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Extra pay for
overtime work;
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Pay for
holidays, vacations, or periods
of sickness;
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Payment by an
employer of amounts that would
have been withheld from
employees to meet statutory
obligations for insurance or
pension plans such as the
Federal Social Security Act or
Medicare.
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Payment to
employees on any basis other
than time worked, such as
piecework, profit sharing or
incentive plans.
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Payment or
allowances for hand tools or
hand-held power tools used by
employees in their work or
operations for the insured.
These tools may be supplied
directly by the employee or to
the employee through a third
party;.
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The rental
value of an apartment or house
provided to an employee based on
comparable accommodations;
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The value of
lodging, other than an apartment
or house received by an employee
as part of their pay to the
extent shown in the insured's
records;
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The value of
meals received by employees as
part of their pay to the extent
shown in the insured's records;
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The value of
store certificates, merchandise,
credits or any other substitute
for money received by employees
as part of their pay;
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Payments for
salary reduction, employee
savings plans, retirement or
cafeteria plans (IRC 125) that
are made through
employee-authorized salary
reduction from the employee's
gross pay;
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Davis-Bacon
wages or wages from a similar
prevailing wage la;.
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Annuity plans;
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Expense
reimbursements to employees to
the extent that an employer's
records do not confirm that the
expense was incurred as a valid
business expense;
Exception:
When it can be verified that the
employee was away from home
overnight on the business of the
employer, but the employer did
not maintain verifiable receipts
for incurred expenses, a
reasonable expense allowance,
limited to a maximum of $30 per
day, is permitted.
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Payment for
filming of commercials excluding
subsequent residuals that are
earned by the commercial's
participant(s) each time the
commercial appears in print or
is broadcast.
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Under NCCI rules, Remuneration
excludes:
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Tips or other gratuities;
Payments by an employer to group
insurance or group pension plans for
employees;
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Payments by an employer into third-party
trusts for the Davis-Bacon Act or a similar
prevailing wage law provided the pension
trust is qualified under IRC Sections 401(a)
and 501(a);
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The value of special rewards for
individual invention or discovery;
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Dismissal or severance payments except
for time worked or vacation accrued;
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Payments for active military duty;
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Employee discounts on goods purchased
from the employee's employer;
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Expense reimbursements to employees to
the extent that an employer's records
confirm that the expense was incurred as a
valid business expense;
Reimbursed expenses and flat expense
allowances (except for hand or hand-held
power tools) paid to employees may be
excluded from the audit only if all three of
the following conditions are met:
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(1) |
The expenses are
incurred for the
business of the employer
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(2) |
The amount of each
employee's expense
payments or allowances
are shown separately in
the records of the
employer
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(3) |
The amount of each
employee's expense
reimbursement is a fair
estimate of the actual
expenses incurred by the
employee in the conduct
of his/her work
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OVERTIME:
The only pay
differential that can be adjusted back to straight
time, under NCCI rules, is overtime (either time and
a half or double time). Other pay differentials,
such as paying nine hours pay for eight hours work,
can not be adjusted under NCCI manual rules. Also,
keep in mind that although most states follow this
NCCI rule regarding overtime, there are some
exceptions. Pennsylvania and Delaware, for example,
do not allow the premium portion of overtime to be
removed from the payroll calculation. So always
check and make sure about the rules in your
particular state or state.
Remember, Workers
Compensation policies start with an estimated premium,
but after the policy expires the insurance company will
want to determine actual audited premium, by determining
actual remuneration (or payroll) for the policy period.
A good way to avoid mistakes in the audit process is to
request a copy of the auditor's workpapers. This can
serve as a roadmap, showing how the auditor determined
remuneration and how it was placed into particular
classifications.
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